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(originally published by Booz & Company)


Can the U.S. Learn to Love Renewables?

The CEO of Applied Materials offers a road map for the adoption of solar energy technologies in the United States.

After years of being noncommittal — if not downright neglectful — about solar energy, the United States now has a new chance to become a major player in this arena, says Michael Splinter, chairman and chief executive officer of Santa Clara, Calif.–based Applied Materials Inc. But much has to change for that to occur.

According to Splinter, the U.S. must come to grips with three major pieces of the solar energy puzzle. One is research and development, where the U.S. is already making serious contributions thanks to the efforts of companies like Applied Materials. This company, best known for equipment used in the manufacture of semiconductors and thin-film liquid crystal displays, has earmarked 25 percent of its US$1 billion annual R&D budget for determining whether Applied Materials’ know-how can be harnessed to manufacture machines that make solar energy–producing devices.

The second piece is deciding where the solar energy equipment will be made. So far, almost none is manufactured in the United States. And the U.S. is well behind Europe and Asia, particularly China.

The final piece of the solar energy puzzle is Americans overcoming their resistance to producing commercially significant quantities of solar electricity. The U.S. trails Germany, Spain, and Japan, among other countries, in its production.

Part of the explanation for U.S. resistance is that solar electricity is still seen as being too expensive, and venture capital financing for the industry has been dramatically reduced because of the credit crisis. But there are some bright spots. Applied Materials, with revenue of $8.1 billion in 2008, had sales of nearly $800 million from solar equipment in 2008, up from $165 million in 2007. And Splinter believes that the relatively inexpensive thin-film solar panels made with Applied Materials’ machines could have a dramatic impact on U.S. energy production patterns. He says he hopes the company can find ways to deliver efficiency improvements in the same order of magnitude as Moore’s Law, which holds that the power of semiconductors should double every two years. In this interview with strategy+business, Splinter shared his views about new solar technologies and the role that the U.S. government should play in making sure that they are adopted.

S+B: Why is the industry so excited about thin-film solar technology?
SPLINTER: If you look at the potential for thin-film solar, the real excitement is about the potential to lower the cost and make it very cost-effective over a period of time, achieving parity with the cost of delivering other kinds of electricity during peak hours. Solar electricity is especially effective in the afternoon during peak electricity use and when electricity costs are highest.

The idea of thin-film has been around for quite some time, but Applied Materials has industrialized this technology and made it cost-effective. Companies around the world have purchased our turnkey SunFab factories, but not in the United States.

We believe that thin-film silicon and crystalline silicon on wafers are the technologies that will scale in the short- to medium-term solar market. They will divide the lion’s share of sales for the next five to 10 years. There may be some technology disruption over a period of time, but the fundamentals of putting solar on glass or on wafers will stay the same well into the future.

S+B: How are you applying your knowledge about semiconductors and flat-panel displays to the solar industry?
SPLINTER: The kind of equipment we make for semiconductors and displays is very complex, but we can achieve very high volume with it seven days a week, 24 hours a day, 365 days of the year. We’ve driven down the cost of making semiconductors 20 million times over the past 40 years, and we’ve driven down the cost of making flat panels by more than 20 times over the past 15 years. These kinds of cost progressions, when occurring in the solar market, will allow for the industrialization of this technology.

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  1. Adam Aston, “Can China Go Green?BusinessWeek, May 14, 2009: An examination of Suntech Power, Himin Solar Energy Group, and other companies attempting to help China clean up its environment.
  2. David Biello, “Solar Power Lightens Up with Thin-Film Technology,” Scientific American, April 25, 2008: A detailed look at various forms of thin-film solar systems.
  3. Yuliya Chernova, “Applying Moore’s Law to Solar,” Venture Capital Dispatch blog, April 22, 2009: Applied Materials CEO Michael Splinter explains why he thinks Moore’s Law can be applied to solar energy.
  4. Peter Farley, “Thin Film’s Time in the Sun,” Technology Review, July 27, 2007: A look at the technologies that seek to challenge solar panels built on silicon. 
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