Suntech sees costs halving in 5 years
By Nichola Groom, Los Angeles, CA, June 3, 2008
Source: Reuters UK
http://uk.reuters.com/article/oilRpt/idUKN0336042620080603
Solar cell maker Suntech Power Holdings Co Ltd’s (STP.N: Quote, Profile, Research) silicon costs per watt should drop to $1 in the next five years, about half of current levels, enabling its products to compete without government incentives, a top executive said on Tuesday. “We feel that in the next five years our product could survive without the need for government subsidies,” Suntech Chief Strategy Officer Steven Chan said by phone at the Reuters Global Energy Summit.
Demand for renewable energy has skyrocketed recently, yet the industry still depends on government subsidies to make power produced from solar panels or wind farms competitive with electricity from dirtier coal or gas-fired plants. Today, Suntech’s silicon costs per watt are between $2 and $2.20, while non-silicon costs are about 70 cents or 80 cents per watt, Chan said. In the next five years, silicon costs per watt should drop to $1, while non-silicon costs should fall to between 50 cents and 60 cents per watt, Chan said.
Suntech expects production of about 530 megawatts (MW) this year, Chan said. One megawatt, or 1 million watts, is enough energy to power about 800 homes. Lower silicon prices, which Chan expects to start to see next year, would be a major factor in reducing the cost of solar power and eliminating the need for subsidies, Chan said.
Silicon is the key raw material used to make computer chips and most photovoltaic solar cells, which turn sunlight into electricity. Soaring demand for renewable energy, however, has led to skyrocketing prices on silicon, leading China-based Suntech to make several investments in silicon providers.
At the summit, Chan said those deals are reducing how much Suntech pays for silicon by 20 percent or more. “The fact that we made these equity investments in various silicon providers has helped a lot,” Chan said.
Average selling prices on Suntech’s solar products should drop 10 percent next year, followed by annual declines of 7 percent thereafter, Chan said. To help expand its fast-growing business, Chan said Suntech over the next two or three years will consider setting up manufacturing facilities closer to the places where it does business, such as the United States and Europe.
The company’s recent acquisition of Germany’s KSL-Kuttler Automation, which will supply equipment for Suntech’s manufacturing process, will help the company open facilities in countries where production costs are higher than in China, where its solar cells are produced currently. “A big part of buying this German automation company is to automate our production lines in a way that we can set up production in high-labor-cost geographies and not really suffer a high cost structure,” Chan said.
Suntech shares were up 7 cents at $41.12 in afternoon New York Stock Exchange trade.