While profit margins on solar modules dropped dramatically during 2011 and will probably remain relatively low for the foreseeable future, margins on some of the materials used to build them is in the double digits.
This is especially true of innovative new raw materials that ultimately increase solar panel efficiency.
A recent study from Lux Research, a data and analysis firm specializing in emerging technologies, found that the impact a material has on solar panel efficiency correlates directly with its profit margin.
“Innovations in high-performance encapsulants, backsheets and metallization pastes enable higher profitability by allowing module makers to improve efficiency and command higher prices,” said Fatima Toor, Lux Research Analyst and lead author of the report, whcih is titled "Photovoltaic Materials Opportunities Beyond Commoditization."
Of course, certain materials are more likely than others to make a significant impact on solar panel efficiency and what manufacturers can charge for their products as a result.
Toor said that frontsheet glass, polysilicon and ethylene vinyl acetate have low profit margins and are less likely to shine economically than the gases, metals, polymers, process chemicals and solvents that are emerging from research and development labs to increase solar panel efficiency.
High-performance encapsulants can increase module efficiency by 1 percent while innovative backsheets and metallization pastes can increase solar panel efficiency by 3 to 3.5 percent.
With efficiency improvements like that, solar panel manufacturers can demand higher prices for their products because they will produce more solar electricity than other panels on the market.
Innovative materials suppliers can demand top dollar because their products will help solar manufacturers differentiate themselves in a competitive market and potentially increase manufacturers’ own profit margins.
As a result, companies have developed a narrow focus, concentrating on one element of the solar panel. Some startups are working to develop new processes or new backsheets to market to the solar manufacturing industry. It’s an industry more interested in innovative new materials and incremental product improvements than most.
While the majority of the companies working to develop new high-impact and high-profit solar materials and processes are startups, some are long-established businesses.
DuPont is the reining champion of intellectual property for encapsulants. According to the Lux Report, the company has 87 granted or applied patents. Dow Corning, LG Chem and Dai Nippon Printing are amongst the other established companies working to increase solar panel efficiency along with their own profitability.