EPIA Unlocking the Sunbelt Potential of Photovoltaics v2

8/8/2019 EPIA Unlocking the Sunbelt Potential of Photovoltaics v2

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unLOCKInG THESunbeltPotential of PhotovoltaicS

Seco eitio Octoe 2010


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FOREWORD

The European Photovoltaic Industry Association (EPIA) is delighted to present Unlocking the

Sunbelt Potential o Photovoltaics, a study that was carried in 2010 by EPIA with the collabora-

tion o the Strategy Consulting irm A.T. Kearney.

We would like to warmly thank Mr. E. Macias, President o the Alliance or Rural Electriication,

who has irst established the concept o this important research, as well as A.T. Kearney or thequality o their contribution as well as the complete EPIA team or steering works and delivering

this study.

We also thank ASIF, the Spanish PV association and ARE, the Alliance or Rural Electriication

who supported the initial phases o this study.

This study is o considerable importance as it highlights, with demonstrated acts and igures,

the immense competitive potential o PV in high irradiation countries, where it increasingly con-

stitutes a clean, sustainable and competitive alternative to conventional uels.

The study urthermore analyses conditions and explores various possible scenarios under which

ull PV potential o Sunbelt Countries could be unlocked.

With its unique undamentals, PV is poised to become a mainstream electricity source able to

sustainably meet the soaring electricity demand o growing economies in the Sunbelt region

and elsewhere in the World

It is now our collective mission to unlock the potential o PV and deliver the promises o a demo-

cratic, responsible and sustainable energy uture.

A. El Gammal

Secretary General

Autors :

A.T. Kearney : Jochen Hau, Marnik Verdonck, Harold Derveaux, Laurent Dumarest, Jose Alberich

and Jean-Charles Malherbe

EPIA : Adel El Gammal, Paula Llamas and Gatan Masson

ARE : Ernesto Macas

Second edition Publication date : October 2010

Cover pictures courtesy o Concentrix, First Solar and Isooton


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ExECuTIvE Summary ExECuTIvE Summary 5

TABLE OF CONTENTS

1 Executive summary 4

2 The Sunbelt vision or PV 6

2.1 The overall Sunbelt PV opportunity 6

2.2 Competitiveness o PV 13

2.3 Key pre-conditions to realise the Sunbelt PV potential 17

3 Selected regional perspectives on PV 22

3.1 Mediterranean and Northern Arica 24

3.2 South East Asia 29

3.3 China and India 32

3.4 Latin America 37

4 Recommendations to key stakeholders to unlock the Sunbelt potential 40

5 How EPIA will help make the Sunbelt vision happen 42


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ExECuTIvE Summary ExECuTIvE Summary 7

1ExECuTivE SummARyPhotovoltaic (PV) development is booming. With more than 7,000 MW added to the

global generation base in 2009, the cumulated installed base is now well over 22 GW.

Somewhat paradoxically, however, this growth is mainly driven by countries outside theworlds Sunbelt; in act the growth o PV could be accelerated tremendously, i the worlds

Sunbelt PV potential would be unlocked.

Doing so would bring enormous benets to the Sunbelt countries. PV can contribute

signicantly to cover the dynamically increasing electricity demand o these growing

economies by harnessing low-carbon, ree and domestic energy sources - thus

decreasing dependencies on (imported) ossil uels, reducing pressures on water use

and improving the carbon balance.

This report presents ndings regarding possible scenarios under which the Sunbelt

PV potential could be unlocked, namely, the Base, the Accelerated and the Paradigm

shit. The study urther examines the countries which might be irst in line to do so,

given the attractiveness o PV or their economies and the overall investment climate

they oer. The result is graphically summarised in Figure 1, showing PV potential o 66

Sunbelt countries that jointly constitute one large Sunbelt PV potential. This underlines

two main messages : while PV potential diers depending on country size and suitability,

there is signicant potential in every country o the Sunbelt. And jointly, the PV potential

o Sunbelt countries amounts to a major contribution to satisy power demand and

decrease the worlds dependency on conventional uel sources.

Summary ndings :

Under an Accelerated scenario, these countries would reach an installed PV ca-

pacity o around 405 GW by 2030, which would provide sustainable electricity

supply to about 300 million people and make up between 2.5% and 6% o the

Sunbelts overall power generation.

Under an ambitious Paradigm Shit scenario, the Sunbelt countries could even reach

about 1,100 GW, representing up to 12% o power generation in some geographies

by 2030.

In many regions, PV already constitutes a competitive orm o peak power supply. This

is true in particular when replacing diesel-red peak power in distributed generators.

By 2020, PV can reach LCOE (Levelised Cost o Energy) o 5-12 cts/kWh in Sunbelt

countries. It would then likely be more competitive than gas or oil uelled peak power

plants.

As cost will drop to 4-8 cts/KWh by 2030, PV will be competitive with all orms o coal

and gas-red mid-load plants, even i assuming only modest uel price increases.

Key preconditions :

To enable realisation o the PV potential put orward in the dierent scenarios, decision-

makers in Sunbelt countries (such as governments and utilities) must consciously

include PV as an explicit part o their energy vision and investment planning.

Power utilities in particular need to utilise the strengths o PV to increase peak capacity

and strengthen the resilience o grids by distributed generation assets. At the same

time, the opportunity to leaprog expensive grid development by deploying PV and

other renewables must be ully leveraged.

To acilitate political support, the PV industry needs to increase its commitment to

contribute signiicantly to domestic economic value generation, e.g. by means o

investment in manuacturing capacity and establishment o local service oerings. This

implies increased levels o collaboration to open markets or PV deployment.

Development banks and private inancial intermediaries need to actively address

the nance gap that exists in many Sunbelt countries. Transerring experience rom

established PV markets and collaborating closely with governments and PV industry is

key to acilitate project nancing.

EPIAs role :

As an active contributor to unlocking the PV potential in the Sunbelt countries, EPIA will :

Build awareness and know-how in key Sunbelt countries on the benets o PV as well

as on sustainable support policies.

Facilitate PV industry collaboration on opening key Sunbelt markets.

Improve the visibility and image o PV with international development banks and agencies

with particular ocus on grid-connected PV.

Liaise with nancial institutions worldwide to prepare region / country specic nancing

solutions or PV investment in Sunbelt countries.

Encourage PV companies and institutions rom Sunbelt countries to increase inormation

fow and enable close interaction among sector players.

Support the strengthening/creation o national PV associations in emerging Sunbelt

PV markets.

Elaborate market development roadmaps or selected Sunbelt countries.

Figure 1 : Sunbelt PV potential


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THE SunbELT vISIOn fOr Pv 9THE SunbELT vISIOn fOr Pv

2.1 The overall Sunbelt PV opportunity

Power generation rom PV has reached over 20 TWh in 2009, with over 22 GW o PVcapacity installed globally1. The tremendous growth over the past years was driven by

steep cost and price reductions, as well as signicant policy support in a number o

key markets. However, it must be noted that the growth occurred primarily in regions o

relatively modest solar irradiation : 9 out o the top 10 PV markets are located outside the

worlds Sunbelt.

This is despite the much higher solar irradiation o Sunbelt countries (Figure 2, let), which

make up only 9% o installed capacity today (Figure 2, right). Hence, rom a physical point

o view, the high solar potential o Sunbelt countries remains largely untapped.

At the same time, expected electricity demand growth in the Sunbelt is much higher than

in non-sunbelt countries; according to the IEA World Energy Outlook, almost 80% o

the expected global el ectricity demand growth will come rom Sunbelt countries2.

In addition to a contribution to meeting growing electricity demand, PV can provide

the solution to many additional energy challenges in Sunbelt countries (Figure 3). These

range rom a reduction o import dependency, to the contribution to economic and

social development resulting rom electrication o the country by using highly versatile PV

adapted to local needs. Electricity access is a key to poverty alleviation and t hus acili tates

the achievement o the Millennium Development Goals.3

Full realisation o these benets is currently hampered by a number o barriers that are the

reality in many Sunbelt markets. Subsidised uel prices, limited ability to serve the marketand a low level o awareness among power utilities are some o the most important.

Together, the untapped solar potential, rapidly increasing electricity demand and

signicant additional PV benets clearly underline the relevance o this report - Unlocking

the PV potential o Sunbelt countries would be very benecial to all stakeholders.

