Solar Frontier Eyes Lower Panel Costs With Production Overhaul

Solar Frontier K.K., a unit of Showa Shell Sekiyu K.K. says the switch to a more efficient production process will help cut costs at a new factory intended to serve as a model plant for overseas expansion.

The company aims to shave more than a fifth off its production costs for thin-film solar panels within two years at the plant in Miyagi prefecture, President Atsuhiko Hirano said in an interview.

The Tokyo-based company expects to cut manufacturing cost to 40 cents per watt from about 50 cents at the moment, Hirano said. Excluding depreciation, costs could fall to as low as 30 cents, he said.

“To reach that level would allow us to stay competitive, even though there is further reduction in average selling prices in the market,” the president said.

Large Chinese panel makers reached in-house production costs of 42 cents per watt to 49 cents per watt in the first quarter this year, according to Bloomberg New Energy Finance. Average selling prices for those companies were 58 cents per watt to 60 cents per watt.

Production Capacity

The Miyagi plant has production capacity of 150 MW a year, the minimum size necessary for efficient production, according to Hirano. That compares with Solar Frontier’s main factory in Miyazaki prefecture in southwestern Japan that can produce nearly 1,000 MW annually. The company is planning to build production capacity of 1,000 MW outside Japan.

The new plant’s compact production line will reduce capital expenditure, while a change in module structure will push down material costs, Hirano said. Further reduction is also expected by cutting the manufacturing process to 8 hours from 24 hours, he said.

Japan’s solar market is expanding rapidly after the government introduced an incentive program for renewables in July 2012. The Japanese solar market shifted focus to utility-scale projects while installations before the incentives were mostly residential.

The domestic residential solar can still be highly sustainable as the market is getting close to achieve grid parity, where residential solar is equal in cost to power from a utility, amid falling prices of systems, Hirano said.

“Given that grid parity is just around the corner, the residential solar market can still expand,” he said. “Our company is closer than anyone to grid parity and we can use our position to tap into demand.”

Thin-Film Panels

Solar Frontier makes panels using copper, indium, gallium and selenium, known as CIGS. The company competes with Tempe, Arizona-based First Solar Inc. in the thin-film market.

Solar Frontier is wholly owned by Showa Shell, which is pursuing a merger with Idemitsu Kosan Co. following an announcement in July that Royal Dutch Shell Plc. agreed to sell a stake in Showa Shell to Idemitsu.

©2015 Bloomberg News

Lead image: Raw solar cell in a hand. Credit: Shutterstock.

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