Sharp-Enel Alliance Offers New Solar Biz Model

(page 2 of 2)

The prospects are best in sunny areas with generous solar-energy subsidies, such as Italy, Japan, and California. "We are a lot closer than we thought, thanks to the credit crisis," says CLSA's Charles Yonts, who is based in Hong Kong.

A Silicon Glut in the Making

The dynamics of the solar market are in flux. There might not be enough crystalline silicon to go around now, but dozens of new plants are scheduled to open in the coming months. Analysts say the current silicon shortage could quickly give way to a glut. By 2010, CLSA predicts the number of silicon producers could reach 175, from just five in 2004.

An abundance of silicon should drive prices lower. Since silicon accounts for two-thirds of the cost of making a solar panel, Sharp and other manufacturers would normally benefit from higher profits. But cash-strapped utilities and renewable energy facilities are all now shopping around for cheaper panels. Panel makers may have to lower their prices between 10% and 30% in 2009, analysts say. (Many companies in China have delayed their plans. Korea's LG Electronics pulled out of an agreement to buy a majority stake in Congery's solar panel-making plant in Frankfurt.)

Sharp knows it can't compete with Chinese and Taiwanese companies if prices collapse. That's why it's aggressively investing in its thin-film technology, which only a handful of companies have the knowhow to mass-produce. Sharp officials say thin-film solar panels can be made five times faster and with 100 times less silicon than the standard crystalline silicon type and are better suited for large-scale industrial applications such as power plants. Sharp has a small-scale production line at a facility in the western city of Nara. By 2010, Sharp plans to open a $760 million state-of-the-art thin-film panel plant in neighboring Osaka. The Italy plant it's building with Enel and others will be modeled on the Osaka plant. At the press announcement last week, Sharp's Hamano wouldn't say when the company expects to recoup its investments.

Hall is BusinessWeek's technology correspondent in Tokyo.