MIT Energy Conference 2007 -Solar Power: A Path to Grid Parity?

Moderator - Travis Bradford, President, Prometheus Institute

1. Manufacturing - Dick Swanson, President and CTO SunPower 2. Technology - Charlie Gay, VP & GM Solar Group, Applied Materials3. Policy - Rhone Resch, President SEIA 4. Financing/Integration - Jigar Shah, CEO SunEdison

Special Thanks to the student organizers: Keith Peltzman - Eerik Hantsoo - Joel Conkling - Anthony Fotopoulos - Carlos Molina

Meeting the NeedThe Prometheus Institute for Sustainable Development

Institute Research Products2006

Solar Revolution

From MIT Press – September 2006

Based on Economic-only Projection Models

Not only will we reach grid-parity, but permanently exceed it

Disruptive Technological Transformation

What is Grid Parity?

Assumes Distributed (not Centralized) Solar

Must correctly calculate the cost of PV, including:Component Costs (Modules, Inverters, Racking, etc.)Installation CostFinancing Costs (and terms of repayment)

And must impute amount of sunlight captured in usable form:

Sunlight AvailableInstallation characteristics (angles and shading)Losses from DC capture to AC use

Decide to compare with or without subsidies:Rebates, Tax Credits, Accelerated Depreciation, Tax Deducibility of Home Mortgage Interest

What is Grid Parity ?

PV presents a range of cents/ kWh (based on many variables)Compare versus range of local grid-prices

When do we achieve grid parity? How do we get there?When do we achieve grid parity? How do we get there?

Grid El

ectric

ity

Grid El

ectric

ity

Num

ber

of L

ocat

ions Distributed PV

Distributed PV

Cents / kWh

Dr. Richard Swanson

SunPower Corporation

Richard SwansonFounder, President, CTO

MIT Energy ConferenceMarch 10, 2007

8

2002$3/W

1979$30/W

Solar Price Learning Curve

1

10

100

1 10 100 1000 10000

Cumulative Production (MW)

Mod

ule

Pric

e (2

002$

)

1979$32/W

2002$3.10/W

Silicon Shortage

81% Progress Ratio

Solar Panel Cost Drops by 19% With Each Doubling in Manufacturing Capacity

9

Now two new factors are emerging that will help continue this trend:

• Efficiency as an Important Driver– Increased efficiency drives value

through the entire value chain

• Thinner wafers– Reduces consumption of expensive

silicon

10

Poly Grams per Cell Watt

0

2

4

6

8

10

12

14

Q105 Q205 Q305 Q405 Q106 Q206 Q306

Silicon Utilization

11

• Thinner wafers• Higher efficiency• Improvements in crystal growth technology• Improvements in slicing technology• Improvements in cell processing technology• New lower cost silicon refining technologies• Increased manufacturing scale:

200 MW → 500 MW plant size

Future Cost Reduction Drivers

12

Polysilicon

Wafer Solar Cell Solar Panel SystemIngotPolysilicon

Value Chain Cost Distribution

20%30%

50%

2006 US Solar System Cost Allocation by Category

13

2006 2016

Downstream Savings (50%)

Panel Savings (50%)

Cell Savings (25%)

Silicon Savings (50%)

Conversion Efficiency (15%)

Downstream

Panel

Cell

Silicon

60% Drop in System Cost

50%+ cost reduction from CA system cost is achievable50%+ cost reduction from CA system cost is achievable

14

Silicon Roadmap Cost1

10

100

1 10 100 1,000 10,000 100,000

Cumulative Production (MW)

Mod

ule

Pric

e ($

/W) (

$200

2)

Historical

Projected

1980$21.83/W

1990$6.07/W

2000$3.89/W

2010$1.82/W

2013$1.44/W2002 Roadmap

Solar Panel Learning Curve Predicts Retail Rate Parity < Decade

Dr. Charlie Gay

Applied Materials Corporation

External Use

Gigawatt Scale Solar Manufacturing

Charlie GayVice President and General Manager, Solar Business

The MIT Energy ConferenceMarch 10, 2007

External Use17

Enabling Industry Growth by Driving Cost Reduction….

