MINNESOTA STATE LEGISLATURE, 2 APRIL 2013 1 / / / / / / / / / / / / / / / / SOLAR MARKET UPDATE...

MINNESOTA STATE LEGISLATURE, 2 APRIL 2013 1/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /

SOLAR MARKET UPDATE

MINNESOTA LEGISLATURE TESTIMONY

2 APRIL 2013, ST. PAUL, MN

ETHAN ZINDLER, HEAD OF POLICY ANALYSIS

MINNESOTA STATE LEGISLATURE, 2 APRIL 2013 2/ / / /

North America

(39)

South America

(5)

Europe

(88)

Asia Pacific

(24)

Africa

(29)

San Francisco

Sao Paulo

WashingtonNew York

Cape Town Sydney

London Beijing

New Delhi

Hong Kong

BLOOMBERG NEW ENERGY FINANCE: 200 STAFF IN 13 OFFICES WORLDWIDE

Tokyo

Singapore

Zurich

Objective: Be the definitive source of insight, data and news on the transformation of the energy sector.


Clean energy investment overview

Global solar trends

US solar trends


$54bn

$80bn

$114bn

$164bn

$191bn $187bn

$251bn

$302bn

$269bn

48%

43%

45%

16%

-2%

34%

20% -11%

2004 2005 2006 2007 2008 2009 2010 2011 2012

GLOBAL TOTAL NEW INVESTMENT IN CLEAN ENERGY 2004–12 ($BN)

Source: Bloomberg New Energy Finance

Note: Includes corporate and government R&D, and small distributed capacity. Adjusted for re-invested equity. Does not include proceeds from acquisition transactions


84%77% 74% 73%

68% 66% 68% 67%

57%

14%

17% 20% 22%25% 27% 26% 27%

35%

3% 7% 5% 6% 7% 6% 6% 6% 9%

2004 2005 2006 2007 2008 2009 2010 2011 2012

ROW

BASIC

OECD

NEW INVESTMENT IN CLEAN ENERGY BY TRADE BLOCK 2004–12 ($BN)

Source: Bloomberg New Energy FinanceNote: Excludes corporate and government R&D


NEW INVESTMENT IN CLEAN ENERGY BY SECTOR IN 2012 AND % CHANGE ON 2011 ($BN)

Source: Bloomberg New Energy FinanceNote: Excludes corporate and government R&D

0.06

0.19

1.58

2.81

3.24

7.35

9.03

76.56

137.68

84%

52%

-41%

-50%

-33%

18%

-28%

-13%

-9%

Other

Marine

Geothermal

Biofuels

Energy smart technologies

Small hydro

Biomass & Waste

Wind

Solar



Global solar market trends

US solar market trends


DYNAMICS OF THE GLOBAL SOLAR SECTOR

• Massive supply-demand imbalance with far more capacity available than currently being demanded.

• Plummeting equipment prices due to technology advancements and the supply-demand imbalance.

• Major demand coming from the EU in recent years with strong growth in Japan (post-Fukushima) and China.

• Commoditization of solar equipment with China now playing a dominant role in manufacturing.

• Consolidation, bankruptcies, and value destruction well underway.

• Trade skirmishes!


DEMAND VS. HISTORICAL AND PROJECTED MODULE PRODUCTION (GW)

Source: Bloomberg New Energy FinanceNote: Supply scenarios based on continued 2012 utilisation rates.

-

10

20

30

40

50

60

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Supply - crystalline silicon Supply - thin-film silicon

Supply - thin film non-silicon Demand - conservative

Demand - optimistic

Historical Future

Current cell manufacturing capacity


PV INSTALLATION BY YEAR, HISTORICAL AND CENTRAL FORECAST, 2007-2015 (MW)

Source: Grid operators, incentive programme administrators, industry associations, Bloomberg New

Energy Finance

Note: Few countries have yet finalised their 2012 data, hence the spread here. Table with all major countries in Appendix. The conservative forecast is the sum of the first quartiles of the spread between conservative and optimistic for each country.

