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renewable energy goals and the mature technology continues to improve in terms of efficiency and cost. According to some estimates, the land use required to power the entire United States would require approximately 0.6 percent of the country’s total land area. New advanced materials and manufacturing processes push prices down and performance up similar to the semiconductor industry of the 1980s and 1990s. However, manufacturing of solar panels is now dominated by the Asian market and predominately China, leveraging technology that was first developed in the United

States and Europe. The top four solar panel manufacturers globally are shown in the accompanying table. Among the top ten solar firms, seven are publicly traded, vertically integrated manufacturers located in China. Note that Canadian Solar is a Canada-based firm, but the majority of manufacturing operations are in China. Among the top ten, only First Solar, out of Tempe, Arizona, is based in the United States and currently manufactures in Ohio and Malaysia.

Solar power is principally harnessed one of two ways: by photovoltaic (PV) cells or solar thermal. Photovoltaic technology has come to dominate the market for solar applications, and has become a symbol of the clean energy economy. The PV industry has grown from a cottage industry in the 1990’s to a multi-billion dollar industry today, expanding around 20 percent per annum for the past 20 years. 1 During the past several years, PV module prices have dropped from more than $4 per Watt-peak (Wp) in 2008 to under $1 per Wp in 2012.2 Much of this drop in price is attributable to low-cost Chinese manufacturers entering the market; backed by generous government subsidies and un- matched scale, these manufacturers have come to dominate the polysilicon photovoltaic market for cells and modules.

1 _{IHS Global Insights: http://www.solarbuzz.com/facts-and-figures/markets-growth/market-growth}

2 _{Aanesen, Krister, Stefan Heck, Dikon Pinner. “Solar Power: Darkest before dawn.” McKinsey on Sustainability & Resource}

Productivity. May, 2012.

Table 1: Top Manufacturers of PV Modules, 2013

Company Primary Country for Manufacturing Module Shipments (MW) Yingli Green Energy China 3,300

Trina Solar China 2,600

Canadian Solar China 1,894

Sharp Solar Japan 1,865

Investment Highlight (January 2014)

Japanese based Solar Frontier, the largest manufacturer of Copper Indium Selenium (CIS) thin- film photovoltaic solar modules, announced the construction of a 70,000 square meter manufacturing plant in the Tohoku region of Japan. The company plans to employ about 100 and reach annual production capacity of 150 MW, investing 13bn Yen. This will be Solar Frontier’s fourth manufacturing facility.

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Technology

PV modules are typically manufactured from polysilicon feedstock which is processed into ingots and then wafers. The wafers are converted to cells, which make up the finished solar modules. The silicon wafers make up 40-50 percent of the cost of crystalline module cost3

High Efficiency Cadmium Telluride (CdTe) and Copper indium gallium selenide (CIGS) Thin Film Solar Cells are the most hopeful new technologies that are expected to compete with conventional crystalline polysilicon modules. The companies engaged in research and production are mostly located in the US, Germany, and Japan. In fact, First Solar, the largest solar manufacturer in the US, uses CdTe technology.

The availability of natural resources play an important role in China is the world’s largest producer of Indium with 390 tons, followed by Canada, Japan, and South Korea, with much smaller sums. At a price of $1,000/kg, Indium prices have been a growing burden for CIGS manufacturers. China is also the world leader in the production of Cadmium, followed by Korea.

Suppliers

Although a majority of polysilicon is produced outside of China, polysilicon wafers are primarily manufactured in mainland China. Together with Taiwan, China produces over 80 percent of worldwide solar polysilicon wafers. The industry is dominated by a few major firms that are becoming increasingly vertically integrated with polysilicon producers expanding into wafers and wafer producers expanding into polysilicon. Polysilicon production capacity is expected to increase by 260,000MT by 2018, with most new capacity in Asia. In Q1’14, silicon sold for around $21/kg, but expectations are that it will decrease to $9-15/kg within the next few years.4 The accompanying table details the largest global suppliers of polysicon and their respective production capacity.

Markets

Although Germany has solar irradiation levels similar to Alaska, it is the world leader in installed capacity with 33 percent of the world total. Italy is the next largest market worldwide, followed by North America, with 17 percent and 9 percent, respectively. However, the global solar marketplace is in flux, with European demand slowing down while demand in Asia

3 _{Overview of the Solar Energy Industry and Supply Chain, Blue Green Alliance Foundation, January 2011}

4 _{IHS Global Insights: http://www.solarbuzz.com/resources/analyst-insights/growing-polysilicon-imports-and-falling-prices-provide-}

chinese-solar-manufacturers-anti-dumping-fodd

Table 2: Top Manufacturers of Polysilicon, 2013

Company Country Polysilicon

Capacity Hemlock

Semiconductor United States 27,500

Wacker Chemie Germany 67,000

OCI South Korea 62,000

GCL-Poly Hong Kong 46,000

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and North America is growing. 5 A new focus on global warming in the U.S. and general air pollution in mainland China is expected to greatly increase the demand in these markets.

In 2013, global PV market demand exceeded 37 GW with an annual growth rate of 37 percent. In 2013 China, Japan and the rest of Asia made up 55 percent of global demand, while Germany, Italy, France, and the UK only made up 19 percent, despite having dominated global demand during the last ten years. Over the next five years, approximately 375 GW of PV demand is expected globally, with China, Japan, and the U.S. making up around half of this total. 6