5 nano-dollars10 cents

1,400,000 trillion4 trillion

20041974

20,000,000x Cost ReductionSource: SIA, IC Knowledge LLC

$1,500 / m2$30,000 / m2

25 million m20.3 million m2

20051995

20x Cost ReductionSource: Display Search, Nikkei BP, Applied Materials

Cost per transistor

FIRSTFIRST

Cost per area

THENTHEN

Cost per watt

NEXTNEXT

External Use18

Cumulative Volume (MW)

1

10

100

1 10 100 1,000 10,000 1E5

HistoricalHistoricalProjectedProjected

19801980$21.83/W$21.83/W

19901990$6.07/W$6.07/W

20052005$2.70/W$2.70/WM

odul

e C

ost (

$/W

)*

Scale to Enable Learning Curve

* 2002 DollarsSource: Navigant Consulting

Production line size (Megawatts per Year):

Lines Per Factory

0.5(1980)

2

5(2000)

3

50(2005)

4

100(2010F)

10

External Use19

Cost Per Watt Expected to Scale with Fab Size

Current thin film Current thin film technology for technology for

25MW 25MW fabfab

Projected Applied Projected Applied thin film thin film

technology for technology for ~60MW ~60MW fabfab

Projected Applied Projected Applied thin film thin film

technology for technology for 1GW 1GW fabfab

$1.00/W$1.00/W

$0.71/W$0.71/W

Sources: First Solar, Applied Materials, supplier quotationsSources: First Solar, Applied Materials, supplier quotations

Glass Substrate

Transparent Conductor

Amorphous Silicon

Microcrystalline Silicon

Back Contact

Glass Substrate

Transparent Conductor

Amorphous Silicon

Microcrystalline Silicon

Back Contact

Device and Device and materials materials optimization optimization

Jumbo size Jumbo size glassglass

Optimized supply Optimized supply chain, especially glass chain, especially glass and glass coatingand glass coatingLine balancingLine balancing

>$1.42/W>$1.42/W

External Use20

Strategy to Reduce Production Costs

=$ Production / WattCost / m2

Watt / m2

Reduce Cost per m2

Jumbo size glass - Equipment scaling28% lower balance of systems cost for jumbo glass vs. 1m x 1mYield & control

Typical for Industry

~1m x 1m

Jumbo Size~2.6m x 2.2m

4X less cabling & mounting

Exhibition Tandem Plate unveiled at Solar Power 2006

Average Cell Efficiency = 10.6% Thickness uniformity <5% (range)

Increase Watts per m2

PVD & PECVD experience in materials and uniformityEntire film stack solution to optimize interfaces, performance and yield

Enhanced light trapping increases

cell efficiency

Enhanced light trapping increases

cell efficiency

External Use21

Large Area Processing Equipment

Rhone Resch

Solar Energy Industries Association(SEIA)

23

www.seia.org

Expanding the Solar Market in the United States

Rhone ReschPresident

Solar Energy Industries Association

24

www.seia.org

Expanding the US Solar Market

Long-term state incentives

Long-term, meaningful Federal incentives

Long-term commitment to

R&D

Public education campaign

25

www.seia.org

California Leading the Country

• California Solar Initiative– 11-year program, $3.2 billion– CPUC Commercial and Existing Residential

Buildings Program (CERB) • $2.8 billion• Fund 2,800 MW• Hybrid PBI program

– 50% rebate– 50% performance based incentive

– CEC Residential New Construction Comp -2007

• $350 million• New residential single and multi-family homes• Set aside for affordable housing

• Renewable Portfolio Standard - 20% by 2010

26

www.seia.org

Requirements: 23 States and Washington

D.C.

Source: DSIRE, www.dsireusa.org, January 2007

State Goal

☼ PA: 18%¹ by 2020☼ NJ: 22.5% by 2021

CT: 10% by 2010

MA: 4% by 2009 + 1% annual increase

WI: requirement varies by utility; 10% by 2015 Goal

IA: 105 MW

MN: 10% by 2015 Goal +Xcel mandate of

1,125 MW wind by 2010

TX: 5,880 MW by 2015

*NM: 10% by 2011☼ AZ: 15% by 2025

CA: 20% by 2010

☼ NV: 20% by 2015

ME: 30% by 2000;10% by 2017 goal - new RE

State RPS

*MD: 7.5% by 2019

☼ Minimum solar or customer-sited requirement* Increased credit for solar or customer-sited

¹PA: 8% Tier I, 10% Tier II (includes non-renewable sources)

HI: 20% by 2020

RI: 15% by 2020

☼ CO: 10% by 2015

☼ DC: 11% by 2022

☼ NY: 24% by 2013

MT: 15% by 2015

*DE: 10% by 2019

IL: 8% by 2013

VT: RE meets load growth by 2012

Solar water heating eligible

*WA: 15% by 2020

27

www.seia.org

Solar RPS Programs11 States and Washington DC

Source: DSIRE, www.dsireusa.org, February 2007

PA: 0.5% solar PV by 2020

TX: 500 MW non-wind

NM: triple credit for solar electric

AZ: 4.5% DG by 2025

NV: 1% solar by 2015;2.4 to 2.45 multiplier for PV

MD: double credit for solar electric

CO: 0.4% solar electric by 2015

DC: 0.386% solar electric by 2022

NY: 0.1542% customer-sited by 2013

DE: triple credit for solar electric

Solar water heating counts towards solar set-aside

WA: double credit for DG

DG: Distributed Generation

NJ: 2.12% solar electric by 2021

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www.seia.org

200735 MWsExisting, subsidy underutilized, need some rule changesNortheast States

$35B market

~7,200 MWs

Solar balances rural central generation from Wind, Geo, etcTotals

2007+300 MWsExisting programs, generally small. Need some work on interconnection, net metering, customer awareness, low rebates

