Solar3.0 Roadmap From Policy To Profitability

Making Solar Happen

Solar3.0 - A Path from Policy to Profitability A National Platform for Process Innovation to Scale DG solar PV

Intersolar N.America San Francisco, CA

Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012

Our Initiatives Scalable

Local best practices

National

impact

Performance`

Interconnect

Financing

Workforce

Permitting

Installation

Our Board Entire Value

Chain

Systems

Approach

Our Partners Collaborative

Consortium

2

About SolarTech

http://www.tiogaenergy.com/

http://www.sce.com/sc3/

http://www.sunedison.com/

http://www.recsolar.com/default.aspx

http://www.pge.com/

http://us.sunpowercorp.com/

http://svlg.org/


Overview

• Current U.S. market landscape

• Solar 1.0 Solar 2.0 Solar3.0

• The Solar3.0 Platform

• Tipping Points

• A (proposed) path from Policy to Profitability

• Q&A

3


U.S. Solar Market Growth Through 2015

0

1000

2000

3000

4000

5000

6000

7000

2005 2006 2007 2008 2009 2010 2011 2012e 2013e 2014e 2015e

Meg

awat

ts (

MW

dc)

PV Installations Forecast

Year Q1 SEIA/GTM Research: Q3 2011 Solar Market Insight

4

Market Uncertainty

•1603 & Solyndra hangovers

•Excess Capacity

•Trade dispute

•Election year POLITICS

•Confused Consumers

•Fractured marketplace

Solar3.0 Program Goal Inject stability & Market Direction

•Efficient local markets through standards, best practices

•Provide lower prices and more predictable transactions to consumers

• 2012 – We face multiple challenges with fragmented solution paths


Average Installed System Costs Continue to Decline (many reasons)

SEIA/GTM Research: Q3 2011 Solar Market Insight

5

Greentech Media Report (Q111 vs Q112)

•Drops across all sectors = $4.44/w average across markets

•Res - $5.89, Commercial $4.53, Utility $2.90 / W

Making Solar Happen

Tipping point - The event of a previously rare phenomenon becoming rapidly and dramatically more common

- Wikipedia


What is “Main St. USA” waiting for? • Residential PV break-even

installed price in 2008 assuming

full retail net metering, state

incentives and 30% ITC.

• Residential PV break-even

installed price in 2015 assuming

full retail net metering and 30%

ITC.

Source: Denholm, Margolis, Ong, Roberts “Break-Even Cost for Residential Photovoltaics in the United States:

Key Drivers and Sensitivities” NREL 12/2009

7

Making Solar Happen

The people who are crazy enough to think they can change the world are the ones who do.

- Apple’s “Think Different” commercial, 1997

Imagine “Going Solar”?

- SolarTech’s “4th Solar Leadership Summit”, 2012


2012 Landscape: “The TOTAL PRODUCT does NOT yet Exist”

• Fragmented Market

– Solar is SOLD (not Bought)

– Solar industry access is

confusing

– Customer Acquisition costs

$2500+

• Lead generation sites yield

1-2%

• Direct conversion rates are

10-15%

– Inefficiencies across the

enterprise

– Few economies of scope &

scale

9


“Solar3.0” - A pathway to industry scale

(Scale Markets)

(Create Markets)

(Capture Markets)

Solar 2.0 Technical Innovation

Fed Policy

RES/RPS

REC’s

SB1, CSI,AB32

Products

Technology

Innovation

Commercialization

Solar 1.0 Policy Innovation

Phase 3.0 Business

Innovation

Processes

Productivity

Scale

“Total Cost of

Ownership”


Solar 1.0 Policy

Innovation

Fed Policy

RES/RPS

REC’s

SB1,

CSI,AB32

http://www.dsireusa.org/

http://www.dsireusa.org/


Solar 2.0 Technology

Products

Technology

Innovation

Commercialization

http://cleanedge.com/research/state-index

•Comparative benchmarking of clean-energy activities

•Analysis of technology, policy, and financing trends / state

•Data on which clean-tech sectors are expanding by market

•Insight on each state's relative strengths and weaknesses





Program Overview 1000+ Communities

90+ Utilities, 500+ PV Installation

Companies

1600 electrical and code officials trained

30,000 industry stakeholders

8 state target, organic adoption beyond

Phase 1

Needs Analyses

Phase 2

Developmen

t Phase 3

Implementati

on

Non-Hdwr BOS costs as % of Installed Costs

2012

<30%

2013

<20%

2014

<10%

Phase 4

Market Impact

$2.85M Funding to Reduce Non-Hardware BOS Soft Costs by 50% by 2014

A National Platform for Process Innovation in Solar PV

http://solar30.org/

http://solar30.org/


“Solar3.0” - A pathway to industry scale

Processes

Productivity

Scale

“Total Cost of Ownership”