Figure 2 : Comparison o solar irradiation, share in electricity demand and cumulative

installed PV capacity

(1) For systems larger than 1 MWp; 85% perormance ratio

(2) Cumulative installed capacity 2009

(3) Electricity demand 2007

Source : NASA, IEA Technology Roadmap Solar photovoltaic energy, EPIA Global Market Outlook or Photovoltaics

until 2014, A.T. Kearney analysis

Average irraiatio Subet

Brai

Egpt

Cie

Sout Arica

Iia

Cia

Austraia

Ioesia

Gera

Uite States

Begiu

Japa

Cec Repubic

Sout Korea

Frace

Spai

Ita

Top 10 PV arkets 2009 Seecte coutries i SubetOperatigours(2)

KW/KWp

Cia

2,000

1,600

1,200

800

IRRAdIATIOn SUnBElT VS. TOP 10 PV mARKETS 2009 (1)

Electricitydemand

39%

61%

17.900 TWNon-Sunbeltcountries

Countriesin Sunbelt

Cumulativeinstalled PV

capacity

9%

91%

23 GWp

ShARE SUnBElT InElECTRICITy dEmAnd(3)

And GlOBAl CUmUlATIVEInSTAllEd PV CAPACITy

(TWh, GWp)

1 Compare EPIA Photovoltaic Market Outlook until 2014 at www.epia.org

2 IEA World Energy Outlook 2009

3 In September 2000, the United Nations adopted the Millennium Development Goals (MDGs) which range rom halvingextreme poverty to halting the spread o HIV/AIDS and providing universal primary education, all by the target date o 2015http://www.undp.org/mdg/

2ThE SuNBELT viSiON FOR Pv

Figure 3 :Benefts o PV or Sunbelt countries

Source : IEA Wor ld Energy Outlook; A.T. Kearney analysis

EnERGy ChAllEnGES FORSUnBElT COUnTRIES

KEy BEnEFITS OF PV AddRESSInGThESE ChAllEnGES

Electricity consumption orecast to grow by

~150% within the next 20 years in Sunbelt

countries

Electricity inrastructure is oten poor and1.5 billion people have no access to

electricity which hampers economic and

social development

Many countries have a high dependency on

imported uels or electricity generation

Large investments in generation and systeminrastructure are needed to meet surging

electricity demand

Pressure on Sunbelt countries to increasepower generation while keeping CO

2

emissions and other environmental impacts

to a minimum

>PV taps into unlimited, indigenous energy

supply and can make a sizeable contribution

to meet rising power demand

>PV generates power close to consumption,thus supporting strained grids or enabling

local mini grids. It can be combined well with

other renewable or conventional technologies.

PV can thus accelerate electrication and

stimulate economic activity, while reducing

import reliance

>High irradiation levels make PV already com-

petitive compared to diesel generators. In the

uture, PV will be highly competitive

to all alternatives. Directing investment into

PV now provides a long term source o

energy with low operational cost and enables

domestic industry build up

>PV is a low carbon technology and has anenergy packback time o 10-20 months.

It doesnt need water to operate and has no

adverse impacts on local air quality


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The summary result o the PV Opportunity assessment is displayed in Figure 5. Here

Sunbelt countries are mapped according to the general country investment attractiveness

and the attractiveness o PV or a country. The resulting PV Opportunity mapping shows

the contribution PV can make to a country combined with the countrys likely ability to

make use o PV based on its overall investment climate. The PV Opportunity should not

be conused with the size o the PV market, although there is a certain correlation as theurther discussion will show. This refects the general thrust o this report, which is not

primarily to provide market intelligence to investors in PV, but to point out the contribution

PV can make to Sunbelt countries energy supply as well as providing guidance on

how the existing barriers can be overcome.

A total o 66 Sunbelt countries4 are analysed in this report, which are highlighted in

Figure 4. These countries with their 5 billion inhabitants represent ~95% o the Sunbelt and

~ 75% o world population. Countries in scope accounted or a GDP o 15.7 trillion USD

and consumed roughly 6,800 TWh o electricity, representing 97% o electricity demand

o all countries located in the Sunbelt. These 66 countries in scope are reerred to when

mentioning Sunbelt countries.

Figure 4 : Sunbelt countries in scope o study

Countries inscope o study

0

35n

35S

Sunbelt

Sunbelt countriesin scope

All countriesin Sunbelt

World

# countries(2008)

66 148 201

Population(2008)

5.0 billion 5.3 billion 6.7 billion

GDP (2008) 15.7 trillion 16.4 trillion 60.0 trillion

Electricityconsumption

(2007)6,800 TWh 7,000 TWh 17,900 TWh

Source : Wor ld Bank, IMF, A.T. Kearney analys is

Sigifcace o Subet Coutries

The 66 Sunbelt countries analyzed in the study account or 5 billion

inhabitants representing respectively 95% o the Sunbelt and 75% o

the worlds population.

Their 6.800 T Wh electricity consumption represents respectively 97%

o th e Sunbelt and 38% o the worlds electricity consumption.

4 Full list included in the Appendix

The analysis show a high level o PV attractiveness or many countries along varying

degrees o country investment attractiveness. In the top cluster, key countries rom

various continents such as China, India, Australia and Mexico are included, underlining

the global range o the PV Opportunity and representing some o the largest economies

in scope. The second and third tiers mostly include a number o middle sized countries

with dynamically growing economies such as Turkey, Argentina, South Arica, Saudi

Arabia, Egypt and Thailand, while the ourth and th tiers consist mostly o developing

countries like Kenya, Vietnam, the Philippines, as well as countries with higher political

risk such as Angola, Yemen and Lebanon.

The ollowing criteria were taken into account to assess country investment attractiveness :

Overall market potential measured as size o GDP,

Political and business environment,

Financial stability, Policies on renewable energy.

The attractiveness o PV or a country is largely independent o the countrys political

and business environment and takes into account the ollowing criteria :

Size o electricity market,

Projectedelectricity consumption growth (2007 2030),

PV cost competitiveness (irradiation, cost o existing energy sources),

Power distribution / transmission losses,

Flexibility o current generation mix to accommodate increasing penetration

o intermittent electricity sources such as PV,

Coverage o electricity network (electrication rate).

Figure 5 :PV Opportunity mapping o Sunbelt countries

RESUlTS OF ThE PV OPPORTUnITy mAPPInG (1)

IncreasingPVOpportunity

High

HighLow Country investment attractiveness

PVattractivenessforcountry

Yemen Republic

Namibia

Tanzania

ColombiaQatar

Morocco

TunisiaAlgeria

United Arab Emirates

CostaRicaNepal

SenegalJamaica

EcuadorGuatemala

Pakistan

SaudiArabia

Mexico

Malaysia

Chile

South Africa

Israel

Botswana

Australia

Singapore

China

IndonesiaKuwait

Bangladesh

Vietnam

LibyaKenya

CameroonMozambique

SriLanka

Jordan

Egypt,Arab Republic

Cambodia

Iran,Islamic Republic

BrazilThailand

Argentina

Turkey

Ghana

Peru

Zambia

EthiopiaNigeria

DominicanRepublic

Philippines

India

Syrian Arab Republic

Angola

Venezuela,RB

Lebanon

(1) Following countries are not shown on the mapping due to poor availability o data :

Chad, Cte dIvoire, Congo Dem Rep, Cuba, Iraq, Madagascar, Mali, Myanmar, Somalia, Sudan, Uganda

Source : NASA, IEA Technology Roadmap, EPIA Global Market Outlook or Photovol taics unti l 2014,

A.T. Kearney analysis


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(1) Outlook or non-Sunbelt countries is based on Greenpeace Solar Generation 2010; Base/Accelerate growth

scenario is based on respectively the moderate/advanced scenario. Outlook or non-Sunbelt countries in

Paradigm shit is the same as used in the Accelerated growth scenario

Source : Greenpeace Solar Generation, IEA Technology Roadmap Solar photovoltaic energy, A.T.

Kearney analysis

Data or the clustering has been sourced rom primarily public databases rom the World

Bank, the International Energy Agency and the World Economic Forum. Data usually

refected 2008 status with 2007 used where 2008 data were not available yet. Where

necessary, A.T. Kearney supplemented and/or calculated indicators.

Based on the PV Opportunity clustering, Figure 6 presents scenarios o PV potential or

Sunbelt countries.

Behind these scenarios lies the assumption that the share o PV in a countrys electricity

consumption is a unction o the positioning o a particular country in the PV Opportunity

mapping, i.e. is strongly infuenced by both the relative attractiveness o PV or a country

and a given countrys investment climate.

Figure 6 :PV potential scenarios or the Sunbelt

1 130 GW

257 GW

405 GW

Basescenario

2005

0

200

400

600

800

1 000

1 200

20202010 20252015 2030

Accelerated growth scenario

Paradigm Shit

42%

67%

73%

58% 1,948 GW

33% 1,223 GW

27% 953 GW

Non-Sunbelt(1)countries

Paradigm Shit

Accelerated growth scenario

Base scenario

Countries inSunbelt

SCEnARIOS InSTAllEd PV CAPACITyIn SUnBElT COUnTRIES UnTIl 2030 (GWp)

ShARE OF SUnBElT COUnTRIES In GlOBAl

CUmUlATIVE InSTAllEd PV CAPACITy By 2030 (GWp)

PV Potetia i Subet Coutries

Depending on the development scenario, PV potential in Sunbe lt countries could

range rom 60 to 250 GWp by 2020, and rom 260 to as much as 1.100 GWp

by 2030.

