CD maker to harness potential of the sun

Moser Baer India transforms tonnes of tiny plastic particles into 3bn blank compact discs and digital video discs each year in a factory in a Delhi suburb, claiming a 20 per cent share of the global CD market.

But with higher costs for raw materials and digital downloads raising questions about the future of discs, the company has found a new outlet for its expertise in stamping and coating: solar panel production.

Moser Baer now aims to generate 40 per cent of its revenue from solar panels by 2010. It launched a new photovoltaic (PV), or solar panel, factory last month that currently produces enough units in one year to generate 40 megawatts of power. The company plans to double the plant’s production capacity by the end of the year.

Moser Baer generated Rs15.2bn ($370m) in sales in the first nine months of fiscal 2007, up 27 per cent from the previous year. Net profits soared to Rs700.7m from Rs49.8m.

Although India counts an average of 300 days of sun each year, the majority of Moser Baer’s solar panels are destined for export, mainly to Europe.

Solar power is thriving in Japan and Germany, where government subsidies have jump-started the market, as well as in the US. Spain, Portugal and other countries are latching on to solar as energy prices rise and concerns about global warming grow.

In a reflection of demand, Moser Baer says it has already booked a full year’s worth of orders from European utilities. The company estimates that the global industry will grow six-fold from current levels to $40bn by 2010.

Based on current demand, in the next few years “it does appear that the industry could easily grow 50 to 100 per cent annually”, said Rajesh Khanna, managing director of Warburg Pincus.

Warburg, the largest private equity investor in India, holds about 33 per cent of Moser Baer, which was originally set up in 1983 as a joint venture with Moser Baer Sumiswald of Switzerland, producing specialised clocks and time-recording units. Warburg invested $149m in 2004.

Other investors are also betting on the power of the sun. The International Fin­ance Corporation, the private sector arm of the World Bank, last week announced a $22.5m loan to Moser Baer for its solar business on top of its existing 9.8 per cent stake in the company. The UK private equity firm Electra Partners has also invested in Moser Baer.

Colin Warren, manager of IFC’s New Delhi office, said: “The market has grown and the economics are getting better. Solar grew initially because of subsidies by Japan and Germany and the western US. But now other European countries are getting into it.”

There are, however, significant obstacles to solar. Its expansion is hemmed in by solar’s relatively high generating cost of $4-$5 per peak watt compared with less than $1 per peak watt for conventional power.

“If prices could decline to $1-$2 per watt peak, then you’d see highly competitive pricing at the retail customer level. That’s been the holy grail of the solar industry,” said Dana Younger, head of IFC’s renewable energy infrastructure unit.

To narrow the gap, companies are trying to make panels more powerful and efficient. One possible solution is to increase the size of solar panels to capture more sunlight and “make them more dense and more concentrated”, said Ravi Khanna, chief executive of Moser Baer Photo Voltaic.

Moser Baer’s first solar panel factory produces conventional solar cells that measure 5in by 6in (12.7cm by 15.2cm). Sixty cells are combined to make a “module” that can generate 200 watts as a freestanding installation that does not require linkage to an electricity grid.

But Moser Baer is looking beyond conventional small solar panels toward a new technology called “thin film” – enormous solar panels comprised of a single sheet of glass that captures more sun and benefits from economies of scale. Most thin film panels are 1.2 square metres but Moser Baer aims to produce units that are 5.7 sq m. These large units could be suitable for commercial use in “solar farms” and would have four times the electricity output of conventional thin film solar panels. “That’s when costs are going to come down,” Moser Baer’s Mr Khanna said.

In March, the company announced it had contracted with Applied Materials, the US semiconductor equipment manufacturer, would develop and install the new thin film production line. Moser Baer plans to invest $250m over the next three years in the thin film factory that will initially produce enough units in a year to generate 40MW.

One constraint to the solar industry is the shortage of silicon due to voracious demand from the semiconductor industry. Demand for the silicon needed to make solar cells is likely to rise from 41,000 tonnes in 2006 to 120,000 tonnes in 2010, according to a recent report from Photon Consulting, a German research group.

New solar panel technologies could provide some relief. Thin film panels do not use highly sought-after crystal silicone but another more abundant form called amorphous silicon.

Moser Baer recently inv­ested in three Californian solar technology companies – Solaria, Stion and SolFocus – that focus on research and development with the intention of shifting manufacturing to India if their technologies mature, according to Rajiv Khanna, chief executive (and no relation to Rajesh Khanna). Moser Baer has earmarked $17m to invest in nanotechnology and a new solar technology called “concentration photovoltaic”, among other R&D efforts.

“Companies in Shanghai and Taiwan focus on lower cost. Players in Europe focus less on cost and more on the latest technology,” said Rajesh Khanna of Warburg. “Moser Baer is trying to manage both those skills: low cost and strategic investments in leading companies.”

While there is a large potential market for solar in India, especially in remote areas that lack electricity, critics say government policies are not yet in place to encourage expansion there.

Source :FT