2.8GW6.6GW 7.7GW

18.2GW

28.7GW 30.2GW

36.7GW

45.6GW

52.1GW

2007 2008 2009 2010 2011 2012 2013 2014 2015Western Europe Eastern Europe Japan USAChina India Rest of World

Historical Forecast


INSTALLED PV PER CAPITA, END OF 2012, CONSERVATIVE SCENARIO (W/PERSON)

Source: World Bank, Bloomberg New Energy FinanceNote: GDP per capita adjusted for purchasing power, in 2011 $

Germany

Italy

BelgiumCzech Republic

GreeceAustraliaSpain

Bulgaria

FranceJapanIsrael

UKDenmarkPortugal

CanadaUSASouth Korea

Netherlands

China

RomaniaIndia

0

50

100

150

200

250

300

350

400

450

0 10,000 20,000 30,000 40,000 50,000GDP per capita


ANNUAL COSTS OF TARIFFS AS SHARE OF GDP VS PV ELECTRICITY PRODUCTION AS SHARE OF CONSUMPTION, END OF 2011

Source: Bloomberg New Energy Finance, Eurostat, Canadian Statistics

Germany

Czech Republic Italy

Spain

France

Greece

Ontario

0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

0.35%

0.40%

0.45%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%

Annual costs as share of GDP

Share of PV electricity production of overall electricity consumption

Bubble size representing 5GW cumulative PV capacity at end of 2011


0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

2008 2009 2010 2011 2012

CRYSTALLINE SILICON MODULE SPOT PRICE, 2008–12($/W)

Source: Bloomberg New Energy Finance Solar Spot Price Index

Note: Prior to 11 July 2011 the index collated module prices without differentiating between mono and multi crystalline

-75%Four years


SPOT PRICE OF C-SI MODULES, 2 JANUARY 2012 – 4 MARCH 2013 ($/W)

Source: Bloomberg New Energy Finance Module Spot Index

Note: Dates represent first day of the week for which the price has been averaged, ie 8 August represents quote for the week 8-14 August. Data available here.

0.0

0.2

0.4

0.6

0.8

1.0

1.202

Jan

16 J

an

30 J

an

13 F

eb

27 F

eb

12 M

ar

26 M

ar

09 A

pr

23 A

pr

07 M

ay

21 M

ay

04 J

un

18 J

un

02 J

ul

16 J

ul

30 J

ul

13 A

ug

27 A

ug

10 S

ep

24 S

ep

08 O

ct

22 O

ct

05 N

ov

19 N

ov

03 D

ec

17 D

ec

31 D

ec

14 J

an

28 J

an

11 F

eb

25 F

eb

2012 2013

Multicrystalline silicon module (c-Si) Monocrystalline silicon module (c-Si)

http://bnef.com/SolarIndexes/spotAnalytics


CHINESE MULTICRYSTALLINE SILICON MODULE PRICE BUILD-UP, MARCH 2013


Note: Assumes 5.6g of silicon per watt of wafer. Processing cost based on SEC filings of quoted companies, publically available reports, various discussions and analyst estimates. SG&A represents sales, general, administration and R&D.

0.09

0.14

0.13

0.25

0.005

0.010

0.050

0.094

0.03

0.06

0.03

$16.6/kg

$0.91/piece

$0.40/W

$0.68/W

Polysilicon

Ingot &Wafer

Cell

Module

Processing cost per W SG&A per WDepreciation per W Best-in-class margin per W

SSSS Spot price

-0.03

-0.08

0.003

-0.04

-0.07


FORECAST COSTS FOR GROUND MOUNTED PV PROJECTS, 2010-2020 (2012 $/W)


Note: Based on experience curves for each component. Methodology here http://bnef.com/Insight/1954 though charts updated January 2013