3.0 Tipping Points – High Priority Markets 2.9 Connect Private Capital & Human Capital 2.8 Mass Market products – “Plug-in-Play” 2.7 Micro-Grid proof points 2.6 Integrated Architectures: RE + NG + EE 2.5 Empowering Consumer Choice 2.4 Broader Access to Lower Cost Capital 2.3 Relentless Soft Cost reduction 2.2 Unified Messaging, Aggregate Demand 2.1 Market driven solutions

Solar 2.0 Technology

Solar 1.0 Policy

Innovation

Fed Policy

RES/RPS

REC’s

SB1,

CSI,AB32

Products

Technology

Innovation

Commercialization

Phase 3.0 Business

Innovation (Scale Markets)


2.1 Shift to Market driven solutions Phase 3.0 Business



2.2 Unified Messaging, Aggregate Demand

Phase 3.0 Business


Solar Most Popular Energy by Far “All of Above” But Major Partisan Divide on Other Energy

Source: Lazard (2011)

+85.3%

+15.7%

+93% +93% +73%

+94.7% +56% +24% +62%

+62%

+29%

+18%

+24%

+31%

+88% +77% +32%

+15% +28%

+13%

+24% +4%

+38% +1% +68%

+58% +84%

+67%

Solar

Natural Gas

Wind

Nuclear

Oil

Biofuels

Clean Coal


Headlines Say One Thing …


Phase 3.0 Business


Why the Clean Tech

Boom Went Bust

Economic Slowdown Challenges

Renewable Energy

Clean-Energy Aid Racks Up Losses

*In instances where the data was split-sampled and aggregate data was not

available, the sample with the higher %yes was used.

… Americans Are Thinking Another

There is majority support for a measure to increase renewable energy standards in every state.

Summer 2011



Phase 3.0 Business


Clean,

renewable

energy

Clean

energy

75 72

10

20

30

40

50

60

70

80

90

Renewable

energy

Thermometer Ratings (Mean Rating)

Sustain.

energy

Green

energy

74 70 68

“Clean, renewable energy” is seen very positively – that

phrase tends to resonate most strongly.

Phrase %80-100

Clean, renewable energy 52%

Clean energy 52%

Renewable energy 47%

Sustainable energy 43%

Green energy 44%


2.3 Relentless Soft Cost reduction Phase 3.0 Business


•With rapid decline in hardware costs, reducing

soft-cost is becoming increasingly important

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

$22

$24

1980 1985 1990 1995 2000 2005 2010

Avera

ge M

od

ule

Pri

ce (

2010 $

/Wp

)

2005 2010 Note

ASP $4.04/W $2.40/W in 2010 Avg installed system price decreased ($1.70/W)

Relative module price decline = 96% of the total decline PV system price

What’s left?




1) Choose installer

2) Finance PV system

3) Permit, Inspect

-

4) Install, Interconnect

There is more to a system than

hardware

5) Monitor

performance

$$$

• In the U.S., the process of selecting an installer

through operating a PV system can add significant

time and cost to project completion.

• Inefficient supply chains, O&M, and delays can

also increase cost.

Need for standardization and automation




21

$-

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

$1.60

Baseline Solar 3.0 Goal

In

sta

lled

Co

sts

(2

01

1$

/W

dc)

Non Hardware Balance of System Costs:

Baseline and Solar 3.0 Goals by 2014

Source: Ardani et al. Quantifying Non-hardware Balance of System Costs for Photovoltaic Installations in the United states Using a Combined Annual Expenditure-Labor Hour productivity Approach. National Renewable Energy Laboratory. 2012.

$1.52

$0.80

Installation

Labor

Customer

Acquisition

System Design

All Other

“Soft”

Costs




Solar30.org

Portal

Cities

Code Officials

Building Inspectors

PV Installers

PV Developers

Utilities

States

Industry Partners

Local/State Fire Marshals

Q3 – Q4 Plan • 100 communities selected

• Monthly webinars

• Leadership event

• Solar 3.0 Tool Kit Update 2

• Inspector/Installer workshops

• Affiliate-led workshops

• Solar 3.0 scorecard 1


2.4 Broader Access to Lower Cost Capital Phase 3.0 Business


Balanced understanding of uncertainty in the performance,

reliability, and safety of components/systems optimized for

appropriate risk and cost.

