Profiling DuPont’s Solar PV Business

Posted on September 18th, 2012 by

Conrad Burke, GM of DuPont Innovalight, discusses his company’s solar business.

Full Transcript:

Ben Lack Can you talk to me about the company and the problems you are trying to solve.
Conrad Burke At the highest level, DuPont is a 210 year old market-driven science company, focused on sustainable growth in three areas:  feeding a growing population, protecting people and the environment, and helping to reduce global dependence on fossil fuels.  I’ll narrow this last category very quickly to the photovoltaics (solar energy) sector which I think is what you’re most interested in.Of the 38 Billion US dollars in sales that DuPont as a corporation earned last year, we sold 1.4 billion US dollars in materials into the solar market. We have a good foothold and a good understanding of the solar industry so I hope that’s partly why you want to talk to us. We have certain viewpoints and opinions about the industry given our intimacy with customers and what we see going on globally. We’ve been in the PV business for over 30 years. Half of the approximately 300 million solar panels that have been installed around the world over the last 35 years have DuPont materials inside of them in some form or other. For example, we make critical films for solar backsheets which is the outer skin that protects the solar panels. We make metallization pastes that are used for the conduction of electricity out from the solar cells as light is converted into electricity. And we make encapsulants and a number of other materials that go into solar panels which wouldn’t normally be seen by the naked eye but they are critical components to ensure high performance and durability of solar panels over decades of use.Of the half of those 300 million panels that have been installed over the last 35 years, we estimated that our materials have been tested for over five trillion panel hours since 1975. We’ve helped to deliver somewhere in the region of over a 125 Billion kilowatt-hours of energy from solar as a result of the industry using our materials. A lot of things have changed in the solar industry over the past 6 months. There is a race for survival in the PV industry. As costs are being cut, you can see many solar module manufacturers in a really distressed state in terms of manufacturing costs because of production over-capacity. Corners are being cut and some manufacturers are substituting what one could call unproven materials particularly for the outer skin or ‘backsheet’.  It’s an important area of focus for PV modules, because a backsheet actually protects the panel, and if it fails, it could threaten system lifetime.The winners in this industry are those companies that will continue to improve solar panel performance (output electrical power) and those that improve solar panel lifetime and durability – all which ultimately impacts investment returns. If you can make a solar panel last longer, your financial returns and your investment returns improve. Tedlar, a material that we’ve been manufacturing for over 50 years, which is also used in the aviation industry inside airplanes, is also used in hundreds of millions of solar panels. It is the only back sheet material proven to protect modules for more than 30 years in the field. We’re just trying to raise the conversation that materials do really matter.
Ben Lack That brings a good point that as the industry consolidates and as prices drop the part price plays in the role of sales increases. But what is overlooked many times as you’re saying is the actual value of the product that you’re purchasing. And talk to me a little bit about the quality of the types of materials that you’re putting into modules, that you manufacture and why it’s still important to make sure that solar panel manufacturers are purchasing high quality materials in additional obviously looking for a nice price.
Conrad Burke Materials matter a great deal – they are critically important. Solar panels are installed in pretty harsh environments; hot, cold, wet, dry and various other extreme conditions. There are certainly a lot of industry tests that are in place to help ensure that solar modules meet certain requirements as they go out the door of the factory – industry bodies such as IEC and UL set industry standards for that, for example. However, these tests are not good predictors of long term failure and durability.What is becoming more and more important as we have been drawn into conversations with insurance companies and financiers of solar projects, is that they are becoming more conscious and concerned about potential degradation in terms of the output power of solar. They want to make sure that what they’re buying is of the highest quality and durability.  I think by the fact that we’ve been in this PV industry for over 30 years and the fact that we’ve been around for 210 years as a corporation, we put a lot of emphasis not surprisingly, into the quality of our products.  Photon, one of the largest solar industry consultancy groups, predicts that as an industry, we will see somewhere in the range of 250 solar module suppliers last year collapse to less than 50 module suppliers by 2016.  