1.85

1.35

0.73 0.72 0.72 0.70 0.65 0.61 0.57 0.54 0.52

0.30

0.21

0.12 0.11 0.10 0.10 0.09 0.09 0.08 0.08 0.08

0.50

0.50

0.27 0.26 0.25 0.25 0.24 0.23 0.23 0.22 0.22

0.41

0.41

0.32 0.31 0.30 0.29 0.28 0.28 0.27 0.26 0.26

0.18

0.18

0.15 0.15 0.14 0.14 0.13 0.13 0.13 0.12 0.12

3.24

2.65

1.59 1.55 1.52 1.47 1.40 1.34 1.28 1.23 1.19

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Module Inverter Balance of plant EPC Other

http://bnef.com/Insight/1954


FORECAST COSTS FOR RESIDENTIAL PV PROJECTS, 2010-2020 (2012 $/W)

Source: Bloomberg New Energy FinanceNote: Based on experience curves for each component. Methodology here http://bnef.com/Insight/1954 though charts updated January 2013

2.41

1.76

0.91 0.87 0.84 0.79 0.72 0.66 0.61 0.57 0.54

0.41

0.28

0.26 0.24 0.23 0.21 0.20 0.19 0.18 0.17 0.17

0.67

0.68

0.65 0.63 0.61 0.59 0.57 0.56 0.55 0.54 0.53

0.64

0.63

0.60 0.58 0.56 0.54 0.53 0.52 0.51 0.49 0.49

0.52

0.81

0.520.43 0.36 0.31 0.26 0.22 0.20 0.18 0.16

4.64

4.16

2.952.75 2.59

2.44 2.282.15 2.04 1.95 1.88

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Module Inverter BOP EPC Other

http://bnef.com/Insight/1954


SMALL PV SYSTEM COST IN JAPAN, GERMANY AND CALIFORNIA, $/W

Source: BSW-Solar, California Solar Initiative filings, JPEA, Bloomberg New Energy Finance

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

Q42009

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Average sub-10kW German system cost Average California residential system cost

Japanese residential system cost average Chinese multicrystalline silicon module price


GLOBAL CRYSTALLINE SILICON CELL MANUFACTURING CAPACITY (MW/YEAR)


2,193 5,0367,300

16,944

36,253

42,303

438952

1,6322,057

4,205

7,147

7,747

3636

116466

856

1,476

1,666

1,2922,095

3,2904,936

6,953

8,294

9,344

2.4GW5.3GW

10.1GW

14.8GW

29GW

53.2GW

61.1GW

2006 2007 2008 2009 2010 2011 2012

China Taiwan Korea Rest of world


PV MODULE PRODUCTION BY COUNTRY, 2010-12 (%, GW)

Source: Company reports, Bloomberg New Energy Finance estimates and enquiriesNote: Geography calculated by company headquarters, not manufacturing capacity location

54.7%64.3%

71.1%

12.9%

11.2%

10.9%12.7%

9.1%

7.4%12.0%9.4%

6.3%2.7% 2.4% 2.6%1.3%

2.1% 0.7% 0.1%1.4% 0.6% 0.3%1.3% 1.0% 1.2%

18.1 29.7 30.1

2010 2011 2012

Taiwan

Spain

India

United Kingdom

South Korea

Norway

Germany

Japan

USA

China


c-Si CELL PRODUCTION BY COUNTRY, 2010-12 (%, GW)


54.3% 57.8%

67.8%

18.1%17.9%

15.3%10.8% 7.5%

2.6%9.5% 8.6%

7.6%

4.3% 3.2%4.0%

2.4% 3.0%2.7%

1.7%0.4%0.4%0.3%

20.7 23.0 27.4

2010 2011 2012

India

South Korea

Norway

USA

Japan

Germany

Taiwan

China


POLYSILICON PRODUCTION BY COUNTRY, 2010-12 (%, TONNES)