Mature

industry

< Newer

industry

(ie. Solar)

Uncertainties (real or perceived) can lead to an

unnecessarily high assessment of risk and cost.

The Problem

Making Solar Happen 24

Source: Team Analysis

Solar as an Asset Class

Policy Risk

Development Risk

Construction Risk

Customer Risk

Resource Risk

Technology Risk

Operating Risk

Future State

• A standardized approach to risk:

• Construction, Solar resource

models, Technology, O&M

• Opportunity

• Broader participation of

lenders in Solar

• Facilitate the emergence of a

secondary market for Solar

debt

• Solar Securitizations, Solar Bonds

Current State

• Discrete risks in traditional lending

verticals are known (e.g., Auto, Real-Estate)

• Solar finance involves a unique

combination of risks in a single vertical

• No standardized way to analyze solar PV

project risks, consistent methods,

standardized risk asessment

• Most lenders struggle to efficiently

underwrite loans in this field

2.4 Broader Access to Lower Cost Capital Phase 3.0 Business

Innovation (Scale

Markets)


Why Solar as an Asset Class? Objectives

• Coordinated strategies to increase confidence, decrease risk, and improve flow of capital

• Ways to accelerate commercialization of new technologies through validation of system performance and reliability.

• Close gaps in model guidelines re. quantification of risk, capital formation, and bankability.

25

1:1 (Business-To-Business paradigm 2007-2012)

Development

• Sites

• Contract

• Partnerships

• Structure

• Economics

Construction

• Pre / Post

• Performance

• Commission

Wharehouse

• Insurance

• Final due diligence

• Risk / De-risk

Capital Markets

• Portfolio

• Ratings

• Cash Flow

Capital Market Drivers •~30-35% CAGR to 200GW+ by 2020(GTM)

•Low cost debt fuels expansion Today: ~$70bn/ year (<50% is debt financed) •2020: ~$375bn/ year

(~70-80% debt financed)

NEED - $1 trillion in cumulative debt issuance to fuel industry growth by 2020


26

1:Many (Scale)

• Over 6,500 banks or U.S. lending

institutions

• <5% are actively lending to Solar

projects

• A “participation gap” exists

• Methods, standards, resources, tools,

guidelines, skills or the capabilities to

efficiently diligence and underwrite

these loans does NOT exist AT SCALE

Standards + Methods = Scale

<300*

<5%

Total no. of

Banks in the

US

Banks actively

lending to Solar

projects

~6,500

Total US Banks vs US Banks actively lending to Solar

projects

Source: S. Ghaemmaghami & Prof. King “The Solar Risk

Project @ IQSS/ Harvard University “

Why does securitization matter 2012-2020?

•Closing the “participation gap” means: •Lower cost of capital •Improved terms •Lower prices for consumers •Subsidy free markets (cheaper,

better, faster)

Making Solar Happen

Who has $1,000,000,000,000?

$0.8

$1.0

$1.2

$1.4

$1.6

$1.8

$2.0

2005 2006 2007 2008 2009 2010 2011

Deposits

Loans

Cumulative Loans and Deposits for US

Community Banks*, 2005-Present ($T)

• Solar could represent

an attractive new

vertical for many

Community Banks

• Excess cash,

strong(er) balance

sheets, shortage of

quality, local, non-

traditional lending

verticals (e.g., Real

Estate)

* Commercial Banks with assets $200m-$10bn Source: Federal Reserve Weekly H8 Report Loans

excludes assets reclassified under FASB Statement 166; Team Analysis


A Holistic Approach is needed - Key Elements

• Program Framework - Chart a course towards ITC expiration

• Ratings - Understand how project/portfolio analysis is conducted, risks stacks are evaluated, quantified, and mitigated at various points in time

• Risk Stack - Facilitate the underwriting process w/consistent ways to backstop risk (policy, customer, performance, technology, construction, O&M , data analytics, and methods independent of market sectors.

