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CleanTech makes a comeback. But solar stays in the shadows
DTT TMT predicts mixed performance for the CleanTech68 sector in 2010. After a near-collapse in the stock market value of the entire industry during the recent economic crisis, government stimulus and investor interest catalyzed a sharp recovery. However, not all areas are sharing equally in the bounty. The solar technology subsector will likely be outperformed by the broader CleanTech industry. Prices of solar equipment, tools, and raw materials will probably continue to be depressed due to global overcapacity and insufficient growth in demand.
Between its high point in June 2008 and its low in March 2009, the CleanTech Index dropped even more than broader markets, declining 61 percent versus the S&P 500's 49 percent and the NASDAQ's 46 percent dips. The recovery has shown the opposite pattern: to the end of November 2009, the S&P and NASDAQ were up 67 percent and 72 percent, respectively, and CleanTech was up 80 percent69. Consensus expectations are that this momentum will continue for the next year or two as tens of billions of dollars of government stimulus spending is targeted at environmental technologies that are less commoditized than more mature technology industries.70 There are many who also anticipate an equally rapid recovery in solar stocks.71
We are by no means negative on the long-term prospects of solar power; however, unlike the rest of the CleanTech industry, the dominant solar technology — crystalline silicon photovoltaic (C-Si PV) — and its infrastructure currently face strong challenges that will likely limit its recovery in 2010 and 2011.
The first challenge is an unprecedented level of overcapacity in the history of silicon technology. Just prior to when the economic crisis began in late 2008, governments worldwide created a spike in demand for C-Si PV manufacturing capacity and installations. Global C-Si PV manufacturing capacity experienced material growth into 2008, with almost 12GW of annual global capacity, driving silicon and module prices up sharply. But although the economy and demand slowed (PV consumption of that capacity declined 15 percent in 2009), the capacity expansion continues unabated, largely in China and the United States. By the end of 2010, annual global capacity is expected to be 24GW, and although demand will grow, it will still only be about 6.2GW, meaning that utilization will be barely above 25 percent.72
Although there are significant differences between using silicon for integrated circuits and for C-Si PV, there are also enough similarities that the much longer history of the chip industry is likely to be at least partially relevant. Since data collection began in 1994, the global chip industry has never seen utilization drop below 56 percent.73 Given the potentially unprecedented nature of the prospective 2010 PV overcapacity, three developments may be expected: low module prices, significant consolidation, and an unusually protracted recovery.
There are few signs of consolidation so far. In fact the opposite is occurring as various governments worldwide are targeting solar as a strategic industry. The result has been falling module prices (down 50 percent in 2009), rising inventories (up 64 percent to 120 days) and falling poly-silicon prices (down 72 percent year over year from $180/kg at the start of 2009).74
These falling prices are making C-Si PV solar more affordable, thereby stimulating demand. However, this is being partially offset by weaker energy prices, especially natural gas and electricity. Further, as governments worldwide committed to bailouts and stimulus packages aimed at job creation, their ability to provide solar subsidies decreased in some geographies.75 A recent contentious study even argued that support for renewable energy did not create as many jobs as investing in other sectors of the economy.76
Although solar demand is likely to grow strongly in 2010 and 2011, some subsidy cuts and cheaper-thanexpected electrical rates may prevent that growth from being as strong as some might hope. For at least the near term, the PV industry is likely to remain in overcapacity.
Bottom line
The most obvious short-term implication is that governments and industry should anticipate the looming overcapacity and slow down the construction of new PV silicon plants. Even in China — historically one of the most aggressive builders of PV capacity — recent announcements indicate that the government is restricting financing and withholding approvals of new solar plants.77
PV silicon and module manufacturers need to keep strong balance sheets and costs in line during the period of overcapacity. Sometimes closing entire plants may be necessary.78 Many are experiencing negative gross margins, and those with inadequate cash balances are forced into dilutive equity and debt financings. Those further down the supply chain must also prepare for changing economics. Some of those selling raw materials to the PV industry are discovering that fixed volume contracts are being canceled or that reduced and guaranteed prices are being slashed.79
Competing solar technologies such as cadmium telluride (CdTe) thin film, copper indium gallium selenide (CIGS) thin film, amorphous silicon (a-Si) and solar thermal do not have the same overcapacity problems as C-Si PV. However, the entire solar industry forms a closed ecosystem, and the economic pressures that C-Si PV is experiencing are having a serious effect on competing technologies and companies, which need to worry about cost control, reducing output, and securing long-term contracts.80
Semiconductor equipment companies that have so far mitigated the effect of the recession by selling to the solar industry may need to brace themselves. Although sales to C-Si PV plants under construction have generated significant sales in recent months, any freeze on construction in 2010 would likely cause equipment sales to slow markedly. Semiconductor equipment has historically been a highly cyclical business, and it was expected that solar would provide a secular growth market. However, the short-term oversupply and likely freeze in new plant construction suggest that PV solar may not be as robust as hoped for several years ago.81
Consumers and utilities, on the other hand, are poised to benefit. Although paybacks continue to depend on geography, local electricity rates, subsidies, tax breaks, and feed-in tariffs, the significant drop in PV silicon prices (and follow-on pricing drops in competing technologies) will likely make solar more affordable than during the high-price bubble of 2007 and 2008. As a result, those with longer-term investment horizons will be able to have their day in the sun.