Sunbelt countries would then represent 27% to 58% o the orecasted globalPV installed capacity by 2030.

The percentage shares o PV in electricity consumption used as assumptions or the

dierent scenarios were derived rom previous studies, showing technical easibility, such

as grid absorption o shares o up to 4-6% and the preconditions or reaching a Paradigm

Shit level o up to 12%5. The assumptions or the Base and Accelerated scenarios are

consistent with the methodology used in the EPIA / Greenpeace Solar Generation

Studies6, while the Paradigm Shit scenario is to be seen as a visionary stretch scenario

o what would be easible i a number o stakeholders collaborated closely and decisively

to realise the preconditions required to make the Paradigm Shit a reality.

The methodology applied thus represents a top-down approach, applying specic PV

electricity share assumptions or each cluster o PV Opportunity as deined above.

Please reer to the methodology appendix or details on the exact shares applied.

Due to the high level o uncertainty and undamental dierence o Chinas development,

a dierent methodology was used to relect the PV potential or China. It takes into

account the somewhat digital nature o the Chinese market growth. Hence, the Base

and Accelerated scenarios include a relatively low assumption o a 0.7- 1% market share

o PV in China by 2020, reaching 2-3% by 2030. This refects a continuation o the current

reluctant approach by the central governments policy makers or some time, ollowedby an accelerated development between 2020 and 2030 when LCOE are well below

current levels. The Paradigm Shit scenario, however, assumes that China will change

course soon and decide to unleash the ull potential o PV to reach a 4% share in power

generation by 2020 and 12% in 2030. Such a Paradigm Shit development would be

ully consistent with Chinas positioning in the PV Opportunity mapping and would make

China the dominant PV market in the next 20 years.

Figure 7 breaks down the overall scenario igures or the Paradigm Shit scenario by

country. The graph clearly shows the key importance o China or the overall PV potential

in the region. This is largely driven by the steep increases in Chinese electricity demand,

as orecast by the IEA.

5 EPIA 2009 : Set or 2020 Report

6 EPIA, Greenpeace : Solar Generation VI to be released in October 2010.

It should be also noted that, when summing up the next 15 middle markets, their

combined PV potential exceeds that o China under the Base and Accelerated scenarios.

Only i the Paradigm Shit scenario came true would China dominate both markets.

Hence, PV in the Sunbelt is a multi-country opportunity, oering a broad range o specic

countries potential throughout several continents ready to be unlocked or realising the

ull Sunbelt potential o PV.


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On the conventional side, uel price assumptions are indexed with uel price projections

based on IEA and EIA projections8. Country specic natural gas prices were assumed

based on regional price ranges, while oil and coal prices were assumed to be global.

The eects o current advances in unconventional gas production technology were

considered in the gas price projections to the extent possible at the time o writing the

report. Figure 10 displays the low and high case conventional uel price assumptions

used in the modeling. The country specic starting points or gas prices as well as

assumptions regarding the impact o unconventional gas on the long term development

o gas prices are included in the methodology appendix.

Figure 9 : PV Levelised Cost of Energy in Sunbelt irradiation conditions 2010, 2020 and

2030

8 International Energy Agency (IEA) : World Energy Outlook 2009; Energy Inormation Administration (EIA) : InternationalEnergy Outlook 2009

1) Turnkey PV systems larger than 1 MWp, 85% perormance ratio; lietime until and ater 2020 is respectively

25 and 30 years; O&M costs 1.5% o Capex; Debt fnancing with WACC : 6.4 %; System Price 2010 :

2,800 - 2,600 /kWp

2) Low and high LCOE correspond respectively with the lowest and highest turnkey system price within the

price range

Sources : NREL, EIA Technology Roadmap Solar photovoltaic energy, A.T. Kearney analysis

PV lCOE RAnGES(1,2) (cts/kW)

cts/kWh

25

20

15

20.1

12.6

7.4

11.8

18.7

11.7

5.4

3.7

8.78.3

5.9

10

5

0

1,300 1,400 1,500 1,600 1,700 1,800 1,900 2,000 2,100OperatinghourskWh/kW

p

2010

2020

20305.2

2010

igigowow

2020

igigowow

2030

igigowow

1,200

Figure 10 :Fuel price assumptions underlying LCOE comparisons

(1) OECD Steam coal import price

(2) Historical prices are or the U.S. the Henry Hub price and or ROW (rest o world) the NBP price

(3) See Appendix, or urther details on price assumptions

(4) More than 50 years o gas production let, given the current production

Source : IEA WEO 2009, EIA AEO 2010, BP statistical review 2009

FUEl

Coal(1)

Naturalgas

(2)

Crudeoil

PRICE ASSUmPTIOnS (3)FUEl PRICE PROJECTIOnS ($ 2008, 2010 - 2030)

Coal price diers betweencountries with and countrieswithout coal resources, i.e.$ 20/tonne, to take intoaccount transport costs

Country specic price, basedon regional price range andgas reserves

Prices in countries withabundant supply o gas (4) willremain the same

Price is the same or allcountries

Residual oil ollows the crudeoil price and is set at 1.7$/gallon (New York HarborResidual Fuel Oil 1.0 % Sulfur)

$2008/MBtu

$2008/MBtu 150

100

50

0

20

10

0

$2008/MBtu

2000 2005 2010 2015 2020 2025 2030

2000 2005 2010 2015 2020 2025 2030

2000 2005 2010 2015 2020 2025 2030

150

100

50

0

150

18

143

14

115

10

76

8

High case

Low case

High case

Low case

ROW Low case

ROW High case

US Low case

US High case

Figure 11 :LCOE comparisons PV vs. conventional low uel price scenario

(1) LCOE o Gas Peaking and Combined Cycle Gas Turbine (CCGT) in gas producing countries wi th very low

gas prices are not displayed

(2) IGCC = Integrated Gasifcation Combined Cycle, a modern coal combustion technology

Source : National Renewable Energy Laboratory, National Ener gy Technology Laboratory, EPIA Set

or 2020, Wor ld Bank, A.T. Kearney analysis

COmPARISOn OF lCOE 2010, 2020, 2030, lOW CASE FUEl PROJECTIOn (cts/kW)

PeakLoadenergysources

MediumLoadenergysources

Based on the aorementioned assumptions laid out above, the comparisons o PV

competitiveness depicted in Figure 11 and Figure 12 show the ollowing :

In 2010, PV is already competitive with no additional support i compared to peak

power generation rom diesel generators, provided their uel is not subsidised. This

already represents a relevant market potential in many Sunbelt countries, where diesel

generators are an integral part o power systems,

By 2020, even in a low uel price scenario, PV is likely to be more competitive than

diesel or gas uelled peak power capacity. It also outperorms all oil red mid-load ca-

pacities and competes with Combined Cycle Gas Turbines and Integrated Gasication

Combined Cycle coal plants or parts o the mid-load market,

By 2030, also in a low uel price scenario, PV will be more competitive than all other

power generation technologies.

20202010 2030 20202010 2030 20202010 2030

LCOE ( cts/kWh)

0

5

10

15

20

25

30

20202010 2030 20202010 2030 20202010 2030

LCOE ( cts/kWh)

0

5

10

15

20

25

30

Gas Peaking(1)Diesel PeakPV

Gas(1) Coal(2) Oil redSizeof barrepresentsregional range


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Hence, even when assuming low conventional uel cost, the competitive position o PV

is likely to become very strong. In a high uel price scenario, PV is already competitive

against all other power generation technologies by 2020. A signicant share o PV as

part o Sunbelt countries power generation mix can thus serve as a major hedge or

economies to saeguard against strong hikes in uel-price driven electricity increases.

This is an additional essential reason why governments should be highly motivated to

support the deployment o PV in their countries already today.

Figure 12 :LCOE comparisons PV vs. conventional high uel price scenario

(1) WACC : 6.4%

(2) LCOE o Gas Peaking and Combined Cycle Gas Turbine (CCGT) in gas producing countries with ver y low

gas prices are not displayed

(3) IGCC = Integrated Gasifcation Combined Cycle, a modern coal combustion technology

Source : National Renewable Energy Labor atory, National Energy Technology La boratory, EPIA Set

or 2020, Wor ld Bank, A.T. Kearney analysis

COmPARISOn OF lCOE 2010, 2020, 2030, hIGh CASE FUEl PROJECTIOn (1) (cts/kW)

Forecaste lCOE o PV i Subet Coutries

With expected price digression o 56% to 66% by 2030 compared to 2010, PV

LCOE in Sunbelt Countries is expected to range rom 5 to 12 c/kWh by 2020

and 4 to 8 c/KWh by 2030.

