Taiwan also has a strong incentive to develop its solar power sector because there are few oil, coal and natural gas deposits on the island itself. Today, Taiwan gets about 98 percent of the energy it uses from imported sources, according to statistics from the Taiwan Institute of Economic Research, leaving the island at the mercy of geopolitics and the vicissitudes of the market.

As recently as late last summer, the market for solar cells was booming, both in Taiwan and around the world. But in September, after rising to unprecedented levels, energy prices began to drop as the global economy started falling into a recession. With the cost of natural gas, coal and oil plummeting and companies looking for savings wherever possible, the market for photovoltaic products that generate electricity from sunlight has faced a downturn because prices for the products are still relatively high. Nevertheless, those in government and the industry itself remain bullish on the future of solar power because of the confluence of several indisputable trends: Competition for fossil fuel energy resources will remain strong, especially as a growing mainland China competes for global resources; few new deposits of oil, natural gas and coal are being found worldwide; options for storing nuclear waste remain limited and the public's perception of dangers associated with nuclear power generation has not changed; and because electricity generated via solar technology produces much less pollution and greenhouse gas than fossil fuels.

Taiwan's public and private sectors have shifted attention to the photovoltaic field in light of the growing concerns about the environment and the predictable depletion of oil and other traditional energy resources. "We should leave oil before it leaves us," says Lan Chung-wen, a professor of chemical engineering at National Taiwan University (NTU), quoting the words of Fatih Birol, chief economist with the Paris-based International Energy Agency. Lan is also the director-general of the Photovoltaic Technology Center (PVTC) at the Industrial Technology Research Institute (ITRI), a government-funded research organization in Hsinchu.

If the findings of a 2004 report released by Rice University in the United States Lan cites are correct, global dependence on fossil fuels should be reduced as early as possible, as oil will be used up in 40 years and natural gas in 60 years. The report estimates that coal resources will last for 190 more years, but coal is the most pollutingin terms of both particulate matter and greenhouse gasof all major energy sources.

Despite the economic downturn, Doris Hsu, president of local solar product manufacturer Sino-American Silicon Products Inc., maintains high hopes for the development of the energy source in the long term. "This is the path our planet has to follow to keep the environment clean," Hsu says. She observes that while scientists formerly argued for the use of "green" energy sources because of fears of oil depletion, today they are more apt to express concerns about the environment and climate change. This means that concerns over a possible slowing of solar energy development due to the falling price of oil, which dropped by more than US$100 per barrel from July through December in 2008, can be dismissed.

The Pinch

In the current economic downturn, however, the solar power industry has inevitably also felt the pinch. One Taiwan manufacturer, Gintech Energy Corp., has postponed the construction of a new plant for a year. Sino-American itself has also expressed worries about the possible drop in the demand for silicon wafers used to make solar cells. "In winter, it's natural to see fewer orders because it is not so convenient to install solar panels then in much of Europe and the United States," Hsu says. "So you have to wait until about February. If the demand remains low after that, you'll know that the recession has had an impact on this industry."

However, Hsu notes that in contrast with the recession's impact on Sino-American's semiconductor manufacturing branch, the production of silicon wafers used to make solar cells is holding up well. While semiconductor production dropped about 20 percent from the third quarter to the fourth quarter of 2008, solar cells remained stable. "The impact on semiconductors has been immediate and severe," she says. "Semiconductors are used in various consumer electronic products, which people can decide almost overnight not to buy if they've been laid off."

The semiconductor sector is also fundamentally more vulnerable to the recession because it costs much more to set up semiconductor manufacturing plants than solar cell plants. According to the Bureau of Energy, the cost of setting up a production line for standard 12-inch semiconductor wafers can reach as much as NT$60 billion (US$1.8 billion), while an average crystalline silicon solar cell production line costs between NT$200 million (US$6 million) and NT$300 million (US$9 million) and the expense for a thin-film solar cell line is NT$2 billion (US$60 million).

Despite all the talk around the world about the benefits of green energy sources, Gintech says solar cells now provide less than 0.1 percent of the world's total electricity demand. "That means there's a lot of room for the development of the industry and its boom will last for a long time," Ellick Liao says. "When its production cost goes down and economies of scale start to emerge, the photovoltaic industry should be able to survive on its own without government support," he adds. Gintech estimates that the annual production value of the industry could reach US$100 billion globally in 2016, compared with US$18.6 billion in 2007. By 2050, half of all electricity generated around the world is likely to be produced by solar cells, according to Gintech's research. As for Taiwan, PVTC says the amount of solar power generated on the island could increase to 31 megawatts by 2010, up from 4 megawatts in 2008.

