Changes in the PV Market that May Influence the Adoption of Smart Coatings

Friday 10 August 2012, Amsterdam

This report continues to believe that there are opportunities for commercialization of smart coatings in the photovoltaics (PV) sector, even though the PV market is quite different today than it was just a year ago, both from an economic and a political perspective.

Starting in 2012, the PV market is entering a period of reduced growth. This new market is very different from the one of the last several years, in which year-to-year growth in production doubled (or more), even in the midst of a worldwide recession. Today, however, a glut of conventional crystalline silicon (c-Si) PV modules on the market after over-production by the Chinese PV panel makers, along with dropping prices, is expected to significantly slow growth rates in PV production starting in 2012 and for the next few years.

Meanwhile, the political environment has also changed. Lingering fiscal concerns in the United States and the European Union, coupled with slow growth and high unemployment, have led governments around the world to pursue serious cost-cutting measures in an effort to reduce debt. To date, most subsidies, feed-in tariffs, and other tax incentives for PV remain in place. However, their future is uncertain; governments are likely to see these subsidies as targets for the cost-cutting axe. (At the time of this writing, Germany has just announced a more aggressive FIT reduction of 30% vs the previously targeted 15%)

But what does all of this mean for smart coatings in PV applications? First of all, it means that suppliers of materials and technologies to the PV market cannot simply rely on high growth rates for organic growth of their products. It also means that the ongoing commoditization of PV, especially in the market-dominant c-Si PV sector, will encourage PV panel makers to do one of two things:

• Look for ways to cut prices in order to stay competitive and keep sales volumes up, or

• Look for ways to add value to their products and create differentiation in the market in order to maximize profit margins.

That portion of the PV sector that opts for the latter strategy—addition of value-added features to their PV products—is where the opportunities can be found for smart coatings suppliers. To capitalize on these opportunities, coating suppliers must actively make the case to their customers, and potential customers, that the additional cost of adding a smart coating to a PV panel or module is worthwhile to the bottom line.

In summary, this report believes that there are significant opportunities for smart coatings suppliers in the PV business. The sheer size of the PV market as a whole means that the addressable market for smart coatings in PV is potentially large; even modest penetration in the PV market for smart coatings can lead to significant revenues for coatings and coatings technology suppliers. In addition, the adoption of smart coatings in PV can help PV panel makers accomplish two key goals important to the future success of the PV sector:

• Integration of smart coatings can cost-effectively increase conversion efficiencies for PV, and/or,

• Smart coatings can provide additional functionality that enables PV panel makers to create "premium" products and differentiate themselves in a rapidly commoditizing, and homogenizing, marketplace.

How Smart Coatings Improve the Value Proposition for PV

It is not clear how far the PV industry is willing to go with respect to adoption of smart coatings. The degree of penetration will hinge on two factors. The first question relates to cost; panel makers must be convinced that smart coatings can boost the performance of PV without adding so much cost that the economic benefits of the added coatings are negated. The second, and even more important, question is how well smart coating-enabled PV products will do in the marketplace.

Smart coatings can be broadly divided into two categories:

• Smart coatings that improve the basic performance of the PV panels, thereby helping to create higher performance PV products with better cost-in-use propositions to customers, and

• Smart coatings that add novel functionality to PV panels, thereby creating new types of devices and end-uses for the PV panels and higher profit margins for panel suppliers.

Within these categories, the most obvious opportunities for smart coatings in PV are for coatings that can increase efficiencies. This area is promising because the PV market is very likely to buy into increased efficiencies, as long as the increase in efficiency takes cost into account. For example, self-cleaning coatings may be employed to prevent dirt accumulation, thereby improving panel efficiency. But to be worthwhile in the marketplace, they must be practical solutions for the life of the panel. In other words, coating maintenance must be simple and inexpensive enough so as not to negate their benefits or erode their value below their cost.

At the other end of the scale, smart coatings that add novel functionally could certainly make PV panels stand out in the marketplace, but it is far from certain to what degree customers will care about the added functionality. Using smart coatings to add novel functionality should therefore be regarded as a much riskier proposition than using them to increase efficiency.

Smart Coatings for Better Panel Performance

Smart coatings can enable higher performance of PV panels by increasing the light capture in the panels. To that end, this report believes that there are roles for both self-cleaning and self-repairing smart coatings in preventing dirt, scratches, and other damage. Such problems are difficult to avoid in outdoor environments where most PV panels are deployed.

Specifically, self-cleaning smart coatings can improve performance by keeping the PV panels clear of dirt and debris, and self-repairing smart coatings can reduce the degradation of optical quality caused by scratches and other minor damage.

• Self-cleaning coatings will be successful if they can reduce the costs associated with manual cleaning. Routine cleaning using manual labor is an inherently expensive process that will only get more expensive in the long run. Thus, there are opportunities to improve the self-cleaning properties of PV panels in order to minimize ongoing maintenance costs.

• Self-repairing coatings that reduce the incidence of scratches and other damage could also improve underlying panel performance, reduce warranty claims related to underperformance, and reduce the incidence of breakage. And here again, routine repair of PV panels is inherently expensive, so self-repairing coatings that reduce the need for repairs and replacement are likely to present opportunities for both coatings companies and panel makers alike.

The key value proposition that performance-enhancing self-cleaning and self-repairing coatings bring to PV is reduced costs. These sources of value to the panel maker and the customer are quite tangible, and hence may be more easily monetized than the more speculative values of the added functionalities of new products that we discuss below.

Smart Coatings and Added Functionality

Smart coatings can also offer new functionality to PV panels—functionality that can provide new value to end users and better distinguish PV panels in the marketplace. As we have already noted, this latter issue is very important to maintaining margins in the PV marketplace, especially in today's economic environment in which panel prices are dropping and growth prospects are much more moderate than in recent years.

This report therefore believes that there are opportunities for coatings and coating systems that can selectively customize PV performance in the hands of the customer. In particular, we believe that smart coatings can enable certain niche PV products that can turn off or dim when required:

• First, thermochromic coating systems that dim or shut down panels can help to preserve service lifetimes. This functionality could be of particular use in PV technologies like cadmium telluride (CdTe) PV, which suffers from degradation when under power at high temperature. A thermochromic smart coating could protect such panels from permanent damage if temperatures exceed the limits. The value of preventing record heat from wiping out an otherwise fully functional PV generator should certainly be sufficient to fund some interesting products in this space.

• Both electrochromic and thermochromic coating systems for the fabrication of smart windows could also be used to add tangible, value-added functionality to PV panels. For example, these kinds of smart coatings could be integrated with BIPV glass, in which a transparent or semitransparent PV panel is combined with a smart window to provide controlled shading.

Other, longer-term opportunities may emerge as well, such as the integration of PV panels with OLED lighting or different kinds of displays, or more sophisticated smart window/PV panel combinations with OLED lighting in which an electrochromic shading layer would provide increased reflection of light back through the PV cell or toward the target as necessary.

There are also opportunities for combining PV with electrochromic layers across the portable and/or flexible PV sector, for both on- and off-grid applications, and for combining PV with other kinds of devices.