In Sunbelt countries PV is already competitive today with peak diesel generators;

it would become competitive with gas uelled peak power capacit y as well as

with some mid load capacity by 2020, and would most probably outperorm

all other power generation technologies by 2030.

2.3 Key pre-conditions to realise the SunbeltPV potential

Several barries need to be overcome in order or Sunbelt countries to develop their

massive PV potential. This chapter oers a brie overview o key hurdles that stand in

the way o PV deployment. It suggests general approaches to overcome them, while

a more region-speciic view ollows i n the regional sub-chapters.

As is depicted in Figure 13, the lack o PV know how is an important hurdle to PV deploymentin Sunbelt countries. It prevents PV penetration even where it is already competitive.

Throughout the Sunbelt, PV is still perceived as an expensive energy source mostly

suitable or o grid installations o small and medium size. This misconception is not

only held among local governments and utility sector players, but also in parts o the

development nancing community. As a matter o act, PV can already compete with

other commonly used power generation technologies such as diesel generators.

Also, PV is still not ully considered by some as a suitable option or large scale power

generation. But the truth is that PV is increasingly a competitive large scale alternative

compared to other technologies such as Concentrating Solar Power (CSP).

To address such misperceptions, signiicant awareness building and an inormation

campaign regarding PV are needed among opinion leaders and decision-makers in

Sunbelt countries, but also among development banks and other infuencers.

Figure 13 :Key barriers to Sunbelt PV deployment

PV Know-how & Perception

Policy support / level playing eld

Finance

Grid inrastructure

Implementation & Service

PeakLoadenergysources

MediumLoadenergysources

20202010 2030 20202010 2030 20202010 2030

LCOE ( cts/kWh)

0

5

10

15

20

25

30

20202010 2030 20202010 2030 20202010 2030

LCOE ( cts/kWh)

0

5

10

15

20

25

30

Gas Peaking(2)Diesel PeakPV

Gas(2) Coal(3) Oil redSizeof barrepresentsregional range


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In spite o recent improvements in perceptions, the absence or early stage o policy

support schemes still represents a signicant barrie r. This is aggravated by biases against

PV such as subsidies or conventional energy use and/or end user electricity prices,

which are still widespread. Additionally, administrative hurdles exist due to the novelty o

the technology and/or lack o experience at local, regional and national levels.

Hence, highlighting cases o successul implementation is crucial to support the emerging

policy initiatives in some countries. In other countries, political lobbying to convince key

players o the need or support o PV i s essential. Both activities should be inormed

by policy experiences in Europe. While overly generous support schemes in some

countries have created overheated markets, others have provided a more stable growth

o PV over time. Also, PV support does not have to imply large budgets or cost to the

nal consumer - simple bottleneck removal such as ensuring grid connection and net

metering as well as clear guidance to local and regional administrations or spatial

planning and authorisation procedures can help greatly. This is particularly true in

countries were PV is already competitive compared to diesel generators. Appropriate

and temporary support to close a countrys speciic competitiveness gap will then

ensure accelerated deployment o PV.

Lack o competitively priced nance. While high-prole large projects with political

support are currently able to receive nance, the capability/willingness o nancial

players in Sunbelt countries to nance PV is oten limited.

The lack o nance is o course correlated to the lack o PV know-how and early stage o

policy support discussed above. To the extent that policy support becomes reliable and

word o the benets o PV spreads, nance can be expected to ollow. To accelerate this

development, however, nancial intermediaries need to be an active part o awareness

building. Transerring project inance experience rom established PV markets and

collaborating with industry and policy experts can turn banks into catalysts or PV

deployment rather than constituting a bottleneck. For example, by understanding

the unctioning o mini-grids in rural communities, banks could also beneit rom

stimulating economic activity in areas and customer segments that were not the

ocus o their commercial activity.

Underdeveloped grid inrastructure and inexperienced management limits the

absorption o intermittent power sources and increases operative challenges or grid

operators.

The lack o grids in some part o the Sunbelt region is an opportunity rather than a barrier

to PV. Mini-grids with hybrid systems including PV can ll the gap, leap-rogging the need

or a costly grid extension and support economic development by making electricity

available switly.

This is discussed in detail in the ollowing special section on mini grids.

In cases where existing grids are regularly acing operative challenges, brown-outs or

partial breakdowns, grid-connected distributed PV can be benecial. For example, in

cases o mid-day load peaks, when PV also reaches maximum capacity, the advantage

o generation close to consumption can lower the burden on grids. Hence, the key barriers

in this context are oten grid operators, who are not always aware o these operative

possibilities or lack the experience to manage them successully. In some countries,

PV can prot rom the pioneering role o wind power deployment. Once grid operators

understood how to manage intermittent wind power, they will also be attentive to the

benets o PV, especially where acing mid-day peak demand.

Emerging markets or PV systems and services mean a still limited ability to serve

local PV markets, resulting in higher cost and longe r lead-times due to a lack o competing

oers and long supply chains. This slows PV market development and can put o local

investors.

It is here where the PV sector can contribute actively to unlock Sunbelt potential. Market

making activities o established PV companies are needed to establish PV rmly and to

help create an ecosystem or urther growth in a given country. This is already happeningin some Sunbelt countries, which also serve as manuacturing hubs, but more countries

with signicant potential are waiting to be developed.


12/29


miNi GRiDS

In countries where a signicant part o the population lives in rural areas

without link up to a national power grid, mini-grids can provide a solution or

supplying electricity at a reasonable cost. Mini-grids can connect a mix o

stand-alone electricity sources to private consumers and small business o

a community, thus enabling economic activity, education, improved medical

care, and increased saety levels. They can be interconnected between com-

munities, orming the nu cleus or a more systematic electrication, particularly

in more densely populated rural areas.

Phot ovoltaics Wind Hydro G enerat or

AC/DCConverter

AC/DCConverterand Charger

Change Controller

Master Inverter

and

Battery charger

ACbusline

ACVoltage

DCVoltage

DCbusline

Optional

Battery

ACLoads

DCLoads

Figure A

Figure A shows an exemplary confguration o a hybrid mini-grid using PV, small

wind, small hydro and a backup diesel generator to generate electricity. Bat-

teries can be used as an additional buer to enhance the dispatchability o

the system. Mini-grids have lower and more localized maintenance needs and

signifcantly lower transmission losses compared to long-distance grid extension.

Two main indicators determine the size o a countries mini grid potential :

1) The lower the electrication rate in a country, the larger the potential or

mini-grids,

2) The higher the investment attractiveness o a country, the higher the poten-

tial or mini-grids.

Figure B shows the mapping o all Sunbelt countries with an electrication rate

lower than 90% vs. their respective investment attractiveness. The bubble size

represents the countries total population, while bubble color indicates the size

o the PV Opportunity in a given country. Countries such as India, Indonesia,

and Bangladesh but also the Philippines and Nigeria show a high opportunity

or mini-grids. In those countries alone, more than 710 million people have no

access to electricity today. Hybrid mini-grids including PV applications can

change this situation at competitive cost and should be actively promoted.

Hybridising existing conventionally uelled mini-grids could be a particularly

attractive option to increase PV penetration ast. As PV is almost universally

suitable in Sunbelt countries, it can be retrotted to most existing mini grids,

thus loweringthe need or diesel uel and bringing down lie-cycle cost o the

power supply10.

While the rst indicator appears straightorward, the second warrantsexplanation : investors in a mini-grid need to be reasonably certain o areturn. Hence, the investment attractiveness o a country needs to behigh enough so that any investor can expect to be paid or their serviceby local consumers or the community. Such certainty can also be sup-ported by specic schemes where public or donor support covers thedierence o an aordable electricity price or communities9.

9 JRC A New Scheme or the Promotion o RE in Developing Countries, 2008

10 Compare ARE Brochure : Hybrid power systems based on renewable energies

Figure B

Source : ARE

IncreasingPVOpportunity

IncreasingMini -gridOpportunity

Bubblesi ze= population

100%

80%

60%

40%

20%

HighInvestment attractiveness

0%

Low

GuatemalaVietnam

Sri Lanka

Indonesia

Pakistan

Yemen, Rep.

Angola

Mozambique

Cambodia ZambiaKenya

Cameroon

Bangladesh

Nigeria

Peru

Philippines

NepalSenegal

Ghana

Namibia

South Arica

Botswana

India

TanzaniaEthiopia

Source : A.T. Kearney


13/29

SELECTEd rEGIOnaL PErSPECTIvES On Pv 25SELECTEd rEGIOnaL PErSPECTIvES On Pv

3SELECTED REGiONAL

PERSPECTivES ON Pv

Across the Sunbelt, the penetration o installed PV is low. PV manuacturing indus-try base diers strongly by region, and support policies are only emerging at dierent

speeds. To ensure sucient comprehensiveness while ocus on the most relevant

aspects, a selected group o regions within the Sunbelt is discussed in the ollowing

chapters. These are highlighted in Figure 14 and represent very dierent stages o de-

velopment.