From gray to green: technology reinvents cement
Throughout 2010, technology's contribution to carbon dioxide (CO2) reduction is likely to include initiatives such as electric cars, more efficient airplanes, and leaner data centers — all virtuous. Yet there is another, largely overlooked industrial segment that may deliver an equally meritorious benefit: cement.
Advances in technology may soon lead to the world's first carbon-negative cement plant82 that could, in the medium term, deliver a significant (at least 5 percent) reduction in global CO2 emissions. Reinventing cement matters given the industry's status as one of the largest single contributors to CO2 emissions.
Cement represents about 5 percent of global emissions — even greater than that of the aviation sector. The culprit is calcination, the process used to manufacture most of the world's cement. This entails baking limestone at up to 1,500°C.83 Heating the limestone requires carbon-emitting fuel. Afterwards a further wave of CO2 is released as the limestone burns. Roughly 900 kg of CO2 is generated per ton of cement manufactured,84 some of which is then reabsorbed as the cement dries.85
In 2010, worldwide demand for cement is expected to be at least two billion tons; China alone is expected to construct one billion square meters of new buildings.86 Global forecast demand for cement in 2020 is three billion tons87, that is about 2.7 trillion kg in emissions from production. Plus, by 2020, carbon trading programs are likely to have been introduced. As a result, the price of carbon credits could double the effective price of cement, which is essential to economic growth. The technology sector's challenge is to enable economic progress without a commensurate rise in carbon footprint.
There have been several attempts at engineering lower carbon cements, most commonly by combining traditional Portland cement with a variety of industrial by-products, such as power-station fly ash.88 In some regions agricultural by-products, such as rice and sugar cane husk, have also been used.89 Yet another approach is based on alkali activation of fly ash or other volcanic ash, creating a material that can be used as a substitute for traditional cements.
These products have most of the properties of traditional cement, but with a lower carbon footprint.90 Emissions from production of these cements are claimed to be considerably lower than emissions associated with the manufacture of traditional cement.91 A few of the world's recent landmark constructions have been built on low-carbon cements.92
In 2010, output of low-carbon cements should grow and exceed two million tons, or about 0.1 percent of total cement production in 2010.93 But the supply of these blended cements may be limited by the availability of sufficient by-product.
Another limitation of blended cement is its CO2 absorption capability, which is considered inferior to that of Portland cement. Traditional cement when in the form of exposed cement blocks absorbs up to 0.51 tons of CO2 for every ton manufactured. 94 Blended cement, based on 25 percent fly ash, absorbs just 0.38 tons.95 The delta in net emissions, adding production emissions and subtracting absorption, is about 0.13 tons.96
The challenge is to design a cement that generates zero CO2 in production, emulates Portland cement's CO2 absorption, and is available in sufficient quantities to satisfy global demand.
One possible solution is based on the combination of magnesium silicates and special carbonates. In 2010, a test plant for cement based on these materials will be built.97 Supply should not be a problem as there are an estimated 10 trillion tons of reserves of magnesium silicate. The carbonate, hydrated magnesium carbonate, is a by-product from the processing of magnesium silicate. The latter is heated to create magnesium oxide (MgO). The use of magnesium silicates eliminates CO2 emissions from raw materials processing; the special carbonates are carbon negative. The magnesium silicate needs to be heated to 650°C (rather than 1,500°C for traditional cement). This means that biomass fuel can be used whereas traditional cement requires more calorific fuels.
This new cement's ability to absorb CO2 varies according to the ratio of carbonates to magnesium oxide (the material extracted from the magnesium silicate) used. Assuming 25 percent carbonates, final emissions are estimated at -0.06 tons of CO2 absorbed per ton of cement created. If biomass is used, emissions drop to -0.27 tons of CO2 per ton manufactured.
The annual emissions dividend in 2020 could be net absorption of 330 million tons of CO2 in the manufacturing process alone, and a net reduction of over three billion tons relative to using Portland cement.
Bottom line
The potential benefits of carbon-negative cement are enormous, but they are likely to be realized over a five- to 10-year period. It may be a while before the world's skyscrapers are constructed of carbonnegative cement. Sidewalks and driveways are more likely to be the first carbon-negative constructions.
