Walter Nasdeo is managing director and director of research at Ardour Capital, developer of the Ardour Capital Global Solar Energy ETF. He spoke recently with the editors of HardAssetsInvestor.com about the future for solar energy.

HardAssetsInvestor.com (HAI): Let's start with the big question first: Is solar energy cost-competitive today with traditional energy sources?

Walter Nasdeo, managing director, Ardour Capital (Nasdeo): No, it is not. But it is getting closer on a very regular basis.

Costs are being driven down by a number of factors. First, there is the sheer amount of new solar power that's coming on-line. That's helping the industry create economies of scale in manufacturing and production, which is driving down costs.

Also, we're seeing the price of traditional forms of power rise, which helps tilt the balance.

So we're getting closer and closer to grid parity, but we're not there yet.

HAI: Are there actual numbers we can look at?

Nasdeo: Depending on the type of solar you're looking at, costs are currently running around 25-28 cents per kilowatt hour. The national average for power product is 12-14 cents per kilowatt hour, so that's your cost gap.

However, if you look at some specific areas, the cost gap narrows. The average cost of power in California is 23 cents per kilowatt hour; in New York, it's 22 cents. So you're getting very close there.

Given time and a continued ramp-up in production, we'll see significant drivers that get us closer to parity. When exactly that happens will depend on a lot of factors.

HAI: What's preventing us from reaching grid parity? What are the biggest stumbling blocks?

Nasdeo: We've been a little bit constrained by the availability of solar-grade silicon. In late-2009, we should start to see a significant amount of new silicon hitting the market, as a number of new silicon ingot production facilities come on-line. That should help drive costs down.

HAI: So is silicon the biggest factor in solar energy costs? Isn't it just sand?

Nasdeo: Yes and no. Silicon is probably the biggest cost factor, but it's not just raw silicon that is the issue.

The process of making a solar module starts with silicon. Raw silicon is turned into a silicon ingot, and from there, the ingot is sawed [using lasers] to produce a very thin wafer of silicon. These wafers are polished and cleaned up and they're sent to the cell manufacturing facilities, where electrodes are put on to create a solar cell. The solar cell gets wired together with other solar cells and then laminated onto a substrate [typically a plastic material] that becomes the solar module.

The real technology resides in the cell area, and the challenge is to make them more efficient and trying to use less silicon. That's what we're seeing: Certain technologies are allowing companies to go from 300-350 microns of silicon thickness down to 200 or even 180 microns. That means we're cutting in half the amount of silicon used in each wafer.

The flip side is that you have an increase in breakage, and they are working on solving that through new manufacturing processes.

HAI: Is that what they mean when they talk about "thin-film" solar technology? New systems that use thinner layers of silicon?

Nasdeo: No. That's called thin wafer technology.

Thin film is a completely different technology. Most thin film cells have no polysilicon in them at all. They use different substrates. The one that's getting the most use because it's most successful is glass.

A company like First Solar has a technology involving cadmium that's composed onto glass modules to make it into solar cells. It's an interesting technology.

HAI: What are the upsides and downsides of thin film? Why do you hear so much about it?

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