India & China are both signicant players in PV manuacturing in the Sunbelt region, with

China dominating by ar in terms o capacity, while India has the longer track record. But

the installed base is still relatively modest in both countries and policies to spur installation

are still under implementation (India) or under discussion (China). South East Asia

does have some manuacturing capacity and a number o countries are at the verge o

implementing promising support policies. Also, a substantial number o projects are in

the pipeline and PV growth seems imminent. The same is not true orLatin America,

where almost no local industry base exists (with the exception o Mexico) and only some

countries are contemplating signicant support. Here, PV has gained some ground mostly as

an o-grid / electrication opportunity, not yet as a part o the mainstream power mix. In the

Mediterranean & Northern Arican region, the solar potential is only beginning to be tapped

into. PV still needs to be positioned much more strongly in this process which is driven by local

policy makers and development banks.

Figure 14 : Focus regions o Sunbelt as scope or regional analysis

Figure 15 :2030 Paradigm shit regional potential and key regional indicators

SElECTEd FOCUS REGIOnS

PV potential o13 GW by 2020 and48 GW by 2030 inthe Acceleratedscenario

Current developmentdriven by o-gridapplications inremote areas

PV potential o7 GW by 2020 and27 GW by 2030 in theAccelerated scenario

Large scalesolar projectsare announced;openness or PVincreasing

PV potential o53 GW by 2020 and228 GW by 2030in the Acceleratedscenario

Surging electricitydemand and existingmanuacturing basedrive PV potential

PV potential o10 GW by 2020and 46 GW by 2030in the Acceleratedscenario

Existingmanuacturing basedrives PV growth inthe region

0

35n

35S

Countriesinscopeo study

Sunbelt

LATINAMERICA

MEDITERRANEAN &NORTHERN AFRICA

CHINA& INDIA

SOUTH EASTASIA

Electricity cons. (TWh)

PV (3) attractiveness

Country (3) attractiveness

% o fexible energy sources

GDP (bn$)

PV LCOE (2) (/kWh)

Approx. Cumul. Inst. Cap. (MW)

242

+++

+++


14/29


From a PV potential perspective, Figure 15 highlights the signicance o the selected

ocal regions and oers a comparison o some key indicators across all regions. The

specic trends opportunities and challenges in ocus regions are discussed in more

detail in the ollowing sections.

3.1 Mediterranean and Nor thern Arica

The energy uture o non-EU Mediterranean countries as well as Northern Arica

currently receives a lot o attention. This is in part due to the high importance o

energy or the continued dynamic economic development o countries such as Turkey,

Egypt and Morocco, which ace signicant domestic supply challenges. Partly, however,

the attention is also politically driven by the European Union, which intends to increase

Mediterranean economic cooperation with programs such as the Mediterranean

Solar Plan, one o the main initiatives o the Union or the Mediterranean. Also, the

industry driven Desertec Industrial Initiative (DII) has broadly publicised the idea o an

integrated EU / Northern Arican energy grid with strong solar energy components11.

Although the region is receiving much attention, it is o medium potential and opportunitywhen compared to the other Sunbelt regions. With a combined GDP o over $1.5 trillion

it accounts or about 9% o Sunbelt GDP and is growing about 3% per annum. While the

region accounts or about 6.8% o todays Sunbelt electricity consumption, the identied

30 MW o installed PV represent only around 4.4% o the identied PV capacity in all

Sunbelt countries. Figure 16 positions the regional countries in scope vs. the regional

and other-sunbelt countries average.

The regions countries show a signicant variation o investment competitiveness, mostly

driven by political uncertainties in some countries, which reduce the attractiveness

somewhat versus an overall relatively stable macroeconomic development. Limited

support policies or renewable including PV exist in most countries, except or Libya and

Syria where no policy supporting PV is reported. Here, the Mediterranean Solar Plan

with its target o 20 GW o renewable energy to be deployed by 2020 in the region could

possibly play an important role.

The attractiveness o PV or the countries in the region varies less strongly and is about

Sunbelt average or important energy markets such as in Egypt or Turkey, where strongly

increasing energy demand is a key driver. A relatively high degree o fexibility in the

generation mix with signicant shares o oil and gas is a urther enabler or PV, while at

the same time indicating a comparatively attractive cost position o PV in terms o mid-

term LCOE dierential.

High electrication rates ranging rom 93% to 100% indicate that the o-grid potential o

PV is relatively less important i compared to other regions. Signicant PV growth in the

region would likely ocus more on grid-connected installations, which would constitute

a departure rom the current main application o rural electrication.

Throughout the region, only a modest base o installed PV capacity and PV manuacturing

exists to date, but an ambition or larger scale projects exists.

Figure 17 provides an overview o i dentiied capacities and selected sample projects

announced.

11 http://www.dii-eumena.com

Source : A.T. Kearney analysis

Figure 17 : Med & NA countries installed capacities and example projects

SElECTEd PhOTOVOlTAIC PROJECTS In mEdITERRAnEAn And nORThERn AFRICA

Isooton announced1 MW o PV systems

Themasol and BPSolar announcedan o-grid PVproject o 7.7 MW

MOROCCO

Egyptian NationalResearch Centrereports 15 MW oPV capacity underpreparation

EGYPT

TF announced 1,000MW o PV by 2017

NEPCO announceda 20 MW PV project

Shams Maan PowerGeneration PSCannounced a 200 MWo PV plant

JORDAN

Anel Enerji & Inciannounced a 20 MWPV plant

TURKEY

Production capacity or cells

Cumulativeinstalled PVcapacity

Production capacity or thin lm modules

Production capacity ormodules

morocco :6 mW

Tuisia1.4 mW

Turke :5 mW

Israe :25 mW

Ageria2.3 mW

Egpt :3 mW

0 MW

0 MW

200 MW

Jora :0.2 mW

0 MW

0 MW

39 MW

Figure 16 :Med & NA countries PV Opportunity positioning


High

HighRegional investment attractiveness

P

Vattractivenessforregion

LowLow

TunisiaMorocco

Algeria

Jordan

Turkey

Israel

Lebanon

Syrian Arab Republic

Lybia

Egypt ArabRepublic

Increasing PVOpportunityAverage other sunbelt countries

Average Mediterranean & Northern Arica


15/29


One striking actor in the regional discussion is that many actors on the government and

donor side ocus very much on Concentrating Solar Power (CSP) applications when

talking about Mediterranean and North Arican solar potential. This refects partly the act

that there are several CSP investment projects ongoing or some time already, mostly

in the orm o hybrid applications with gas, e.g. in Morocco, Algeria and Egypt. PV,

however, is becoming more present in initiatives such as the Government-sponsored

Moroccan project or 2 GW o solar energy which is open or PV as well as CSP. Also,

the well known Desertec Initiative is now stressing the act that it is technology neutral,

i.e. open to both CSP and PV applications. For more inormation, see the special section

about CSP and PV.

development bank players needs to change undamentally. A key example is the

multi-donor unded Clean Technology Fund which was created in 2008 to provide

scaled-up inancing or demonstration, deployment and transer o low-carbon

technologies that is administered by the World Bank. While signicant loans are

earmarked or solar investment, only CSP with trough technology is currently seen as

scalable and bankable.

Policy support in the region exists in the orm o established renewable energytargets, which countries such as Egypt, Algeria and Morocco have dened. Nevertheless,

support mechanisms such as eed-in taris are largely lacking with the exception o

Israel, where a eed-in tari or small applications exists. An important drat law has

been under discussion in Turkey already or some time, while countries such as

Jordan support PV with individual large scale developments. In addition to this wide

spread absence o systematic policy support, extensive documentation requirements

and bureaucratic hurdles make project development very dicult.

Figure 18 :Med & NA countries photovoltaic

potential 2020/2030

PROJECTIOn OF CUmUlATIVE InSTAllEdPV CAPACITy (GWp)


2010


16/29


CSP PV

Installed baseend 09 (GW)

0.7 22

Role Mid-Merit / Peak Intermittent / Peak

LCOE($ct/kWh)

09 19-30 29-33

20 11.5-27.5 9.5-12.0

Ease o gridconnection

low medium

Oten high distance to

consumption areas, HVand/or DC links needed

Distributed PV simple, large

PV plant on ground acilitiesneed MV or HV link

Short termenergy ondemand

Possible with thermal storage not possible / expensive

Dispatchable, i thermalstorage is part o concept

Intermittent generation, buthigh degree o predictability;still expensive storage

Ease odeployment

difcult simple

Specic land / climateconditions required :signicant water needs ornon-aircooled system

Hybrid solution can lowerCAPEX requirement inselected locations

Strong requirement on eldtopography

Simple installation, very astlead times

No signicant water needsScalable, can be phased

3.2 South East Asia

South East Asia (SEA) is home to some ast growing economies and an emerging hub

or PV manuacturing in Asia. Although political stability deteriorated recently in Thailand,

the region at large has enjoyed a stable economic development over the recent past.

