At a press conference in Dresden, Germany, on Tuesday, Oerlikon Solar said it has sold a second thin-film solar production system to ErSol for more than 30 million Swiss francs (about $24.3 million).

The system will have a capacity of 20 megawatts per year. The sale comes after two other such announcements in the last six months.

In March, Pfäffikon, Switzerland-based Oerlikon—better known for its coatings, semiconductors equipment, and vacuum pumps—announced the sale of another 20-megawatt-per-year thin-film plant to ErSol, worth 33.5 million Swiss francs. In April, Oerlikon announced it had sold SCHOTT Solar two production lines for more than 50 million Swiss francs.

The latest system will be delivered in the first quarter of 2007, and will begin production in the third quarter, according to Oerlikon.

“We’re really proud we were able to win ErSol’s business,” said Oerlikon CEO Thomas Limberger, speaking in German. “ErSol is a very important customer for us.”

Claus Beneking, chief executive of ErSol Solar Energy, said the new plant will strengthen ErSol’s competitive advantage. “We consider this to be very important for our growth,” he said, in German.

What Is Thin-Film Solar?

Thin films are promising because they use little to no silicon—an advantage because polysilicon, the high-grade silicon needed for PV, is scarce. Even without today’s shortage, silicon has been the costliest part of a traditional cell.

Also, light, flexible thin films could tap into lucrative new applications like building materials, consumer electronics and clothing (see Solar’s Going Thin).

But researchers have been developing thin films for years, with little success. They have historically proven difficult and expensive to manufacture on a large scale, less efficient at converting sunlight into electricity in ideal conditions, and short-lived.

Publicly traded Oerlikon says it has solved those problems. The company knows it can scale up its thin-film production because the technology came from its plasma coating display technology, and the processes are very close, Mr. Limberger said.

“We have a 50-year history of coating; we are the No. 1 coater in the world,” he said. “Our coatings are on Nascar engines, hard drives, screws… common rail diesel wouldn’t be in existence without our coating. It’s just a completely different story from those coming out of PV [photovoltaics] or something else.”

Even at the low volume of 20 megawatts per year, thin films will cost 30 percent less to produce than crystalline technologies, Mr. Limberger said. Conventional monocrystalline silicon cells cost about €3 to €3.5 per watt, implying that Oerlikon’s thin films would cost €2.1 to €2.45 per watt.

“Others, such as our American competitors, talk about what they have, but haven’t sold any systems yet,” he said. “We’ve sold around 150 million Swiss francs worth of thin-film equipment in half a year.”

As for efficiency, Oerlikon’s thin film cells have 6 to 7 percent efficiency, compared with an industry average of about 12 percent for crystalline silicon cells, Mr. Limberger said.

But thin films can produce electricity in indirect light, when silicon-based modules produce none, allowing thin films to actually produce more electricity per year than traditional technologies in many cases.

And Oerlikon’s next generation of technology, called microcrystalline, will be more efficient, Mr. Limberger said. Oerlikon plans to introduce its microcrystalline technology in 2007, and expects it could reach more than 10 percent efficiency by about 2012.

Competitive Advantage

Mr. Beneking said ErSol selected Oerlikon because it offers a complete process—not just deposition, but also laser scribing and module encapsulation technologies, which other thin-film companies can’t provide yet.

While crystalline solar will remain ErSol’s core business, it is entering thin film because the technology gives ErSol the ability to grow independent of the availability of silicon, he said. The technology has significant cost-cutting potential in the long run, he said.

ErSol, a publicly traded solar company based in Erfurt, Germany, is also intrigued by the possibility of integrating thin films into building materials, and using them in large-scale systems. Palo Alto, California-based Nanosolar recently signed an agreement with Conergy to make large thin-film power plants (see Thin Film Solar to Go Large).

The 40 megawatts will make up about 20 percent of ErSol’s 2008 capacity, and the latest plant will cost ErSol a total of about €80 million to build, Mr. Beneking said.

Depending on how ErSol’s first 40 megawatts of thin-film capacity performs, and on how the market develops, the company envisions having 100 to 150 megawatts of thin-film capacity by 2010, and could one day reach 1 gigawatt of capacity, he said.

Still, ErSol seems to see its foray into thin film as more of a hedge than a definite commitment to the technology.

After all, the company in August signed a six-year contract with Wacker Chemie for 100 megawatts worth of polysilicon.

“We have a good silicon supply, but it’s not unlimited, and the growth rate in the future is not what we want,” he said. “It’s hard to predict the market, but if it grows as expected, it won’t be enough. If it doesn’t, we will probably have enough and won’t need to grow thin film as much.”

Oerlikon isn’t the only company making progress in thin films, of course. Nanosolar, Innovalight, Konarka, Miasolé, HelioVolt, and DayStar are among Oerlikon’s competitors (see Nanosolar Gets $100M for PV, Nano Solar Firm Gets Funding, Konarka Raises $20M in Funds, Energy Innovations Gets Cash). Chip equipment maker Applied Materials, which bought Applied Films in May to enter the thin-film market, is another (see Applied Materials’ Sunny Plan).

Contact the writer: JKho@RedHerring.com