• Local/Regional Capital - Improve the process to access broader, lower cost capital pools through standardization\

• DATA - Access to system data, analytics, and methods to better quantify risk stacks: engineering performance, data collection, Operations & Maintenance, Technology, Financials

• Origination - Propose risk reduction solutions to reduce perceived and real project risk across the project delivery chain

• Backstop - Leverage models, analytics, data gathering efforts from National Labs to backstop ratings & risk` 28

Local $

Rating Agency’s

Performance Symposium – Intersolar NA 7/9/2012


2.5 Empowering Consumer Choice Phase 3.0 Business


Create Demand Pull < 2014!!!

GTM Forecasts 21 GW of PV Module Capacity to Retire by

2015


2.6 Integrated Architectures: Renewables + Natural Gas + EE

Phase 3.0 Business

Innovation

(Scale Markets)

21st Century Clean Local Energy Architecture •IT enabled and automated

•Integrated supply/demand models •Smart grid applications

•Enterprise delivery systems •Open architectures moving energy information

across consumers, industry, cities, and utilities.

Architecture Challenges Ahead •Grid integration challenges

•Capacity factors / contribution •Interconnection •Dispatchability

•Impact on power markets, economics •Central vs. DG renewable delivery

http://www.nrel.gov/docs/fy12osti/53732.pdf

http://www.nrel.gov/docs/fy12osti/53732.pdf


Trickle down energy innovation effect

2.7 Micro-Grid proof points Phase 3.0 Business


Can military bases improve energy

generation and transmission via a new

system: Energy Surety Migrogrids™?

Vision: An energy surety system that

uses more small, renewable, and

distributed generation and storage

nearer the load (microgrid), with less

reliance on generation from big power

plants using a microgrid approach.

“Solar Energy is now a clean enabling technology. It’s simply all about clean

electrons now.”


2.8 Mass Market products “Plug-in-Play” Phase 3.0

Business Innovation

(Scale Markets)

•April 24,2012 •$5M for “plug-and-play” PV systems that can be purchased, installed and operational <1day •partnerships with universities, industry, utilities, and other stakeholders. •Part of a 5 yr program for an additional $20M ‘ask’ of Congress over the next four years


2.9 Connect Private Capital with Human Capital Phase 3.0 Business


Who will train all these new workers?

State Cumulative

Capacity (MW)

Funding Needs Based on Market

Share ($M)

California 1,513.4 $25.5M

New Jersey 601.7 $10.1M

Arizona 383.2 $6.5M

Colorado 198.6 $3.3M

New Mexico 160.9 $2.7M

Pennsylvania 141.9 $2.4M

Nevada 141.0 $2.4M

New York 114.4 $1.9M

North Carolina

97.2 $1.6M

Florida 87.1 $1.5M

Rest of Nation

510.60 $8.6M

Total 3,950 $66.5M

Where’s the $$$?

How can we create a better match between private capital and

human capital?


2.9 Connect Private Capital with Human Capital Phase 3.0 Business


Key Element and Relative Weighting %

Model Technical Simplicity

(7.5%)

Industry Participation

(35%)

Ease of Funding

(30%)

Long-Term Viability

(20%)

Replicable (7.5%)

Total Weighted

Score

Public/Private Partnership 5 10 2 4 6 5.7

Revolving Fund 3 5 7 10 8 6.7

Crowd sourcing 2 5 4 9 7 5.4

Highest Score Public/Private

Partnership Public/Private

Partnership Revolving

Fund Revolving

Fund Revolving

Fund Revolving

Fund

Sustainable Business Models (suggested) Next steps – Industry vetting

A joint collaboration of:


3.0 Tipping Point: High Priority Markets Phase 3.0 Business



“Solar3.0” - A Market Based approach to accelerate grid parity for 46,016,325 people

Processes

Productivity

Scale

“Total Cost of

Ownership”

3.0 Tipping Points – High Priority Markets 2.9 Connect Private Capital & Human Capital 2.8 Mass Market products – “Plug-in-Play” 2.7 Micro-Grid proof points 2.6 Integrated Architectures: RE + NG + EE 2.5 Empowering Consumer Choice 2.4 Broader Access to Lower Cost Capital 2.3 Relentless Soft Cost reduction 2.2 Unified Messaging, Aggregate Demand 2.1 Market driven solutions

Phase 3.0 Business


Solar 3.0 = Better Tools | Efficient Markets | Lower Costs

Making Solar Happen

Imagine “Going Solar”

- SolarTech’s “4th Solar Leadership Summit”, 2012

What does the U.S. solar industry look like at scale?

- Intersolar N.A, San Francisco CA 7/2012

Solar3.0 Roadmap From Policy To Profitability

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