The countries in scope (Figure 19) account or a GDP o over $1.5 trillion and make

up 9% o Sunbelt GDP - comparable to that o the Mediterranean and North Arican

countries discussed in the previous chapter. However, SEA countries in scope have

been growing more dynamically with a strong growth rate o 4.3% in 2008. Also, their

installed PV capacity amounts to over 60 MW, which constitutes around 7% o Sunbelt

installed PV capacity. This compares to an electricity consumption o 515 TWh or about

7% o Sunbelt nal electricity consumption, showing a slightly above average penetration

o PV.

The PV growth is mostly driven by Thailand and Malaysia, where comprehensive support

policies are emerging. Overall, the PV Opportunity mapping o the region results slightly

above the average mapping o the other Sunbelt countries in scope (Figure 19).

An important driver o urther PV growth is the already competitive cost position in

particular in the many isolated systems on SEA islands. PV LCOE in 2010 ranges

between 15.5 and 17.6 cts/kWh in the region, which is already in the competitive range to

diesel or gas generated peak power LCOE (9.9 18.3 cts/kWh). Overall, the power generation

uel mix is quite heterogeneous across the region, with Vietnam sourcing only 36% rom gas

or oil, while the shares o Malaysia and Cambodia reach 64% and 96%, respectively.

Electrication rates in the region range rom 65% to 100%, except or Cambodia (24%)

where PV can make a particular contribution or rural electrication. Hence, on-grid as

well as o-grid PV applications will likely play a signicant role in SEA.

Figure 19 : SEA countries PV Opportunity positioning

Increasing PVOpportunity

High


PVattractivenessforregion

LowLow

Average other sunbelt countries

Average South East Asia

Singapore

Malaysia

Thailand

Philippines

VietnamCambodia Indonesia


Pv AND CSP

Photovoltaic (PV) and Concentrating Solar Power (CSP) represent two

distinct solar power generation technologies, which oer a diverse set o charac-

teristics that make each o them suitable or particular conditions and objectives. The

table below oers a comparison along a number o key criteria.

The distinct properties o PV and CSP make them suitable or dierent

applications that can well complement each other in Sunbelt conditions. While

CSP has a role to play, or example, in combination with already established con-

ventional power generation and contributes to dispatchable solar energy in

cases where thermal storage is provided, PVs chie role lies in supplying peak

power in a broad range o application sizes in close proximity to consumption.

Jointly, they can increase the maximal penetration o solar power in manySunbelt countries. One area o overlap exists regarding larger scale applications

in desert conditions. Here, the advantages and disadvantages o the technologies

have to be weighed in everyparticular investment case :

I te case of CSP :

Advantages : Thermal storage option enables dispatching of output; can be combined

with existing conventional power plants.

Disadvantages : Installation location limitations (direct radiation, large, at ground &

signifcant water requirements). Limited project experiences with the exception o para-

bolic trough technology.

Regarig PV :

Advantages : No location limitations, full scalability/modularity of project size, indirect

sunlight can be utilised and no signifcant water needs exist

Disadvantages : Day production only unless enhanced with (still expensive) battery storage


17/29


SElECTEd PhOTOVOlTAIC PROJECTS In SEA


Cumulative installed PV capacity


Production capacity or modules

IEAGT announced 8 MW osolar power Installations

A Hong Kong based electricityproducer announced to builda 55 MW solar power plant

Conergy entered a consortiumand announced to builda 3 MW solar plant

Thai Government announcedto develop a 73 MW solar elduntil 2012

THAILAND

MYANMAR

LAOS

CHINATAIWAN

Quang Binh department oIndustry and Trade announcedto install solar battery systemsto generate electricity or dailyuse in remote communestotaling 790 kW

VIETNAM

Indonesian governmentannounced to extendan existing PV plantwith 50 MW

INDONESIA

550 MW

0 MW

590 MW

Sigapore1.4 mW

Vieta0.8 mW

Caboia0.1 mW

Piippies0.6 mW

574 MW

0 MW

0 MW

maasia11 mW

150 MW

812 MW

0 MW

25 MW

60 MW

65 MW

Taia40 mW

Ioesia6.5 mW

A look at the installed PV and PV manuacturing capacities by country (Figure 20) under-

lines that the region is clearly emerging as a manuacturing hub and that PV deployment

appears to be going along with this development. Singapore and Malaysia stick out rom

a manuacturing perspective with a high output o modules that could satisy strong

increases o regional demand.

A number o high proile and large scale projects indicate signiicant increases in

installed capacity also in the grid connected arena. Nevertheless, the currently announced

projects do not yet represent a stable fow o policy supported investment, but in many

cases represent announcements o what could be done i sucient policy support were

available. In that regard, the announcement that Malaysia will introduce a eed-in tari

Figure 20 : SEA installed capacities and example projects

in 2011 sends a strong signal to its neighbors in the region that PV can make

a contribution as a grid-connected source o electricity in addition to the o-grid

applications already in use in the region.

Figure 21 presents the regional PV potential or the South East Asia region according

to the three scenarios dened in section 2.3 o this study. The Accelerated scenario

suggests an installed PV base o 10 GW by 2020, accelerating growth until 2030 to

reach 46 GW. I a Paradigm Shit should occur, a 20 GW potential exists in 2020, and

a 2030 gure o 92 GW could be reached.

The key barriers and preconditions identiied in chapter 2.3. hold true also in the case

o South East Asia. A number o specic preconditions to enable signiicant penetration

o PV in the region are :

Know-how and perceptiono PV

or hybrid systems as an opportunity

to displace other uels (or example

expensive diesel generation on

islands) needs to be enhanced by

understanding the grid connected

potential o PV as well.

Policy support or PV is emerging

or imminent in some markets such

as Malaysia, Thailand and Singa-

pore. These should be designed to

ensure sustainable support levels

based on competitive installed

system prices. Currently reported

FiT levels o $0.39 to $0.54 per kWh

or 21 years under discussion in

Malaysia12 appear, however, rather

on the high side. I successul,

sustainable policies might serve

as templates also or other SEA

countries such as Indonesia and

the Philippines, where currently no

signicant policy plans are report-

ed.

Financestill constitutes a key barrier in the region and the economic crisis has

worsened the situation. Long term government support as well as utility investment will

re-invigorate bank trust in PV projects and enable additional nance rom banks.

Gridchallenges are not likely to occur soon given the low penetration o PV to date.

Ensuring eective rules or grid connection is an important precondition or short term

development o PV, while realisation o higher PV additions in the mid- to long-term

can pose ewer rather than additional challenges in countries with expanding electricity

demand and generation capacity.

Implementation and Service- Leveraging the existing ootprint o PV industry in the

region, it should be possible to improve availability and quality o PV installation and

support to nal customers. Manuacturers active in the region might do well to consider

downstream activities in order to acil itate regional growth rather than ocusing

exclusively at technology export.

12 http://www.ecoseed.org/en/general-green-news/green-topics/green-policies/eed-in-tari/7075-Malaysia-nalizes-details-o-eed-in-tari-or-renewables


Figure 21 : SEA photovoltaic potential 2020 / 2030

PROJECTIOn OF CUmUlATIVEInSTAllEd PV CAPACITy (GWp)

2010


18/29


SElECTEd PhOTOVOlTAIC PROJECTS In IndIA And ChInA





ZebaSolar announced installation o 10 MW PVcapacity in India by the end o 2010

Astoneld Renewable Resources and Belectricannounced to build a 5 MW PV plant

NTPC announced that it would construct111 MW o PV capacity by 2014

Topsun Energy Ltd. announced plans toconstruct a 5 MW PV system in Gujarat

INDIA

The Chinese Government selected 294 projectstotaling 642 MW to benet rom their GoldenSun subsidy

Diverse developers announced a total o12,5 GW o PV projects in China, butdeployment will depend on governmentalwillingness or additional nancial support.Examples are :- FirstSolar announced plans to build a 2 GW PV plant

in Mongolia- Suntech announced the extension o a 10 MW utility

scale PV plant up to 50 MW by 2011

CHINA

3.3 China and India

As the worlds most populous countries with steeply increasing electricit y demand, China

and India play a crucial role or PV in the Sunbelt. While the two countries dier very

strongly on many counts, they are treated jointly here due to their large impact or overall

PV development in the Sunbelt. As Figure 22 illustrates, China and India are located in

the same cluster o highest, with China being better positioned in terms o investment

attractiveness, while PV shows a slightly higher attraction or India than or China.