That’s pretty massive consolidation. In fact one could argue that we might see even lower numbers than that .The industry is going to ultimately have much fewer but very large solar cell and solar module manufactures being serviced by a few very large materials manufacturers like DuPont. Between where we are today and getting to that point I think we’re going to have some difficult bumpiness as an industry. I am concerned that the greatest pressure on quality has been in the last 1 to 2 years. To quote industry consultants, SolarBuyer LLC, who have been attempting to track solar panel quality, they believe that major solar installation problems in the US have not likely surfaced yet as a result of inferior materials making the way in to how solar panels have been made more recently. So it behooves us, as one of the industry leaders, to make sure that we help advise and educate to ensure that there is no compromising of quality of solar panels for the sake of cost.Commoditization is a term that we tend to banter around more recently when referring to rapidly falling solar panel prices. I think consumers are going to benefit from cheaper solar panels and we’re all for that here at DuPont . I think it’s healthy for the industry. It will make the cost of solar more and more affordable. However, commoditization is a dangerous term.  It is a dangerous term because we should make sure that quality, reliability and durability are not compromised in the pursuit of that endeavor.
Ben Lack What does DuPont do to protect themselves from having their products in the PV space protected from commoditization?
Conrad Burke Commoditization is not always a bad thing. If anything, it reassures us all that we now truly have a very very large market opportunity in front of us all. DuPont is not new to that as a company. We’ve been around for a long time supplying materials and we continue to innovate and bring technologies that increase the efficiencies of solar cells, increase the longevity and durability of solar panels – all important factors to increase the return on investments of solar projects. We continue to innovate and invest heavily in R&D.  As a corporation, last year we spent USD $2 billion in R&D. What we have recently been trying to do is help raise awareness as an industry leader, in conjunction with others in the industry –  insurance companies, financiers, banks involved in solar projects.We are being asked for our expertise and advice to elevate the conversation and raise awareness regarding the importance of the quality of materials being used by solar module manufacturers. The solar industry is on track by 2015 to be a 100 billion dollar industry — that’s a pretty big business. Yet having said that, the world is only producing a paltry 0.4% of its energy from solar. I feel the best days are ahead and there are tremendous growth opportunities in front of us. We’re actually getting to the point now as an industry where we’re close or actually already at grid parity when compared to other conventional methods to produce electricity. In some markets, certainly in Germany, Italy, Brazil and some portions of the United States, for example, Hawaii and Puerto Rico, we are already there. Australia too.We are at a very important transitional point for solar – transforming from a niche business to being a fully sized global multi-billion dollar industry. Again, it behooves us as leaders to make sure that as an industry we don’t experience serious hiccups at this very important juncture. Because of recent over-supply of solar panels, we’re seeing a lot of very distressed module manufacturers, with many companies going out of business. One major concern is that corners are being cut and we want to make sure that high quality materials continue to be used in making solar panels.
Ben Lack You have briefly mentioned that one of the opportunities that are coming out of this consolidation is that as these companies get larger because they’re swallowing up under performing organizations; they’re looking for larger suppliers to do business with, which perfectly positions DuPont’s PV business for additional opportunity. Share a little more light on how realistic that really is and what other opportunities are coming out of this consolidation effort.
Conrad Burke Consolidation doesn’t happen very fast – it does take time. There will be some pain that the industry will be going through over the next two to four years. But that’s where we will ultimately end up. It will be no different from how the semi-conductor industry has ended up, and a thriving business it became, I may add. It will be no different from how the flat panel TV industry ended up. 90% of all the TVs made in the world today are made by only 5 companies; AUO, Samsung, LG and two others. No matter who’s brand name is on a TV display, it will be made by one of 5 companies only. There was a lot of pain in getting there and I think solar is going to go the same way. Now the criticality of performance and durability of a TV and the criticality of the performance and durability of a solar panel are measured very differently. If a TV fails, you can easily replace your TV. In the case of a solar panel, if it fails catastrophically or worse still, if it slowly degrades over time, you will not be producing the amount of energy that you had financed and assumed you would get over its lifetime.Financing a solar project, whether it’s at the small residential level or in a major field installation of many megawatts, it’s a pretty big financial endeavor. Any deviation from the performance of what was assumed from day 1 over the next 25 years has massive implications on the financial returns of that project because you may not be getting the electricity promised out of that system that you would have otherwise assumed and would have been the basis for underwriting the financing of such a project. Durability and reliability are not the only important factors important to solar panel manufacturers.Solar panel manufacturers also must continue to introduce higher performance solar panels that are more and more efficient in