CIGS Positioned for the Biggest PV COGS Reduction by 2017, but CdTe Remains the Undisputed COGS Champion

By Ed Cahill, Lux Research

Today’s solar module production capacity is nearly twice the demand, resulting in significant overcapacity and growing inventories. To compete, manufacturers have dropped prices to record lows, often at or below the module cost of goods sold (COGS). Companies choose to cover their heads until overall market conditions improve or actively seek innovative solutions to lower COGS below current prices. This decision will determine how well positioned they are once the clouds clear. Module COGS drivers like low-cost manufacturing locations, high efficiency, increased capacity utilization, and higher production yields will impact incumbent PV technologies in different ways making informed decisions critical throughout the value chain.

In mapping today’s landscape and analyzing for likely upside by technology, COGS are set to fall across the board between 2012 and 2017, but the rate of decline depends largely on the technology. The technologies with the most room to grow both technologically and strategically will have the steepest descending COGS, with CIGS falling fastest followed by CdTe, c-Si, mc-Si, and TF-Si, seemingly always the ugly duckling of the group, bringing up the rear.

Drilling down even further, manufacturing locations will not change significantly, as module overcapacity has forced companies to cut capital expenditures, making opening new facilities in low-cost countries unlikely. In addition, most technologies, with CIGS being the exception, already have the majority of their capacity in low-cost countries. Increasing capacity utilization will modestly reduce x-Si and CdTe COGS, not surprising given the extent to which these incumbents have taken the brunt of impact of today’s overcapacity. Yield improvements will modestly reduce CIGS and TF-Si COGS as the wrinkles are still ironed out of the manufacturing process. The largest driver reducing COGS in the next five years will be efficiencies increasing across the board, resulting in cost savings of $0.09/W for mc-Si, $0.10/W for c-Si, $0.21/W for CIGS, $0.05/W for TF-Si, and $0.08/W for CdTe.

In an environment where manufacturers need to hoard every penny to stay in the game, these cost savings are not just nice to have, but necessary for survival. Technology developers across the entire value chain – materials suppliers, equipment manufacturers, cell and module producers – can choose to be part of a winning, or losing, position.

Source: Lux Research report "Module Cost Structure Update: Path to Profitability" -- client registration required. To learn more about this graphic and related intelligence from Lux Research, click here or email Carole Jacques.