A major factor shaping the economics of carbon-negative cement is likely to be the additional benefit in the form of carbon credits. As companies start to pay for every ton of CO2 emitted, the financial benefits of carbon-negative cement multiply.98
The low-carbon to carbon-negative cement sector should also consider other ways in which their products can reduce overall emissions. For example, white cements are better able to keep buildings cool by repelling heat.99 Some varieties of low-carbon cement could even be engineered to be more durable than traditional cement.100
The business case for low-carbon or carbon-negative cement should not assume it will be more expensive than traditional cement.101 In fact, the opposite may be true. A ton of raw material may generate a greater quantity of cement due to the volume of CO2 absorbed in the production process.
The business model for reinvented cement should also consider the value of some of the manufacturing process by-products, some of which could be used in the glass, ceramic, or cement industries.102
A building material may seem too basic to merit inclusion in a document devoted to making predictions about technology. But advances in technology are not limited to faster lasers, smaller chips, and flying robots.103 One of its biggest responsibilities is to address the myriad issues the world faces, which is why in previous years we have covered issues such as water scarcity, plastic, nanomaterials, and genetically modified foods. In 2010, debates over global warming are likely to continue over its scale and timing, but the technology sector will continue to be viewed as part of the solution.
Footnotes
68 The Cleantech Index. See: http://cleantech.com/index/
69 The Coming of the Cleantech Era, Greentech Media, 1 January 2009: http://www.greentechmedia.com/articles/read/the-coming-of-the-cleantech-era-5540 /
70 Solar: Analyst Sees Signs Of Demand Recovery, Barron's, 17 September 2009:
71 http://blogs.barrons.com/techtraderdaily/2009/09/17/solar-analyst-sees-signs-of-demand-recovery /
72 Solar crisis set to hit in 2010, 50% of manufacturers may not survive, DIGITIMES, Taipei, 4 September 2009
73 Semiconductor Capacity Shortage in 2010?, Semiconductor Intelligence, LLC, 18 August 2009: http://www.semiconductorintelligence.com/?p=130
74 Analyst: Solar Inventory Piling Up, Renewable Energy World.com, 24 September 2009: http://www.renewableenergyworld.com/rea/news/article/2009/09/analyst-solar-inventory-piling-up
75 http://www.reuters.com/article/GCA-BusinessofGreen/idUSTRE5AO38420091125
76 Study of the effects on employment of public aid to renewable energy sources, March 2009: http://www.juandemariana.org/pdf/090327-employment-public-aidrenewable.pdf
77 Solar industry is reined in, China Daily, 26 October 2009: http://www.chinadaily.com.cn/bizchina/2009-10/26/content_8846229.htm
78 GE Next Victim in Solar Shakeout, Industry Week, 6 November 2009: http://www.industryweek.com/articles/ge_next_victim_in_solar_shakeout_20362.aspx
79 Q-Cells SE plans fundamental changes to halt business decline, EE Times Europe, 13 August 2009: http://eetimes.eu/showArticle.jhtml?articleID=219400005
80 Update 3-First Solar sales lag Wall St, solar shares sag, Reuters, 28 October 2009: http://www.reuters.com/article/technologySector/idUSN2832000020091028
81 Deloitte Semiconductor conference call: October 16, 2009 and UPDATE 2-Applied Materials says value of solar order slashed, Reuters, 6 April 2009: http://www.reuters.com/article/marketsNews/idAFN0642264620090407?rpc=44
82 Page 10, Novacem — carbon negative cement to transform the construction industry , Energy Futures Lab, Imperial College, 15 October 2008: http://www3.imperial.ac.uk/pls/portallive/docs/1/50161701.PDF
83 A cracking alternative to cement, The Guardian, 11 May 2006: http://www.guardian.co.uk/technology/2006/may/11/guardianweeklytechnologysection.carbonemissions ; and Industry scrambles to find a 'greener' concrete, The Christian Science Monitor, 12 March 2008: http://www.csmonitor.com/2008/0312/p14s01-stgn.html
84 Ecocem's cement is both green and white, Sunday Business Post, 26 July 2009: http://www.thepost.ie/story/eymhmhgbey /
85 How solid is concrete's carbon footprint? Science Daily, 24 May 2009: http://www.sciencedaily.com/releases/2009/05/090518121000.htm
86 Asia construction frenzy needs green infection, Reuters, 5 May 2009: http://www.reuters.com/article/GCA-GreenBusiness/idUSTRE54502S20090506 ; and Industry scrambles to find a 'greener' concrete, The Christian Science Monitor, 12 March 2008: http://www.csmonitor.com/2008/0312/p14s01-stgn.html ; for more information on China's production of cement, see: Chinese cement companies to reduce their carbon footprint, China Energy Group, 7 July 2009, http://china.lbl.gov/news/chinese-cement-companies-reduce-their-carbon-footprint . Cement production in China consumes 15 percent of all coal burned, 30 percent of dust emissions in all industrial sectors and emits 20 percent of China's carbon dioxide and 2.6 percent of sulphur dioxide. Source: 'Green building' crucial to world's biggest cement producer, China Daily, 8 June 2008: http://www.chinadaily.com.cn/bw/2009-06/08/content_8257737.htm
