June 2019 - KikoMaza

109 GW is the solar photovoltaic capacity that was installed in 2018 worldwide. To put this figure into perspective, it is more than twice as much as wind farms in 2018 or the equivalent of installing about 130 nuclear reactors. And according to the main forecasts, in 2021 the barrier of 150 GW of annual installation will be surpassed. With these figures, it is obvious that solar PV is already, and will be even more, the main technology of electricity generation.

A few weeks ago I had the opportunity to attend the main solar fair in Europe, Intersolar Munich, and see firsthand the main novelties in the sector. With the news of the fair and the help of the forecasts of the most exhaustive technological report of the sector (ITRPV from VDMA), let’s review the 6 main product trends of the sector:

Modules: from 400/20 to 500/25

These numbers refer to two major frontiers of solar technology: 400W of power per module and 20% of cell efficiency (PERC technology). Both are already widely surpassed, as could be seen in Intersolar’s new launches. In fact, there are already some who speak of 500W and 25% efficiency as the next frontier to be overcome in the coming years.

It seems that the evolution is unstoppable but beyond when the new limits are reached, for me the relevant thing is that there is already more talk of efficiency improvements than pure cost improvements. And this is the best news for the sector: LCoE’s improvements are no longer (only) made at the expense of margins but with important technological and efficiency improvements. Ideally, the sector should evolve into a TV-like price structure: very stable price levels and continuous performance improvements for each level.

What is clear is that no sector is sustainable by improving on the basis of eliminating margins in the supply chain so the solar will have to make an effort to achieve the expected improvements without sacrificing profitability.

Modules: Mono-PERC

As the ITRPV graph shows, Mono-PERC technology is going to be mainstream in the coming years. And these forecasts are usually very reliable because they are based on the installed capacity of manufacturers and orders for manufacturing machinery for the coming years. In addition, improvements are already planned for PERC technology such as n-type and TOPCON. Farther away is another very promising technology such as the HJT, with high performance and supported by industry giants such as Panasonic and Meyer Burger.

Beyond acronyms, the tendency is to give a lot of volume to a technology with room for improvement so that the holy grail is obtained: cost reductions and at the same time performance improvement.

Modules: Bifacial

Although the VDMA report is not particularly optimistic about the transition to bifacial, my impression after Intersolar is that bifacial technology is unstoppable and that we will see a very rapid transition. As soon as the measurement and certification methods are standardized and investors have confidence in them, it will become one of the best tools to improve LCoE. In addition, Trump’s recent decision to exempt bifacial modules from import tariffs for sure helps speed up the transition in the USA.

Inverters: Central vs String

The inverter does not reach 10% of the capex of a park but its importance is much greater than its cost indicates: it is the brain of the plant and is therefore the gateway to the long-awaited value-added services and the “Smart-grid”. It is therefore a strategic component in which companies such as Huawei, GE, Siemens or ABB fight for hegemony.

The main types of product are:

– MLPE: on the one hand, in the residential segment there is a tendency to modularize and integrate the equipment into the module (the so-called MLPEs or module-level power electronics), a trend that is very much liked by the big players of the modules who see it as an extension of their scope.

– String: companies with electronic background such as Huawei have entered this sector with small modular equipment similar in hardware concept to data routers. With this concept and an aggressive pricing strategy, they have become market leaders.

– Centrals: are the traditional inverters that are installed in containers or platforms and that go with their integrated medium voltage equipment.

And the curious thing is that there are 2 tendencies that can seem contradictory: on the one hand the MLPEs are miniaturized and by means of great volumes, they threaten the position of the string in residential and commercial projects. And on the other hand, power plants and string for utility projects tend to grow in size to achieve LCoE reductions by reducing logistical, construction and service costs. In the last Intersolar, Sungrow launched the most powerful string on the market with 250kW while Gamesa Electric launched one of the largest inverter with 3750kW nominal power and integrated solution up to 7500kW.

For the moment being, central inverters keep being the top pick in utility-scale projects and they promise further LCoE reductions by growing in power and improving reliability.

