Business Opportunities in the Mexican PV market •Market analysis and ... 2011 2012 2013 2014 2015...

Business Opportunities in the Mexican PV market

September 2013

Nikolai Dobrott, Managing Partner

Apricum – The Cleantech Advisory

The global solar market

Solar market and opportunities in Mexico

2

Agenda.

Apricum – expertise in Cleantech and solar energy in

particular.

3

Apricum at a glance

Business Strategy consulting and transaction

advisory services

Industry focus Cleantech

Team > 40 Cleantech experts with decade-

long industry experience

Clients Companies, investors and public

institutions

Services

(selected)

• Strategy development (e.g., value

chain, go-to-market, marketing)

• Feasibility analysis, business plan

design

• Partner search (MOU, JV)

• Investor/target search

• Due diligence (comm., technical)

Locations • HQ in Berlin, Germany

• Representative offices in Brazil,

China, India, Indonesia, Japan,

Saudi Arabia, Turkey, UK and USA


Apricum has advised a variety of clients targeting to enter

new markets.

4

Selected recent references


Apricum offers an integrated suite of growth-oriented

services for companies and investors.

5

Apricum service portfolio

Portfolio/value chain

• Value chain screening

• Feasibility analysis

• Business plan design

• Corporate portfolio

strategy

Go-to-market

• Market analysis and

selection

• Localized business model

design

• Partner search

• Implementation support

R&D

• Technology and materials

assessment

• R&D roadmap

development

Marketing & sales

• Customer preferences

and requirements analysis

• Product positioning

• Value modeling and

pricing strategy

• Business development

support

Sell-side search

• Investors

• Acquirers

• License takers

Buy-side search

• Target identification

• Technology scouting

Strategy consulting Transaction advisory services

Due diligence

• Market/commercial

• Technical





6

Agenda.

23.3 32.0 36.6

43.0 49.7

56.1 60.5 66.8

74.6 85.0

0.4

1.1 1.7

1.2

1.1

2.0 2.7

3.2

3.4

3.7

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Apricum forecasts that demand for PV capacity will

continue to dominate over CSP.

Projected global demand solar (annual installations) [GW]

7

16%

CAGR ’11–’20

Source: Apricum solar market model Q3/2013, center scenario

PV

CSP

• Long-term market growth will be driven by markets with

high demand for electricity and increasing pressure to

diversify the power generation from fossil due to

climate change and rising fuel prices

• Short-term market development is dependent on the

policy support from governments

• Price development will define the penetration level in

global electricity generation in mid-long term

• China, India and USA will be the three largest market

in 2020 accounting for more than one third of the

demand


The emerging markets, among them LATAM, will gain

significant share on the future PV world map.

8

Global PV demand: market share by region (annual installations)

Source: Apricum PV market model Q3/2013, center scenario. Numbers may not add up to 100% due to rounding errors

2011 2015

North America

9% 16%

2011 2015

Latin America

0% 2%

2011 2015

Europe

67% 24%

2011 2015

India

2% 8%

2011 2015

China

10% 27%

2011 2015

Asia Pacific

10% 19%

2011 2015

MENA

0% 3%

2011 2015

Southern Africa

0% 1%





9

Agenda.

Two directional decisions will re-shape Mexico’s electricity

sector and open opportunities for renewable energy.

24%

48%

10%

3%

12%

3%

10

Electricity sector dynamics in Mexico

Oil derivatives

Natural gas

Coal

Nuclear

Source: Sener, IEA Key energy statistics 2012, Apricum analysis ¹ passed by Calderon govt., now replaced by Nieto administration

Hydro

Total 226 TWh

Renewables

Electricity generation mix Mexico 2012 Renewable Energy target 2024

• Governmental decision¹ to provide 35%

of electricity generation from non-fossil

sources until 2024

• Goal to cut GHG emissions by 50%

until 2050

Increased private sector participation

• Recent government initiative to open

publicly dominated energy sector for

private sector participation

• Electricity generation could increasingly

be transferred to private IPPs

Trend to reduce oil in generation mix

• Opportunity cost of oil used for

electricity generation


Mexico has abundant solar resources to cater to a growing

need for power generation.

11

Overview solar opportunities in Mexico

Source: NREL, SENER, World Bank, Apricum analysis

Population MW solar Electricity

consumption

115 million ~ 230 TWh 35-50 MW

Mexico City

Chihuahua

Baja California

6.5 6.0 5.5 5.0 4.5 3.0 3.5 4.0 7.0

• Intensive solar radiation in Northern and

Central Mexico and Western costal

regions, Baja California above 6.5

kWh/m²*d

• Mexican Gulf coast has slightly less

total insolation, still significantly higher

than in European countries


Commercial and residential installations can offset high

electricity cost, utility scale driven by govt. demand.