87 'Green' cement may help counter global warming, Gulf Weekly, 14 January 2009: http://www.gulfweeklyworldwide.com/article.asp?Sn=6211&Article=21189
88 Green cement: reforming the carbon criminals, Building, 31 July 2009: http://www.building.co.uk/story.asp?storycode=3146073
89 Industry scrambles to find a 'greener' concrete, The Christian Science Monitor, 12 March 2008: http://www.csmonitor.com/2008/0312/p14s01-stgn.html
90 For more information, see: http://www.cenin.co.uk/products.php ; http://www.ecocem.ie /; Green cement, ABC TV Science, 22 May 2008, http://www.abc.net.au/catalyst/stories/2244816.htm ; From Australia: Green cement and water quality monitoring, Greentech Media, 12 May 2009, http://www.greentechmedia.com/green-light/post/from-australia-green-cement-and-water-quality-monitoring-4609 /
91 The exact footprint depends on the source of energy used in manufacturing, and the ratio of industrial effluent and Portland cement. The substitution ratio of Portland cement depends on the characteristics of the alternative used. If the pozzolan (the alternative material used) has cement-like properties, the Portland cement ratio can be as low as 5 percent. More typically, the ratio is 25 percent pozzolan to 75 percent traditional cement. If cements based on alkali activation of fly ash are used, CO2 reduction can be up to 90 percent, depending on the level of base addition, the level of soluble silicate addition, and the use of heat activated clays. For additional information on this topic see: Cemex Philippines launches 'green' cement, Cementchina.net, 14 May 2009, http://www.cementchina.net/news/shownews.asp?id=5498
92 Constructions based on low-carbon cement include: the 02 in London, UK; Landsdowne Road in Dublin, Ireland; the River Suir Bridge in Waterford, Ireland; the Beijing Shanghai high speed railway. Sources: Helping to build a green edifice with specialty cement, The Business Times, 29 September 2009: http://www.businesstimes.com.sg/sub/companies/story/0,4574,352279,00.html ? ; and Ecocem's cement is both green and white, The Sunday Business Post Online, 26 July 2009: http://archives.tcm.ie/businesspost/2009/07/26/story43364.asp
93 The process uses. Ecocem's cement is both green and white, Sunday Business Post, 26 July 2009: http://www.thepost.ie/story/eymhmhgbey /
94 The 0.51 and 0.38 values reported correspond to the total CO2 absorption potential of the pure Portland cement and blended cement versions, and it is very difficult to achieve them unless under very long timescales (i.e., many years or decades depending on the porosity of the product and the environmental conditions, such as CO2 concentration).
95 The lower capacity of blended cements to absorb CO2 relative to Portland cement are due to: the lower level of CaO-based phases in the blended cement due to the cement replacement by the pozzolan; the reaction of Ca(OH)2 produced by Portland cement hydration with the pozzolans to produce calcium silicate hydrate phases (C-S-H); and the reduced porosity of the resulting cement.
96 Calculation assumes production emissions of 0.80 tons of CO2 from Portland, and 0.65 tons of CO2 from blended cement (75% Portland, 25% fly ash); 0.51 tons of CO2 absorption from Portland, and 0.38 tons from blended cement.
97 Discussions with industry executives undertaken specifically for Technology Predictions, 2010.
98 Green pioneers: Nikolaos Vlasopoulos and Stuart Evans, The Sunday Times, 10 May 2009: http://www.timesonline.co.uk/tol/news/environment/article6255962.ece
99 Ecocem's cement is both green and white, Sunday Business Post, 26 July 2009; see http://archives.tcm.ie/businesspost/2009/07/26/story43364.asp
100 Helping to build a green edifice with specialty cement, The Business Times, 29 September 2009: http://www.businesstimes.com.sg/sub/companies/story/0,4574,352279,00.html ?
101 One low carbon cement costs up to 30 percent less than traditional cement. Source: Helping to build a green edifice with specialty cement, The Business Times, 29 September 2009: http://www.businesstimes.com.sg/sub/companies/story/0,4574,352279,00.html ?
102 During production of MgO from magnesium silicates, a silicate-aluminate by-product is formed. This product could be used in the glass and ceramic industries, or as a pozzolan in blended cements.
103 http://www.youtube.com/watch?v=L5JHMpLIqO4
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