Industry Insight
Re-engineering costs: a debate of universal benchmarks and cross-sector manufacturing
5 July 2010
New trends in the CPV market suggest companies are finding alternative, sometimes imaginative ways to cut costs. Elisabeth Jeffries reports on the latest CPV Today cost analysis findings and speaks to energy executives to get their thoughts on how costs could be minimised without compromising output. But will the CPV companies agree with their ideas?
New
By Elisabeth Jeffries
Two major new cost-cutting tactics are emerging in the CPV market: re-engineering and repackaging the way the product functions and is put together and marketed – which could also change the business model for some companies, and observing and learning skills from other industries that could benefit CPV.
Benchmarking those costs in the first place is a delicate business, because not all companies are being completely transparent leaving the industry at large and those monitoring it with incomplete or inadequate metrics.
Fresh reports of the economic performance of any company in the solar PV industry – and indeed any renewable energy sector – may hide significant facts and so may need to be viewed with a degree of scepticism.
Cost definition needs universal benchmark
The deceptively simple use of installed cost on a $/W basis as a measure, though commonplace, has its limitations.
This is not only because it just considers the cost of a setting up system divided by its peak output rating, but also because there are variations in how those costs are defined.
Some companies may include transport, site preparation and installation in the figure; others may exclude some or all of these.
Nevertheless, there is often a need to compare many of the companies alongside each other.
The levelized cost of electricity (LCOE) metric is a more reliable and comprehensive tool, since it adds operation and maintenance (O&M) costs incurred over the lifetime of a system to the $/W figure.
As with flat plate PV, this includes maintenance of the panels and inverters.
However, in CPV systems the tracker also needs to be maintained – and these costs vary according to the company.
Yet the drawback for CPV is the relative lack of historic data relating to O&M.
Typically, analysts are using a rule of thumb of 2% of annual installed costs for this aspect of company costs.
With these broad caveats in mind, a CPV Today survey of CPV companies conducted by Andy Extance yields some interesting results that show the kind of concerns preoccupying system developers and cell producers.
Is it down to the trackers?
Not surprisingly, tracking is a greater proportion of high CPV (HCPV) component costs, estimated at 21% compared to 15% for low CPV (LCPV), and as a result developers are paying considerable attention to cutting these costs by adjusting and redesigning the way trackers work.
Extance contends that “improved cell efficiency is one of the most important opportunities for system manufacturers to attract investors”, partly because it cuts the number of modules needed for an installation. Reducing tracker costs makes a major contribution to this for both LCPV and HCPV systems.
There are other significant differences between LCPV and HCPV.
LCPV ‘balance of system’ costs (buying and manufacturing some structural and electrical elements) are 50% higher than for HCPV (24% as opposed to 16% of the total), and this is a consequence of the relative immaturity of LCPV.
On the other hand, LCPV systems are easier to put together and this to some extent balances out some of the LCPV higher component costs that companies will undoubtedly want to see drop as soon as possible.
At the same time, the survey also finds that average O&M costs are nearly three times as high for high (HCPV) as for low (LCPV) though there are wide differences in the range for HCPV and that this differential will have increased in five years’ time.
Battling cost issues with new ideas: cross-sector manufacturing
Interesting ideas have emerged to combat some of these cost issues.
One is the ‘megawatt in a box’ model, particularly suitable for LCPV.
Pre-engineered and pre-wired systems are brought in and connected to the electricity network, slashing installation costs.
Mark Kapner, a strategic planner at the Texan utility Austin Energy, takes a slightly different view from Andy Extance.
He suggests that CPV competitiveness will arise more from cutting the cost of manufacturing processes, and that system developers will leave cell producers to deal with efficiency.
This way, he argues, they can learn from other sectors.
“Some companies are looking at finding existing industries making similar enough products,” he states.
This includes the motor manufacturing sector.
There, solar experts have found that some of the metal stamping and windshield manufacturing processes have similarities with aspects of CPV.
"Some companies intend to use some of the same metal bending and stamping techniques used for making car headlights,” he says, indicating that this is because these resemble some reflectors used in CPV.
Frank Siebke, a senior technology officer at the Zug office of Good Energies, makes broadly the same argument: “my view is most of the cost savings will come from scaling up production and improving productivity,” he states, adding that “in CPV, scaling will be even more important [than in c-Si module production].
“Beside the improvements in module design,...supply chain management and reduction of cell prices will be the drivers.”
He indicates that the CPV sector may learn from manufacturing and development of LED lighting.
Photo: Frank Siebke, Good Energies, Zug, Switzerland
