Applied Materials is the world's biggest solutions and equipment provider to the solar photovoltaic manufacturing industry. That vantage position gives Michael Splinter, Chairman and CEO of the $5-billion (fiscal 2009 revenues) company, a unique view of an industry in a tearing phase of growth worldwide.
As nations globally migrate to clean sources of energy, solar panel prices will drop dramatically, driving adoption at a pace never seen before, predicts Splinter. India, he tells BT's Virat Markandeya and Josey Puliyenthuruthel in an interview, has the potential to be at the centre of this explosion in demand for solar-generated energy if it places its bets right. Edited excerpts:
Solar energy is suddenly being talked about as a replacement for fossil-fuels. How did we get here?
If we go back five years, silicon prices were $300 a kg, solar power was $4.20 a kilowatt or maybe even more expensive than that. You could build as big a factory as you want and people would buy all the output. That changed when Spain changed its incentive structure (it withdrew subsidies as an economic slowdown forced cutbacks in government spending) for solar power in 2008. Demand shrunk and all of a sudden there was huge overcapacity as new capacity came up. Prices of (crystalline) silicon came down from $350 to $50 per kg and prices (of panels) came crashing down.
Despite all that and despite the dramatic failure of Copenhagen last year, governments still know that they have to do something about carbon dioxide emissions. A world with another billion cars or so running on gasoline is not a viable future for the planet. I think most people see that and know that countries have to invest, to really make a difference.
India is certainly stepping up in that regard, faster than the US and China, to set a vision of where the country is going to go. I think that's going to be tremendously positive for CO2 emissions in India. The big question is: will it be really positive for the solar industry in India? The answer to that is how some nuances in policy and deployment of this terrific vision plays out in future.
How does solar stack up against other renewable resources? Solar panel technologies deliver efficiencies of less than 20 per cent today...
You have to remember that it's about the cost of electricity; cost of energy and efficiency is just one of those parameters. I believe solar is still the fastest-growing source of renewable energy. Wind is, of course, by far the largest. When you look at the different segments of renewable or clean energy, nuclear may be by the far the largest source of clean energy, then wind, then solar PV and then other smaller techniques.
Pricing of solar PV has been coming down dramatically and we think this year there'll be at least 50 per cent growth in deployment of panels. That's a dramatic change on a worldwide scale and we see no reason that numbers (like) 30 per cent-plus compound growth will not hold out for a long time into the future. Remember, pricing now is already between one dollar and one dollar and twenty cents (a kilowatt). It will have to come down a lot more to get solar competitive with other forms of electricity.
What, according to you, is the sweet spot in terms of pricing where solar needs will double or treble every year in place of growing 30 per cent every year?
I think that sweet spot is around ten cents a kilowatt hour because generally there is no place where you can generate peak electricity at 10 cents.
And how far away are we from that?
Not far, few years, maybe five, six, seven years... something like that on the scale of technology development.
What excites you about emerging technologies in the solar PV space?
I think we are going to see an evolution of capability. It's hard to make revolutions in a technology where, one, you need to have huge scale, two, it has to be reliable and last for 25 years. Any new technology that comes along has to be reliable and tested, you can't just say: okay, we're going make a gigawatt from this or that.
Will something like organic PV become big?
(Smiles) For some applications, it may be okay, but I don't think it's going to be the application that power companies are going to use to generate hundreds of gigawatts in countries around the world.
For the mainstream, it is clearly going to be thin films?
I think it depends on what the applications are. I think thin films are going to play a big role in ground-mounted PV, I think crystalline silicon will be the biggest player in rooftop applications. Let me give you an example, this is a US example, I think it's relevant to India as well. If you look at a city like Los Angeles, it's a big city right, lots of area and most of the rooftops—warehouse constructed buildings, for instance—are a great spot for crystalline silicon.
Turning to India, is solar really suitable for India?
India's a very diverse country so it's hard to say a specific thing, but certainly, the solar hours here—you can find spots with 2,100 peak solar hours a year—are as good as anywhere in the world. However, generally there is haze in the air and very high temperatures. That makes thin film very attractive for India deployment as it has better characteristics for high temperatures and diffused light.
The big question is: As the solar mission gets deployed in India, how is the government going to ensure that the Indian manufacturers are on a level playing field with importers? I think you want to build an industry here that has manufacturing, that has installation... has all the supporting industries to create 20 GW of solar by 2020 or 2022. It's an important factor that the technological part is here and a lot of those companies to scale up, whoever is trying to invest in the country.
In China, crystalline silicon deployment is going very strong; there's a huge capacity build-up. Still, China is considering what its solar policies should be, it's still developing that. India's much further along in deployment. That's the real centre of solar manufacturing.
Given the manufacturing momentum in China, do you think India still has a chance to catch up?
What's the alternative? If you're going to deploy 20 GW of solar by 2020 and then I believe the goal is 100 GW by 2030, are you going to buy all the panels from outside the country? Let's say the cost of a solar panel gets down to 50 cents a watt—that's $50 billion of utilities money leaving the country. I think I would be concerned about that. That is why I'm saying today that now is the time to look at how to scale and grow the industry for this market.
This market can be the biggest solar market in the world. Has the best sun, has a huge need for electricity, has a hugely growing economy. When you add up all the things that are important to market growth, India has a great need for energy, has the need to create jobs and grow an industry. Why wouldn't this be the industry to really think about how to attract both indigenous and overseas investments?
It has to be thought-out well. In all cases with successful semiconductor presence, for instance, the government was always very helpful, had a policy and did capital grants and tax... But we're missing an ingredient in India.
If that's taken care of, what are going to be the big hurdles in ramp-up? Is the lack of semiconductor fabs an issue?
The two big things here are infrastructure and people. There's plenty of Indian engineers who have participated in high technology factories around the world. I think they would love to come here and start and industry. So I don't think talent is an issue. Infrastructure is a bit of an issue but we've worked with almost every manufacturer here in India and all of them are able to be overcome this without too much difficulty.
I'm sure India has looked back at trying to attract semiconductor factories to the country. They were singularly unsuccessful in that quest (earlier) while Singapore and Taiwan were successful.
How does India's solar mission compare with all the regulatory frameworks in place elsewhere?
It's a very bold vision. The goals are exactly right and now it will get down to how you do the deployment. I think the one thing that's missing across the world is what is going to be the responsibility of utilities. Are utilities going to be required to have so-and-so part as renewables by such-and-such date? Because when you start to think about 20 GWof electricity, this has to be deployed by utilities. This is utility scale by definition. You don't get to that kind of scale by putting it on somebody's house or even on tops of buildings.
How optimistic are you that utilities will buy into this model on a large scale?
There'll be negotiation, I believe. This has to be part of the government's vision. I know that there are discussions already going on to have a certain portion as renewable energy by certain time. To have a solar target especially in the early days of the deployment will ensure that solar gets the scale and gets the cost down and allows the government, at the end of this, to remove the incentives. That has to be the goal for everybody, in the end, to have free-market forces pushing the market and not just the regulatory or incentive forces.