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With SunPower and Solaria already operating solar manufacturing plants here, the Philippines could become a profitable "Solar Valley"
The solar power industry these days is a mix of large and small companies pushing their own technologies. The playing field is still wide open for competing solar panel technologies. Eventually, the market will decide which ones will be left standing and which ones will eat the dust.
With all this competition, are there still opportunities for developing countries like the Philippines? Yes, particularly in manufacturing and in the downstream and applications areas of the value chain. The Philippines semiconductor and electronics industry, working closely with local universities, industries, and investors, can offer significant opportunities for innovation, particularly in solar energy applications development and manufacturing-process reengineering and optimization.
Let's start the argument with the fact that SunPower (SPWR) is operating two solar manufacturing facilities here. A company spokesperson confirms that its exports from the Philippines totaled $220 million in 2006. SunPower will be building a 250-megawatt solar plant alongside a 550MW plant built by OptiSolar, a California-based thin-film photovoltaic manufacturer. Taken together, these two plants will form the world's largest solar power plant rated at 800MW for Pacific Gas & Electric in California's San Luis Obispo County.
Driving Down Costs
SunPower's crystalline silicon photovoltaic (PV) fab process in the Philippines is its most efficient, with a 22% light-to-electricity conversion ratio. With the help of its Filipino engineers, SunPower has managed to drive down costs and improve manufacturing yields significantly. It also expects to reduce system installation costs by half in 2012 from 2006 prices. The company does not expect to be affected by a worldwide crunch in silicon availability, as it has supply contracts up to 2010, when the crunch is expected to ease.
The wafers supplied to SunPower are cut from silicon ingots by its joint venture with local Lopez Group's First Philippine Solar. The joint venture is based near the SunPower factory a few miles south of Manila and has been operating since June.
A privately held Silicon Valley-based company, Solaria, is also manufacturing solar panels here. According to a company spokesperson, Solaria is operating locally through contract manufacturer Ionics EMS. In an e-mail message, Solaria Chief Operating Officer Alelie Funcell says the company selected the Philippines because of its "highly educated labor pool and strong electronics industry infrastructure, specifically in back-end assembly." Another plus, she says, is the ability to leverage the large number of engineers and manufacturing personnel experienced in the semiconductor sector. Funcell, a 30-year industry veteran, adds that the solar industry supply chain in Southeast Asia is already well laid out, another reason Solaria chose to locate in this part of the world.
According to Solaria's Funcell, Filipino engineers have made improvements in solar cell manufacturing processes, such as cell interconnect soldering, electrical testing and analysis of solar cells and panels, material analysis and quality control, material handling, and automation. Filipinos can use the presence of companies like SunPower and Solaria, she says, to attract their key suppliers. "In order to replicate that success for the solar industry and create an efficient 'local Solar Valley,' the Philippines would need a solid infrastructure with an ecosystem of supply-chain support," says Funcell. Companies like Solaria and SunPower "represent the magnets helping to attract other pieces of the solar supply chain that specialize in things such as solar glass, frames, equipment design, automation, etc."
Stimulating Investment and R&D
Having companies like SunPower and Solaria here is one thing; leveraging their presence to jump-start a local solar industry is another. A key opportunity for the Philippines is the fact that a lot of the costs are now in the system integration and installation side of the equation. The costs from the technology, design, and manufacturing of solar panels will eventually be surmounted by competing technologies, but what will lower it further is wide-scale adoption. Here is where the Philippines can play a part.
The high initial outlay deters many investors, even though it is a one-time cost that can be depreciated. Sunlight is free and abundant, so there are no fuel costs and very little maintenance costs. There are already several solar (and also wind) projects in the Philippines, both off-grid and on-grid systems. One thing that will help encourage more investment is the recent passage of a renewable energy bill in the Philippine Congress. Features such as net metering, value-added tax exemptions, and tax credits are expected to stimulate investment and research and development.
With an increase in the domestic market for photovoltaics, opportunities will arise for small and large companies alike to develop business and introduce local innovations. For example, local power semiconductor companies such as PSI Technologies can position their power electronics business for the new demands of the solar sector.
The Philippines has 7,100 islands, many of which are not interconnected to the grid, so a myriad of innovative solar applications exists for off-grid areas. For example, the country relies heavily on cell phones for communication, so a backup solar system when there is a natural disaster or blackout is a key need. Problems may crop up in applications such as net metering, or tracking the position of the sun, which can result in local innovations to solve those problems. "There is huge potential in the Philippines for using distributed solar energy to generate power in places where the electricity infrastructure does not reach," says Funcell.
Local Research Help Needed
The key that will drive the Philippines to succeed in this arena is linking the industry more effectively to universities, particularly in industry-funded research and solar panel donations to interested parties. Research groups such as the University of the Philippines National Institute of Physics (UP NIP) have optics and device fabrication capabilities, including thin-film deposition working with technologies like Molecular Beam Epitaxy and compounds like GaAs and InP. In 2005 the prestigious Optical Society of America called a paper from the UP NIP one of the most exciting research papers for that year.
The Ateneo de Manila University Innovation Center is also working on solar. One project involves using solar panels to drive converted dehumidifiers that end up generating high-purity water (up to 16 liters a day) from moisture in the air. Another school, De La Salle University, built a solar car called SINAG that used SunPower solar cells.
An expansion of joint research between academe and industry can produce a healthy solar energy sector here, with the support of the financial sector and government agencies. Any talk of setting up a solar energy valley will involve more than just the renewable energy bill and investments from SunPower and Solaria. The Philippines will need public-private partnerships to encourage the installation and development of local solar plants, the development of technology suppliers for the sector, the development of systems integrators, and the spurring of innovative applications.