12

Drivers and constraints for PV market segments in Mexico

PV market segment Drivers Constraints

Utility

(>500 kW)

Commercial/

industrial

(<500 kW)

Residential

(<30 kW)

• Growing demand for electricity

• Goal to increase share on non-

fossil generation

• Dedicated tenders for < 30 MW

projects

• Strong public domination, required

permissions, adm. procedures

• Low target prices for CFE “small

production” capacities

• Competition from other renewables

• Private PPAs

• Self-generation scheme

• Ability to net meter

• Tax breaks, accel. depreciation

• High grid electricity price

• Restricted commercialization

opportunities

• Downstream capacities

• Long timeframe of investment

• High grid prices for DAC

consumers

• Ability to net meter

• Tax incentives

• Lack of awareness

• Low standard grid electricity prices


Solar value chain: numerous opportunities – but which to

choose?

13

Solar value chain


For new entrants, barriers are lower the further downstream

the business is positioned.

14

Silicon PV value chain

Barriers of

entry

No. of

players few

(~10)

numerous

(>100)

many

(>>1000)

high

(>USD 30 M)

CAPEX very high

(>USD 500 M) very low

Technolo-

gical

complexity

very high moderate low

upstream downstream

Markets

served global regional local

Ingot/

wafer Cell Module

System

integra-

tion

Installation Operation

Metall-

urgical-

silicon

Polysilicon

Dependent

on business

model


Two exemplary business opportunities: module assembly

and integrated system integration/installation.

15

Silicon PV value chain

Barriers of

entry

No. of

players few

(~10)

numerous

(>100)

many

(>>1000)

high

(>USD 30 M)

CAPEX very high

(>USD 500 M) very low

Technolo-

gical

complexity

very high moderate low

upstream downstream

Markets

served global regional local

Dependent

on business

model

Ingot/

wafer Cell Module

System

integra-

tion

Installation Operation

Metall-

urgical-

silicon

Polysilicon


Example 1 – module assembly: Contract manufacturing to

cater to regional markets in US and LATAM.

16

Exemplary business opportunity: assembly of crystalline silicon based PV modules

Front glass

Encapsulant

Frame

Cells

Back sheet

Junction box

• Source module components (see

picture), design and assemble modules

• Target clients: EPC contractors and

system integrators in Mexico, USA and

Rest of Latin America

• Competitive advantages: proximity to

domestic/ regional markets, labor rates

• Cell suppliers from Asia can avoid

potential customs and logistic cost with a

local contract manufacturer

• Minimum recommended size: 150 MW,

which would require an investment of

USD ~30 million


Example 2 – system integration and installation: Initial

target – commercial power consumers.

Exemplary business opportunity: integration and installation of PV system for

commercial/industrial segment

17

Fictitious case: “Shopping mall”

• Sales area: 5,000 m²

• Location: Guadalajara region

• Annual power consumption: 2 MWh

• Power price of 21 Mexican pesos/kWh,

continuously increasing

• A 499 kW PV system can cover 30% of

the power consumed

• Business opportunity: High, continuously

increasing power price

• Design and install PV systems that target

self-consumption

• Target clients: Shopping malls, supermar-

kets, manufacturing facilities


Example 2 – system integration and installation: Feasible

business case if PV LCOE is in the range of 15-20 USDc/kWh.

Grid vs. PV electricity prices [USD/kWh]

11.9 13.2 16.6

23.3

Largeenterprise

Mediumenterprise

Services Commercial

Main drivers for PV LCOE

• System cost

• Irradiation

• Financing cost

• Installation cost

18

Source: NREL, SENER, Apricum analysis, assuming 7% discount rate and system prices between 2.4 and 2.7 USD/Wp, 25 years lifetime

Solar LCOE range

Feasible business case for

customers from small

commercial segment – service

segment to follow soon @ 2.4 USD/W

@ 2.7 USD/W


Apricum develops attractive business models and

convincing business plans for our clients.

19

Technology

Financing

Need for partner

Timing

• Most attractive business model

• Convincing business plan

• Most suitable partner

Business model development by Apricum

Pricing Cost

Target clients

Competition

Local content


Phase 1

Opportunity

screening

Identification of

the most

attractive

business

opportunities

~4 weeks ~4 weeks

Apricum follows a systematic five-phase approach for

developing and implementing a solar strategy.

20

~10 weeks ~6 weeks as needed

Apricum solar strategy development support with indicative timeline

*) If business can be implement without partner, this phase is not applicable

Phase 2

Business model

design

Commercial,

technical and

financial study

resulting in

business model

& overall

strategy

Phase 3*

Partner search

Partner

selection and

partnership

negotiations

Phase 4

Business plan &

contract closing

Development of

resource and

finance plan, full

partnership/tran

saction

agreement

Phase 5

Implementation

Launch and

ramp-up of

business

Business

cases Business

model

Partner(s),

MOU

Business

plan

Ready for

business


Apricum GmbH

Spittelmarkt 12 | 10117 Berlin | Germany

T. +49.30.308 77 62 - 0 | F. +49.30.308 77 62 - 25

[email protected]

www.apricum-group.com

Business Opportunities in the Mexican PV market •Market analysis and ... 2011 2012 2013 2014 2015...

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