To ensure such a bright future, Liao observes, the government should support the sector's early development until the cost of electricity generated by solar cells is competitive with that produced by conventional sources. Liao believes that this "grid parity" could come as early as 2015, when the cost of electricity generated by solar cells is thought likely to equal that of conventionally generated energy. After that, solar-generated electricity is likely to become cheaper than that from conventional sources. At present, the average cost for electricity generated by solar cells in the 10-largest Organization for Economic Cooperation and Development (OECD) member countries is about 1.5 to 3 times higher than that of conventional electricity. Currently, the cost of conventionally generated electricity in the 10-largest OECD countries ranges from a low of US$0.14 per kilowatt-hour in California in the United States to a high of US$0.29 in Germany. Liao believes that the cost for solar electricity in OECD countries could drop from the present US$0.46 to US$0.24 per kilowatt-hour by 2015.

To wean the solar power industry off public subsidies and seek wider applications for solar cell products, the government promotes research into techniques to reduce the cost of electricity generated by solar cells, the major factor behind solar electricity's low market share. That is why PVTC, which was established in 2006 as one of ITRI's five focus centers, has a mission to develop new photovoltaic technologies and pass them along to the private sector for commercial use. "Taiwanese tend to pay royalties for know-how purchased from foreign businesses, such as the payments made by local producers to dynamic random access memory [DRAM] designers. The local photovoltaic industry shouldn't follow in their steps," Lan says, explaining the rational behind the birth of the Hsinchu center, which employs some 120 staffers.

The center's major job is to improve the conversion efficiency of solar cells by making them more capable of absorbing sunlight. For example, researchers have used nanotechnology to build tiny columns on the surfaces of the cells. The result is a cell that reflects only a small amount of sunlight back into the sky, instead absorbing much of it and converting it into power.

Dye-sensitized solar cells are another next-generation technology being developed by research organizations around the world, including Taiwan's PVTC. A type of thin-film cell that employs organic dye to absorb sunlight, the dye-sensitized cell could be the star of the future because it does not require expensive raw materials and elaborate equipment to manufacture. Since the cells are bendable, they can also be attached to consumer products such as handbags to provide a power source for personal electronic devices. At present, solar cells in consumer products account for only 3 percent of all cells in use. The dye-sensitized cells are expected to show up in commercial applications by 2010.

"We're experiencing a critical time in the face of global warming and a shortage of fossil fuels," NTU's Lan Chung-wen says. "It's a time of crisis, but it also represents a very good opportunity for the photovoltaic industry to develop." The worldwide recession has unquestionably affected Taiwan's solar industry, but in light of the potential environmental benefits, cost savings and energy independence promised by solar cells, the industry's future continues to look bright.

The Players

The photovoltaic industry began developing in countries such as Japan and Germany more than 20 years ago, although it did not really take off until this century. According to Gintech, the second-largest maker of solar cells in Taiwan after Motech Industries, the annual solar cell production output worldwide reached 4.3 gigawatts in 2008, 15 times the amount generated in 2000. Products made by companies in Taiwan produced nearly 700 megawatts of the world total in 2008 according to a Bureau of Energy estimate.

The vast majority of the more than 70 Taiwanese enterprises have entered the field since 2000, but they have already performed impressively. According to ITRI, the revenue of the entire industry, from wafer manufacturers to cell makers to module packagers, reached NT$100 billion (US$30 billion) in 2008, up from NT$7 billion (US$212 million) in 2005, with the cell production sector grabbing the majority share. In 2008, Taiwan ranked fourth worldwide in terms of the power generated by the solar cells it manufactured, accounting for about 16 percent of the global total. The top three spots were held by mainland China, Germany and Japan. "Taiwan has solid strength in manufacturing semiconductors and flat panel displays, experience that is invaluable for the development of the solar energy industry," NTU's Lan Chung-wen says of Taiwan's competitive edge in the relatively new sector.

Motech, which was covered in the August 2008 issue of Taiwan Review, was the world's sixth-largest manufacturer of solar cells in 2007. In terms of production capacity, Gintech, which was founded only in 2005, expects to rank sixth in the world this year, contributing 8 percent of the projected world total of seven gigawatts.