Trackers: single axis

Here the tendency is not only that those with 1 axis are the clear technological winners, but that trackers have become a very important element of efficiency improvement. Companies such as NexTracker have gone beyond optimizing metal structures and added the value of control algorithms to optimize orientation. And with the advent of bifacials, this optimization will be even more important.

BoP: floating

A few months ago, the World Bank published an interesting report on the status of floating solar projects in the world and I was very impressed by the data they gave on the available potential.

Simply by using 1% of the reservoir surface area, 400GW of power would be installed. But this potential is still theoretical; the important thing is that they are very viable projects and little more expensive than projects on land. China is currently leading this field but it would not be uncommon for us to see legislation in the near future in Europe that obliges electric companies to install floating solar in their reservoirs (for both new and existing projects). We have already started to see tenders to install floating projects such as the one recently launched in Thailand.

We will pay attention to the technological evolution of the sector which, like good action films, promises 2 things: speed and surprises.

Wind energy is one of the key parts of the energy transition. In 2018 50 GW were installed but it is expected that in the next few years it will reach 60 GW per year. What will wind turbines be like in the next few years? What trends can we guess in the market?

Before we turn on the crystal ball, let’s look at the main factors that will shape the sector in the medium term (and surprisingly, despite the 60GW per year, volume is not one of them):

LCoE: The race to reduce generation costs is very competitive. And the curious thing is that it will no longer be, as it has been until now, a struggle with the conventional ones, but with the solar PV+storage. Wind will have to achieve continuous cost reductions to ensure those 60 GW per year in a very cheap solar environment and probably backed by battery storage.
Auctions: It is often said that the auctions have reduced margins, but it has also affected the development of the turbines since the great competition between the promoters means that instead of simulating the project with a commercially available turbine, it is done with a future development that in some cases is not even developed. This is evident in offshore, where projects are auctioned 4-5 years before they are put into operation, so it is necessary to work with hypotheses of future models.
Consolidation of OEMs: the bigger the manufacturer, the greater its capacity to produce new models. The development of new, more competitive turbines ensures the good health of the sector but also serves as an entry barrier for manufacturers with fewer resources. The higher the volume, the shorter the payback period and the greater the R&D capacity, thus shortening the product life cycles.

Let us now look at some product trends that are likely to occur in the coming years:

Bigger rotors: “Well, what a novelty” some will think. And they are right. The growth of the rotor is the main lever to improve the LCoE of the platforms. Let’s take a look at the latest onshore turbines launched on the market.

In this graph of power vs diameter it can be seen that the growth in rotor can not equal to that of power. Following the trend, the next developments would be in the area of 6MW and 160m rotor. But to guess trends, it is always better to look at power densities:

And this is where we see that the latest models launched in the range of 5-5.5MW, have a higher power density than the previous segments (3.5 and 4.5 MW). It seems clear that the next generation will focus more on lowering the power density by growing in rotor than on increasing the nominal power. My bet is that the next developments will be class III models of the 5-5,5MW platforms with perhaps small power upgrades to reach 6MW but with rotors in the 180m environment. And in these lengths, it seems necessary to have the option of modular blade.

Shorter development cycles: developing a new model in less than 18 months is very complicated as there are tasks such as certification or fatigue tests that require time. But what is possible is to do something that a few years ago was science fiction in this sector: overlap developments. This means that a new turbine could be launched on the market every 9-10 months if resources (and costs) are doubled, so this is an expensive option that is only available to large manufacturers. Let’s see as an example the times of the latest launches:

The time between the commercial launch and the commissioning of the prototype was 21 months for Vestas V150-4.2 and 19 months for SiemensGamesa 4.2-145. If we analyze the time between launches, Vestas waited 18 months to launch its new V162 while SiemensGamesa did it at 17 months. It is clear that the 2 market leaders are sequentially linking developments around the famous 18 months. This pace of launches is already very complicated to match for smaller manufacturers so if at some point in the future breaks the barrier of 18 months through overlapping developments, most manufacturers will not be able to keep pace and will see their products become obsolete.

The curious thing is that a few years ago this type of analysis always tried to guess where was the technical, logistical or even physical limit of the new turbines while now few dare to talk about limits but on the contrary speculate with faster evolutions in time and dimensions.

The 6 technological trends to follow in solar PV

What will the wind turbine of the future look like?