I grouped as a region their average PV Opportunity rating is signicantly higher than

that o all other Sunbelt regions in scope.

The combined GDP o India and China amounts to over $5.5 trillion and accounts or~35% o Sunbelt GDP. Gross Domestic Product was growing at a rate o ~8.4% in 2008.

In terms o energy, the huge weight o India and China in the Sunbelt region is even more

apparent : with an el ectricit y consumption o 3,682 TWh, they ac counted or ~54% o

Sunbelt nal electricity consumption in 2007 (last year or which comparable numbers

were available). This signicance is refected in terms o PV - with a combined total o 460

MW, more than 50% o Sunbelt installed PV capacity was installed in India and China.

What is more, both countries share dynamic growth rates o electricity consumption

and experience supply bottlenecks in catering to the tremendous electricity demand

growth.

The discussion in the ollowing section will ocus on each country separately beore

comparing PV potential and barriers to deployment or both countries.

3.3.1 India

Assuming competitively priced installed systems, PV in India can reach LCOE between

12.4 and 13.4 cts/kWh in 2010. This is well below the range o diesel uelled peak

power (around 16-18 cts/kWh) but slightly a bove gas red peak capacit ies (10-11 cts/

kWh). PV can thus already make a positive contribution to the undamental economics o

power supply in India where a share o 12% o oil and gas red capacity is used or peak

power supply. Apart rom grid connected peak power, PV can also make an important

contribution to the electrication in o-grid/mini-grid applications. This is o high economic

relevance as only 65% o Indian population is currently connected to an electricity grid.

Due to a comparatively long PV tradition including several mid-sized manuacturing

players, Indias installed capacity o 130 MW (Figure 23) is signicant compared to most

Sunbelt countries. This capacity is mostly o-grid capacity in rural regions, which refects

the perception most policy-makers and development banks had o the application o PV.

Figure 23 :India & China installed capacities and example projects

Figure 22 : India & China PV Opportunity positioning



High



LowLow

Average other sunbelt countries

Average China & India

India

China

6.085 MW

444 MW

6.856 MW

557 MW

50 MW

407 MW

Cia300 mW

Iia160 mW


19/29


In 2009, however, India passed the Jawaharlal Nehru National Solar Mission, which

targets the installation o 22 GW solar power by 2022. 20 GW o this capacity is intended

to be grid connected, while 2 GW are slated or o-grid applications.

During a rst implementation phase until March 2013, grid connected PV and CSP will be

supported up to 500 MW each. Additionally, 200 MW o PV o-grid will be supported.

The technology ocus or on-grid solar installations during later phases is not explicitly

dened, but expected to promote both PV and CSP. The ocial guidelines stipulate

a number o restrictions regarding project size, local content and number o projects per

developer, which are to be reviewed regularly13.

While project acceptance and dissemination o inancial support is thus handled on

a national level, project preparations will involve a designated agency on the State level,

which is to acilitate access to land, water, and the electricity grid. It remains to be

see, how quickly States will be able to provide this acilitation and handle the expected

high number o project proposals. Apart rom potentially slow or overtaxed State level

processes, the issue o land use is traditionally dicult in India. Obtaining agricultural or

industrial land or PV system installations might impact project lead times signicantly.

Roo-based systems can avoid this pitall, but bring their own challenges in an emergingmarket with a lack o experienced installation players.

Overall, it needs to be stressed that the Indian Government intends to review and adapt

policies and technological ocus depending on its experience with the scheme. While

the initial installation numbers might thus seem small, the establishment o a stable policy

process and emergence o well adapted players and technologies can enable a signicant

scale up ater the initial phase.

3.3.2 China

In China, PV can already reach LCOE between 15.3 and 16.5 cts/kWh in 2010. This is

slightly below the range o diesel uelled peak power (around 16-18 cts/kWh) but above

gas red peak capaciti es (10-11 cts/kWh). As peak power in China is dispatched almost

exclusively rom hydro acilities owned by grid operators, the generation cost comparison

or grid connected PV is not straight orward. While PV can be assumed to ree some

hydro capacity, which could in turn displace some coal based generation, there is no

explicit system peak power cost that would allow or a direct comparison. Hence, on

a system level, external benets o PV would have to enter the equation to make the

business case or PV deployment.

Nevertheless, on the commercial end-consumer side, locally dierentiated peak prices

or power exist, as regional grid operators try to incentivise consumers to decrease

demand in peak times. PV could thus play a role or the sel consumption o commercial

customers trying to shave costly peak usage and/or or regional grid operators which

are struggling to balance peak loads only with limited hydro sources. While sizable in

absolute terms, the o-grid potential in China appears to be limited to remote areas,

while the bulk o electricity demand is in the heavily populated coastal areas, where the

penetration o the electrical grid is very high. In these areas, land is scarce/expensive,

pointing to a need or roo-based/building integrated development rather than large scale

ground- based systems.

While China commands the largest PV manuacturing capacity in the world, its installed

base o PV is insignicant by comparison (Figure 23). PV capacity additions in China have

emerged only over recent years under the Golden Sun support system or PV. However,

support is capped at 20MW per province and the current overall target is 20 GW by

2020. The Chinese authorities appear currently reluctant to lit the PV caps : as mentioned in

Figure 23, a staggering 12.5 GW o PV projects were an nounced by potential investors by

late 2009. Once unleashed, PV growth in China could be explosive. This is perceived by

the government to be neither cost eective or the overall electricity bill, nor easible or

absorption in the power grid. Clearly, the huge success o wind power, which has grown

over 110% annually in the last our years and has exceeded the ocial growth target or

2010 by a actor o 5, has made the authorities and energy sector companies cautious

regarding triggering a development that might be dicult to manage.

The large manuacturing base is oten seen as a reason why China should open a

domestic market. This is not necessarily obvious to an export-oriented country like China

that supplies the world with many products or which it has no signicant domestic

market. Given that export is currently still going airly well despite decreasing competi-

tiveness due to the weakening Euro, there is no immediate need or China to trigger

domestic demand rom an industrial policy point o view. In act, Chinese ocials havestated that there is overcapacity in PV manuacturing. They might thus not deem it

necessary to rescue all domestic producers, even i exports should slow.

3.3.3 China and India Potential

Figure 24 displays the PV combined

potential scenar ios or India and

China. The large dierence between

the Paradigm Shit and the Accel-

erated Scenario is striking. This is

due to the digital nature o Chinas

expected development. The Accel-

erated scenario assumes a some-

what muted development in China

with PV reaching only 160 GW

o installed capacity by 2030, i.e.

eightold o the oicial target o

20 GW or 2020, while India would

contribute 68 GW, slightly more than

threeold the Solar Mission target

or 2021. Jointly the two countries

would account or 228 GW or 56%o overall Sunbelt PV potential under

the Accelerated scenario.

For the Paradigm shit, however, it

is assumed that China would shit

gear and develop to the ull extent

their PV Opportunity. This would

result in 640 GW o installed PV,

generating a 12% share in power

generation by 2030. India would in

the same Scenario reach 130 GW

installed, meaning the both countries

would jointly account or 69% o

overall Sunbelt potential.


2010


20/29


Further preconditions that would need to be met along the already introduced categories

are listed in the table below

nEEdEd ACTIOnS / mEASURES

IndIA ChInA

PRECOndITIOnS

KnOW-

hOW

/

ImPROVEd

PERCEPTIOn

Need to increase levels o PV

know-how at util ity as well as

at State / Province level, to

enable the rapid implementation

o the Solar Mission with a broad

range o PV applications.

Need to overcome reluctance to

increased shares o PV in central

government and energy sector

companies. This is usually less o

a problem in Provinces that have

a signicant PV manuacturing base

and are keen to develop domestic /

regional installer markets as well.

POlICySUP

PORT

Need to ensure implementation o

the Solar Mission on a State level.

This should be driven with high

priority so that traction is gainedsoon. Need to anchor PV rmly also

as a large scale, grid connected

power source while developing the

signicant o-grid potential as well.

Need to actor in the externalities

o oss i l uel use as cost or

the least cost comparison by

Chinese decision makers. Thiscould lead to a re-appraisal

o PV as a viable opt ion rom

an economic point o view to

provide the rationale to lit caps o

support systems in place.

FInAnCE

Need to dene a clearer picture

o the actual implementation o

support policies in India, which

is current ly ho lding up the

development o PV plants.

As Finance is available through

state owned and private banks it

does not constitute a signicant

bo t t l eneck o r commerc ia l

investors.

GRId

ChAllEnGES

Need to address the lack o an

electricity grid in many regions

by leveraging PV as an element

o hybrid mini-grid systems to

leaprog development patterns

and electrication without massive

investment in the expansion o

the national grid.

Need to address concerns among

gr id operators regarding the

stability o grids when integrating

PV. The potentially beneicial

nature o PV as a natural balance

to wind needs to be examined.

