Thursday, June 24, 2010

Paying for the solar market

I don’t usually venture into solar energy discussions, even though it is also an opto technology. For one thing, it depends a lot on policy decisions and I've been there, done that once before. And there's already plenty written elsewhere. But it's worth pointing out Vinod Khosla’s recent posting on the requirements of investing in solar.

Khosla’s piece is long with detail, but he basically says that startups have to “be competitive with silicon cells at thin film costs or be competitive with III-V cells (well over 20 percent) at silicon costs. Then you have a 50/50 chance of making it. But a billion dollars of capital and billion dollars of debt will be hard to pay off.” A lot of is just basic market sense, and that's exactly the point.
Khosla echoes more or less what we have seen in solar for years. Strategies Unlimited followed the solar industry for decades while it had steady 25+% compound annual growth. (Don’t believe me? Check out the figure below.) Now that solar is finally in the public imagination, overinvestment has become a increasing concern.

Source: Strategies Unlimited and Paula Mints (Navigant Consulting).

I wrote already about the market for lasers needed for making thin-film cells (first here and the sequel here). My point then was that the cycle is amplified because it’s the “second derivative."

I worked on solar cells myself, back in 1978 at Texas Instruments. It's great to see it finally make the big time, and if oil prices go up, it will be even bigger. I'm hoping so. A lot of smart people are working on it. Great things are still to come.

Meanwhile, if you're following solar, read Khosla's piece, and read the comments, too. It makes interesting reading.

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