converting sunlight into electricity. This is largely achieved by improvements in performance of materials used in the solar cells inside a solar panel. Every 1% point efficiency improvement in a solar cell results in a 6% savings in terms of how much power is coming out of a solar panel. This drives the industry towards a lower levelized cost of electricity, or LCOE, a term which you will hear used a lot by the industry going forward. It is vital that we don’t as an industry see any performance issues associated with sub-par quality material or unproven materials in solar panels. To help mitigate problems, a whole new industry has been created today around insuring solar projects. Insurance does not prevent failures.There is a multi-hundred million dollar business today in insuring projects in the likelihood of failure of modules or failure of performance of solar modules over time. The message we’re hearing from the insurance companies is that the best insurance is if solar products are made not to fail in the first place. This  is a requirement that insurance and financiers are only now starting to look into and are soliciting DuPont’s help to educate, advise project developers specify that only robust, proven quality materials are used in the manufacturing of solar panels. We’ve done some analysis internally to show that if you can extend the lifetime of your solar product another 10 years; in other words if it can continue performing and producing electricity beyond the required 25 years to say 35 years, you can improve the economics by up to 40%. This is a pretty significant incentive to make sure that you do the right thing and produce solar panels with the highest standards and quality. It is all about making sure the right materials are being used to make the solar panel in the first place.
Ben Lack What we can expect to see from DuPont’s PV group over the next 12-18 months?
Conrad Burke We will strive to continue to be the largest supplier in the world of materials to the PV industry if you take silicon wafers out of the equation –  we don’t supply those. We will continue to innovate and supply into this industry as it grows and we will continue to bring out new products from our labs. I joined DuPont as part of the acquisition of Innovalight which was acquired just a year ago. We developed a silicon ink technology and process which is synonymous with manufacturing high efficiency solar cells. DuPont also has a suite of silver photovoltaic metallization pastes used for making high efficiency electrical contacts inside a solar cell to get the electricity out. That’s a very significant business for us that will continue to innovate and grow by helping our customers make ever more efficient solar panels.We brought out a new product series this year called Solamet® PV17x which has been a huge success for the company in terms of driving solar cells efficiencies higher by getting more electricity of solar cells out than you would otherwise achieve – and ultimately helped in driving better economics for the end user of solar panels made from this technology. We continue to innovate in our Tedlar® films used in backsheets for solar panels and continue to innovate in other technologies that ultimately drive the cost down improve the efficiencies of solar panels, and ways to further increase the lifetime of the solar panel product beyond the current industry requirement of 25 years. With Tedlar-based backsheets from DuPont, —  that is the skin that protects the solar cells inside the solar panel, that’s the only product that has been out operating successfully in solar panels for over 30 years. The next nearest backsheet product to that has only a lifetime of 15 years in the field. Some of the earliest solar panels ever made are still functioning today using DuPont Tedlar backsheets. Bottom line, it is about increasing the solar cell efficiency, getting more output power from your solar panels and increasing the lifetime of the product. That’s what drives the economics of solar – period.
Ben Lack I’d like to ask you why are you doing what you’re doing and why does this industry interest you?
Conrad Burke Personally, I’m passionate about the solar industry and I’m passionate about that the technologies that we developed here at Innovalight and DuPont. I’m excited about the fact that we are now part of the largest supplier of materials in the world to the solar industry by now being part of DuPont. When this acquisition was announced, it was a win-win situation; our customers applauded it, our investors applauded it, our employees applauded it.  DuPont has really upped the ante in terms of supporting the solar industry not just with materials but also with what Innovalight brought to  equation for customers in terms of solar cell process capabilities. No competitor comes close to the depth of capabilities that DuPont brings to customers. We have a small solar cell manufacturing line here in California, which allows us to develop and optimize all the various materials developed within DuPont before use in the customer’s manufacturing line. We can actually develop and demonstrate processes on a smaller scale, obviously compared to a large solar cell manufacturing site, say in China, and can work very intimately with the customer both here in California but also at their site. I’m excited about this industry I think the best days are ahead for solar.  There’s going to be some pain in the industry between now and full maturity as we all continue to grow as an overall industry. This is still a great industry heading to $100 billion in just the next few years.


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