29.9%20.9% 21.0%

28.3%

32.0%25.0%

20.2%

15.4%

18.5%

11.0%

18.6%19.5%

7.4% 8.9%9.2%

1.3% 1.4% 4.9%1.3% 1.9% 2.0%0.5% 0.6%

0.3%154000 215000 205000

2010 2011 2012

Taiwan

UK

Japan

Other

Norway

South Korea

Germany

China

USA


INVERTER PRODUCTION BY GEOGRAPHY, 2010-12 (%, GW AC)

Source: Company reports, Bloomberg New Energy Finance estimates and enquiries

Note: here DC-DC optimiser production has been converted into AC, which is estimated to be 85% of DC, Geography calculated by company headquarters, not manufacturing capacity location

47.2%43.4%

21.4%21.5%

17.6%

13.7%

10.0%17.0%

3.7% 4.3%

23.0 25.6

2011 2012

Rest of the world

China

Other Europe

USA

Germany


Q4 2012 LEVELIZED COST OF ENERGY FOR SELECT TECHNOLOGIES

Source: Bloomberg New Energy Finance, EIA

0 50 100 150 200 250 300 350 400 450 500

Natural gas CCGT w/CHPCoal fired

Natural gas CCGTNuclear

Small hydroLarge hydro

Geothermal - flash plantMunicipal solid waste

Landfill gasWind - onshore

Biomass - incinerationGeothermal - binary plant

PV - thin filmBiomass - gasification

PV - c-Si trackingBiomass - anaerobic digestion

PV - c-SiCSP - tower & heliostat w/storage

Fuel cellsCSP - parabolic trough

Wind - offshoreCSP - parabolic trough + storage

CSP - tower & heliostat

LCOE Range Current Mid



Global solar market trends

US solar market trends


TOTAL NEW US INVESTMENT IN CLEAN ENERGY, 2004-12 ($BN)


10.617.1

32.1

43.3 43.0

32.8

43.5

65.4

44.2

0

10

20

30

40

50

60

702004

2005

2006

2007

2008

2009

2010

2011

2012

Note: Shows total clean investment in the US across all asset classes (asset finance, public markets, venture capital/private equity), as well as corporate and government R&D and small distributed capacity. Values include estimates for undisclosed deals and are adjusted to account for re-invested equity.


US CUMULATIVE RENEWABLE CAPACITY (GW)


25.335.6 40.1 46.6

59.81.6

2.02.9

4.9

8.0

13.9

14.314.4

14.5

14.7

2.8

2.92.9

3.0

3.1

43.5

54.860.4

68.9

85.7

102030405060708090

100

2008 2009 2010 2011 2012

Geothermal

Biomass & waste

Solar

Wind

2X


US ELECTRICITY GENERATION BY FUEL TYPE, 2007-12 (%)


Note: Contribution from ‘Other’ is minimal and consists of miscellaneous technologies including hydrogen and waste. Values for 2012 are projected, accounting for seasonality, based on latest monthly values from EIA (actual data available through October 2012).

0%

20%

40%

60%

80%

100%

20

07

20

08

20

09

20

10

20

11

20

12

Other

Renewables (including hydro)Natural gas

Nuclear

Oil

Coal


PRIMARY ENERGY CONSUMPTION VS. GDP, 1990-2012

Source: Bloomberg New Energy Finance, Bureau of Economic Analysis, US EIA

Note: Values for 2012 are projected, accounting for seasonality, based on latest monthly values from EIA (actual data available through September 2012). GDP is real and changed; 2012 value is based on economic forecasts from Bloomberg Terminal.

