Solar Frontier Eyes Lower Panel Costs With Production Overhaul

(Bloomberg) — 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 megawatts 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 megawatts annually. The company is planning
to build production capacity of 1,000 megawatts 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.

To contact the reporter on this story:
Chisaki Watanabe in Tokyo at
cwatanabe5@bloomberg.net

To contact the editors responsible for this story:
Reed Landberg at
landberg@bloomberg.net
Iain Wilson, Abhay Singh

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