Integrated management concepts

o a ne two rk o r enewables

need to be tested/introduced.

Incentivising PV development

in portions in the grid that arein need o peak power and / or

are close to demand centers can

mitigate the perceived problems

signicantly.

ImPlEmEnTATIOn

AndSERVICE

Need to build on the domestic

manuacturing base to provide

a base level o services, while

improving industry design and

quality standards to channel

development act ivi t ies and

increase quality control o end

consumer installations.

Need to develop the domestic

market to provide an opportunity or

PV players producing in China to

grow also downstream in the value

chain. Many companies are entirely

geared or export and ocused

on manuactur ing and have

not currently build up signicant

domestic service capabilities.

3.4 Latin America

Overall, Latin America provides a PV Opportunity close to the overall average o the

Sunbelt region. At the same time, the current utilisation o this opportunity is relatively

low.

Latin American countries in the scope o this study have a combined GDP o over

$4 tri l l ion accounting or 26% o the energy generation capacity installed in the

regions researched. This is much larger compared to the GDP o Mediterranean, Northern Arica

and South-East Asian countries discussed in previous chapters. Also GDP growth was

relatively high in 2008 (4.1%). However, the cumulative PV installed capacity amounts to

only 56 MW, being around 4% o Sunbelt installed capacity. Around 95% o this PV base

is located in Mexico, Brazil and Argentina, with almost no installed capacity reported in the

other countries considered in this region. Comparing this to an electricity consumption

o over 1,000 TWh (15% o Sunbelt nal electricity consumption), the Latin American region

shows a below average penetration o PV compared to the other regions.

The investment attractiveness o Latin American countries is scattered signiicantly.

Chile, Mexico and Brazil lead while Venezuela, Jamaica and Ecuador lag behind

(Figure 25). This wide spread is partly the result o a variation in policy support existing

today in these countries. While Venezuela, Jamaica and Colombia dont have any policy

support reported, other countries in the region, such as Chile, have an explicit political

target regarding the renewable energy share and require power generators to meet

minimum quotas o renewable energy. While a quota system may not address the

need or PV specic support, the act that some Latin American countries have dened

renewable energy policy targets will help to unlock the potential in the region. Legal preconditions

such as the permission or grid-connection o PV systems have evolved lately in

important countries such as Mexico and Chile.

Figure 25 :LA countries PV Opportunity positioning


High



LowLow

Average other sunbelt countriesAverage Latin America

Brazil

Mexico

Chile

Colombia

Peru

Argentina

DominicanRepublic

Costa Rica

Guatemala

EcuadorVenezuela, RB

Jamaica



21/29


Except or Peru and Guatemala, the electrication rates are well above 92%, appearing

rather high, which seemingly diminishes the potential or o-grid PV compared to other

regions in the Sunbelt. However, there is already a signicant amount o conventional

mini-grids installed e.g. or industrial / commercial applications in remote operations.

Turning such systems into hybrid systems including PV could be the lowest hanging ruit

or rapid PV deployment. In addition, the PV potential or peak electricity is very high in

countries such as Argentina, Dominican Republic, Jamaica and Mexico having a highly

lexible generation mix (over 65%). The other countries in scope in this region show

a more average fexibility around 30%.

In hal o the countries in scope o the Latin American region, installed PV capacity has

been reported to date (Figure 26) and Mexico has a signicant manuacturing base or

PV modules. Figure 26 shows also the installed capacity in the region and a selected

number o projects announced. These add up to over 200 MW when implemented,

suggesting that a signicant growth o PV in Latin America is imminent.

Figure 26 :LA installed capacities and example projects

or Argentina, they tend not to ocus on PV. Also, given the lack o a signicant domestic

industry base, they operate in a dicult environment, where their lobbying power could

proit rom additional support also rom players not yet present in LA countries.

Increased awareness or the potential o PV among policy makers but also media

and utilities would lay the oundation o improved PV support policies and removal o

administrative barriers.

Generalisedsupport policies or renewables exist already in countries like Chile, Brazil,

Mexico and Argentina. Nevertheless PV speciic support needs to be created to

unleash PV growth in these countries. In other countries such as Venezuela, Jamaica

and Colombia, PV policy still needs to be created rom scratch. Latin America as

a whole can learn rom existing policies in markets such as Malaysia or Thailand, where

relatively better PV deployment exists already today.

Also in the L A region, nance still constitutes a key barrier. The combination o private

investment (utility investment) and international partnerships (World Bank, others) can

provide necessary nancing means or larger scale PV deployment in the region.

Grid connectionis absolutely key or large PV deployment. While undergoing testing

e.g. in Chile, it is not the rule yet everywhere in the region. But the promising example

o Brazil, which is moving towards obligating grid operators to connect PV systems

starting in 2011, could serve as an icebreaker or PV growth.

Implementation and Service : The example o Mexico, which uses its proximity to

the US to export PV modules, shows that a PV manuacturing base can emerge even

i the domestic market remains initially small. This provides a good supply base that

can acilitate signicant growth. Willingness to commit to the creation o a local manuacturing

base would greatly enhance governmental attention towards supporting local

PV deployment.


2010

$ 42 mln)

Solar Energiaannounced tobuild a PV plantwith 160 MWcapacityby 2012

MEXICO PERU ARGENTINA BRAZILCHILE

Source: A.T. Kearney analysis

Source: A.T. Kearney analysis





6 mW

0.29 mW

n/A

n/A

n/A

n/A

MEXICO

0 MW

0 MW

245 MW

40 mW

BRAZIL

14 mW

CHILE

2.5 mW

ARGENTINA

0 MW

0 MW

1 MW

10 mW

PERU

n/A


22/29

rECOmmEndaTIOnS TO KEy STaKEHOLdErS TO unLOCK THE SunbELT POTEnTIaL 43rECOmmEndaTIOnS TO KEy STaKEHOLdErS TO unLOCK THE SunbELT POTEnTIaL

Governments and policy makersare establishing the crucial ramework or PV growth. In

many cases in the Sunbelt, the undamentals such as enabling grid connection and net

metering, empowering local planning authorities to authorise PV acilities and enabling

tax and custom exemptions or PV generated power or PV technologies are needed

to acilitate baseline PV growth. For more ambitious PV penetration, reliable and

sustainable support schemes such as eed in taris are needed to jump-start local

PV deployment and enable the build-up o a domestic industry supplying, installing and

maintaining PV systems at competitive prices.

While the role o governments can thus hardly be overstated, it is important to understand

that their acilitation is oten directly aected by the plans and perceptions o national

utility sector players. The situation and objectives o power generation as well as on the

grid operation players thus need to be considered. Here, PV needs to convince by its

positive attributes as a peak source o energy that can, i installed close to consumption

centers, actually decrease grid pressures and increase low carbon, domestic generation

at almost zero marginal cost.

Concrete commitments o the PV industryare equally important in unlocking markets.

Policy makers are not inclined to install avorable policies to jump-start markets i mosto the value generation is created elsewhere. While the job creation argument is not

equally applicable to all markets, it is worth pointing out that increasing portions o value

creation are actually earned with installation and other downstream services, which are

mostly local. But industry cannot remain passive and wait or the opening o key markets.

Aggressive pricing and early market entry rather than aggressive lobbying or support

might do more to open markets in the long term. Establishing signicant coverage or cli-

ent services and potentially even collaborating with competitors to ensure sucient scale

or national manuacturing bases could constitute new ways to create markets.

Development agencies and banks play an important role in the institution building

as well as the nancing o solar power development. In many Sunbelt countries, they

are long standing advisors to government as well as energy sector players. They

provide nance or co-nance where uncertainties are high and thus acilitate participation

o private capital in inrastructure and other projects. Overcoming the apparent

reluctance o development banks to endorse PV as a mainstream source o power is

thus a key measure. This should acilitate important milestone projects which would

open the PV market in certain countries where PV is currently simply not considered as

a technological option.

Private inancial institutions are more than willing to invest in sustainable energy

applications worldwide, provided risk-adjusted returns justiy the engagement. A key actor

is risk perception, which oten depends on an observers personal background and

experience. PV experienced nancial institutions oten have a European FiT market

background. They need to understand the specic conditions o Sunbelt countries where

the regulatory engagement is likely not to oer the same level o certainty. Local banks

operating in the Sunbelt, however, usually have no signicant experience with nancing

PV. Hence, partnerships between local banks and international partners, or in-house

know-how transers o large multinational banks with a presence in Sunbelt countries,

would likely acilitate Sunbelt PV nancing options.

Last but not least, national and international PV associations have an important role

as acilitators o the discussion between industry, utilities, governments and the nancial

and development communities. They should provide a national source o reliable

inormation and act as brokers and matchmakers between stakeholde

EPIA Unlocking the Sunbelt Potential of Photovoltaics v2

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