Tech giant Intel joins IBM and Applied in big solar bet

I had a chance to chat with Andrew Wilson, a longtime Intel guy who is the CEO of Spectrawatt, about what he is doing. The venture is the result of the last 3 years of extensive business planning, that Andrew said grew out of an off the cuff conversation he had internally four years ago.

While they have very early stage development in the works for some new and novel technology to reduce the manufacturing costs of solar cells, they are not sharing details. The Spectrawatt core business today will be about building a company to manufacture crystalline silicon based solar cells. In the near term the business will be buying wafers and manufacturing cells. According to Andrew, they have a significant supply of silicon secured, and while he cannot say who the vendors are, at least one of those vendors will likely be announcing soon, as the Spectrawatt contract is a material event for them.

So the first question is why x-Si and not thin film? Besides the obvious that it is far and away the biggest market today and a natural fit for Intel, Andrew added two more. Customers care about per kwh cost, and all things equal, how much energy they can get out of the real estate they have (read, efficiency matters). So they think x-Si makes a lot more sense than thin film, especially given the additional issues around stability, manufacturing complexity and materials resource constraints.

Andrew did say that they may vertically integrate later. So I asked why did they start at cells? Andrew explained that since the business comes out of Intel, and Intel is accomplished at processing wafers into products, cells made sense to start with. And at the end of the day they hold the view that the biggest point of value in solar value chain is in creating the cell, moving from low value silicon to high value device. They consider it the largest single value add step.

Andrew and I are in agreement that 2004 was a kind of a magic year changing what the photovoltaic industry is. Andrew stated it was the first year where the average company in every segment of the value chain in solar became profitable. So given today's environment Intel and Spectrawatt could have conceivably started at numerous places in the value chain. This is where the vertical integration may come in. His view on the silicon supply is that no glut is coming, or at least not a long lived one. The end demand market is growing at 30 to 40% per year, and the silicon supply that is coming on line is in large part subject to long term contracts with fixed prices. The silicon supply additions then are pretty much already spoken for. In Andrew's mind while growth at the margin will definitely cause some level of boom bust cycles, those long term supply contracts may moderate it more than other people believe. If he is right, and he has secure supplies, a horizontal business like cell manufacturing is a great place to be. If he is wrong, he sees continued vertical integration to manage the growth issue as one of the major avenues industry participants will go done. In this he and I also agree, rapid movements in supply cycles tend to reward vertical integration. And if he gets big enough with Spectrawatt, vertical integration could be a move Spectrawatt makes, too.

It is great for the solar industry to see more technology giants like Intel joining the fray, and perhaps helping drive down crystalline product costs the same way Applied Materials and IBM are looking to drive down then film costs.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is the founding CEO of Carbonflow, founding contributor of Cleantech Blog, Chairman of Cleantech.org, and a blogger for CNET's Green Tech blog.