Quadrillion Btu GDP ($bn)

0

2

4

6

8

10

12

14

0

15

30

45

60

75

90

105

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

Other

Hydro

Natural gas

Nuclear

Petroleum

Coal

GDP


SHALE GAS EXTRACTION BREAK-EVEN PRICE, BY US PLAY ($/MMBTU)

Source: Bloomberg New Energy Finance; Various

Note: Assumes 15% equity IRR. UK assumes $8m Drilling & Completion cost; 2000-4250 mcfd dry production (per Marcellus and Eagle Ford); 20% royalty rate; usual tax treatment

1 April 2013Henry Hub

$4.03/MMBTU


AVERAGE WIND PPA PRICE RELATIVE TO WHOLESALE REGIONAL PRICES, 2004–SEPT 2012 ($/MWH)

Source: Bloomberg New Energy Finance, FERC

Note: Price indices are calculated by averaging the hourly price at ISO hubs throughout a 24-hour day. Quarterly rolling averages are used to eliminate outliers. Small sample size accounts for some variation in PPA prices in 2011 and 2012.

0

10

20

30

40

50

60

70

80

90

100

2004 2005 2006 2007 2008 2009 2010 2011 2012

PJM West ERCOT West MISO (Illinois Hub)

Southwest Power Pool California PPA price (signing date)


MIDWEST RPS SUPPLY-DEMAND (TWH)


Notes: Demand is split into regions in the Midwest with binding RPS programmes (Iowa, Minnesota, Missouri) and regions with non-binding programmes (North and South Dakota, Oklahoma). Supply is based purely on wind capacity in these states, comprised of capacity commissioned (or having secured financing) as of July 2012.

0

5

10

15

20

25

30

35

40

45

2010 2012 2014 2016 2018 2020

Non-binding programmes

Binding programmes

Wind generation in region (commissioned or financed)


AVERAGE PURCHASING PRICE BY OFFTAKER, ALL PROJECTS 2011–H1 2012 ($/MWH)


Note: Includes wind, biomass and geothermal PPAs. Does not include solar PPAs. Only includes offtakers purchasing energy from two or more projects

26

353535

38383941424344464751525454555757

616466

72737676

100107

23

303234

37

0 5 10 15 20 25

0 25 50 75 100 125

MISOSouthwestern Pub Service Co

SPPNYISO

PJMPublic Service Co of Oklahoma

Minnesota PowerBasin Electric Power Coop

NEPOOLOklahoma Gas and Electric

Great River EnergyAmerican Electric Power

Northern States PowerNorthWestern Energy

Public Service Coof ColoradoS.California Pub Power Authority

Nebraska Public Power DistrictExelon

San Diego Gas & ElectricBonneville Power Admin

Idaho Power CompanyOmaha Public Power District

PacifiCorpFirst Energy Solutions Corp

Associated Electric CoopCA Dept of Water Resources

Tennessee Valley AuthorityAppalachian Power

Arizona Public ServiceNV Energy

Pacific Gas & ElectricSnohomish County PUD

Southern California EdisonNew England Power

Merchant rates PPAs Reporting projects


SOLAR PPA PRICES BY SIGNING DATE, H2 2008–2011 ($/MWH)


Note: Does not include PPAs under 5MW. ‘Banded’ PPA prices are pegged at the average price over the period of project operation. The California RFP resulted in 7.5TWh of shortlisted generation, of which about half was PV. California RFP price estimates are sourced from developers. Topaz PPA price estimate based on first-year total PPA revenues ($198.8m).

0

50

100

150

200

250

Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12

AZCACONMNVNYPR

250MW

50MW

First SolarAgua Caliente

SempraMesquite Solar I

Eurus Energy Avenal Park,Sand Drag, & Sun City Plants

NextEra Hatch

Iberdrola San Luis Valley

CogentrixAlamosa

SempraCopper Mountain Fotowatio

Apex

Solar Reserve Crescent Dunes

First Solar SilverState North

AESIlumina

BP Long Island

FotowatioSpectrum

Estimated 2011 CA RFPshortlist (2016 delivery $70–90)

NRGRoadrunner

11 solar PPAs executedvia CA RAM

EnelStillwater

First SolarTopaz


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