Sino-American, an early player in the industry in Taiwan, began shifting its attention to making silicon wafers for solar cells in 2000 after 19 years of semiconductor manufacturing. The company's decision to diversify its product lines was reinforced as demand for its semiconductor products dropped by 36 percent in 2001 compared with 2000. "The company was thinking about the easiest way to diversify," says Sino-American president Doris Hsu. "Then we decided on the silicon solar cell wafers because we already have the resources needed in this field."

The largest of the seven producers of solar cell wafers in Taiwan, Sino-American started generating more revenue from its photovoltaic operations than from its semiconductor branch in 2006. Initially, Sino-American's biggest clients were Sharp Electronics Corp. and SANYO Electric Co., Ltd., two Japanese giants in the photovoltaic industry, but the Taiwan company is now selling its solar wafers around the world, including in the home market.

Taiwan's solar cell industry is also extending further upstream. In late November 2008, Sun Materials Technology Co. broke ground for a new factory in Litse Industrial Zone in Yilan County that will become the first plant in Taiwan to produce supplies of polysilicon, the major raw material used to make solar cells. "Yilan is developing into a center of the photovoltaic industry on the island, with a complete industrial chain, from upstream suppliers to downstream panel assemblers," says Yang Han-ting, an industrial development specialist with Yilan County Government, which has been promoting the local solar industry for three years. Today, there are nine photovoltaic-related businesses operating in the Litse Industrial Zone, including four solar cell manufacturers.

Polysilicon Payoff

If everything goes as planned, Sun Materials' plant will begin operations in the middle of this year, annually producing 3,500 tons of polysilicon. The company also plans to open several other such plants in the future. Enterprises like state-owned CPC Corp., Taiwan, a large producer of petroleum and petrochemical products, have shown interest in following suit, a positive development for the solar cell industry in light of the historically high cost and limited supply of polysilicon.

The private sector also realizes the need to innovate in this increasingly competitive arena. For example, Sino-American, which spends more than 3 percent of revenue on research, is developing a new technology to slice silicon ingots into extremely thin wafers. "Silicon is quite expensive, so those who can save on it can gain a competitive edge," Doris Hsu says. Only a year ago, the company produced wafers as thin as 0.22 to 0.24 millimeters. Today, it has the capability of providing 0.18-millimeter products and has demonstrated its ability to reduce the thickness to 0.16 millimeters. "Customers might find such a product too thin to be processed by their existing equipment, but we have to stay one step ahead of them; we have to get the products ready before they are needed in the market," Hsu says.

Gintech, meanwhile, has devoted itself to enhancing the conversion efficiency of its polysilicon solar cells, which can currently convert 15.2 percent of absorbed sunlight into electric power. The company's research and development department expects to increase this to more than 17.5 percent by 2015. Ellick Liao, president of Gintech, points out that researchers around the world are also looking for ways to enhance the longevity of solar module systems. "The life of solar module systems should be extended from the current 22 to 25 years to over 30 years by 2015," he says.

A concentrated push to advance solar energy is also underway in the public sphere. "Governments the world over are continuing to make policies encouraging the use of solar energy," Sino-American's Doris Hsu says. These policies typically include subsidies aimed at developing the solar power industry in two categories: by paying one-off subsidies to offset the cost of solar panel installation by household and corporate users and by purchasing electricity generated by solar cells. Taiwan has mainly adopted the first strategy, although the result thus far has been less than impressive, mainly because the subsidy only covers a maximum of half the total expense of installing a solar system. With the typical household system costing a total of NT$200,000 to $300,000 (US$6,060 to $9,090) to install, many homeowners still find the expense too high, even after the 50 percent subsidy. No wonder 98 percent of solar cells made in Taiwan are exported, mostly to Europe, where subsidies and incomes tend to be higher.

Effective Subsidy

One development that would greatly assist the growth of the solar power industry would be the passage of the Renewable Energy Development Act, which was first drafted in 2001. Passage of the act would put a more effective subsidy program in place to encourage the use of solar power. If the act were passed, owners of private installations generating excess solar power could sell it to the government at a preferential rate of between NT$8 to $10 (US$0.24 to $0.30) per kilowatt-hour. To put this in perspective, state-owned Taiwan Power Co. sells conventionally generated electricity for less than NT$3 (US$0.09) per kilowatt-hour. Thus, individual homeowners could be more willing to install solar panel arrays and sell any unused power to the government.

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