AK, DE, FL, IL, MN, MI, MT, NM, OH, OR

Current55 MWsHigh electricity prices, smaller systems, state tax creditsHawaii

Current1,500 MWsProgram increased to 1,500 MWs, rules in place by end of 2007New Jersey

2007200 MWs$500MM legislation going through legislature, Austin 100 MWTexas

Current750 MWsPassed RPS, announced $200MM additional dollarPennsylvania

Current35 MWsReauthorized 35% Tax Credit, $2.5m cap through 2011North Carolina

200725 MWsPassed RPS, more legislation coming, program start by 2008New York

Current145 MWsPassed RPS, current program needs to be fixedNevada

200830 MWsPassed RPS, putting rules in place by end of 2007DC

200650 MWsPassed RPS, started program, looking to double RPSColorado

20073,000 MWsIOU program is place, municipal program in place by end of 2007California

20071,000 MWsACC has secured funding, final rules in place by end of 2007Arizona

Yr to Start Program

MarketsizeThru 2015

StatusState

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www.seia.org

EPAct 2005

First Residential Tax Credit in 20 Years• 30% capped at $2,000• Available for PV and DSWH• Only 2 years

Expands Commercial Credit• 30%, no cap• Covers all equipment and

installation costs• Available for all technologies• Only 2 years

30

www.seia.org

Securing America’s Energy Independence Act (HR 550, S 590)

• Provisions– Extend the Federal tax credits to 10 years

(through 2016)

– Thermal remains at 30%

– PV credit modified to fixed $/W• $3.00/watt

– Remove the residential cap of $2,000

– Provide AMT relief

– Provide 3-year accelerated depreciation

– Retroactive to January 1, 2007

31

www.seia.org

Securing America’s Energy Independence Act (HR 550, S 590)

• Industry activities– Expanded staff– Hired tax lobby firm– Engaged industry, expanded government affairs committee– Created a national grassroots campaign

• Action alert• Targeted local media buy

– Initiated a paid media campaign

• For the Action Alert, Talking Points and Fact Sheets:WWW.SEIA.ORG

32

www.seia.org

Solar Right’s Act

• Remove market barriers nationwide– Create national interconnection standards– Require retail net metering in all 50 states– Remove restrictive homeowner association covenants– Prevent exploitative permitting fees– Encourage solar-friendly rate structures– Facilitate REC ownership and exchanges

• Additional incentives– Remove utility exemption from ITC– Create tax credit for manufacturing facilities in the US

• Still under development, original co-sponsors in House and Senate identified

Jigar Shah

SunEdison, LLC

3/8/2007 34

Jigar Shah, CEOSun Edison LLC

February 07

The Coming “Solar Decade”

Preparing your electricity market forCost-effective distributed solar energy

3/8/2007 35

Insights on grid parity

Energy Cost are going up!– “Gas production has peaked in North America"

CEO - Exxon Mobil, Lee Raymond - Reuters Energy Summit 6/21/05– “Over the past year, that Great Britain and the United States each invested

roughly $800 million in electricity transmission; but the American grid is 15 times larger than the British one” Financial Times 8/18/03

– “In less than two years, the price of coal from the Eastern fields that start a couple of hundred miles south and west of Washington has climbed from a range of $25 to $28 a ton to $50 to $60 a ton.”Washington Post 4/11/05

– Double digit rate increases in AZ, CA, CO, CT, HI, MD, MA, NJ, NV– US needs 20 GWs annually – this can and will come mostly from renewables

• Represents about a 2% increase per annum• US needs more peaking capacity, NOT baseload• US has still not invested enough in Transmission & Distribution• Utilities are turning to expensive technologies because it is what they know

3/8/2007 36

Challenges to grid parity

• Cost of Solar panels– Qcell, Suntech, others have announced cost reductions of 50%

expected by 2010 for traditional crystalline– First Solar announced costs have dropped to less than $1.35/Wp

• Finding labor– To install 10,000 MWs of solar by 2012 we will need 40,000

additional job-years, maybe 10,000 NEW people in the solar industry– Sales, marketing, finance, accounting, construction, safety, quality

• Leveling the playing fieldNo standby charges (Net metering)Streamlined Utility InterconnectionIncentives tied to the Value of Distributed GenerationFair Utility Rate Design

3/8/2007 37

What SunEdison is doing: Getting Ready

• Vision:– Make solar a meaningful worldwide energy source– Deliver electricity at or below existing retail prices

• Make it easier to switch: First provider to offer solar energy as a turn-key service– No capital outlays– No impact on existing services– No ongoing customer maintenance costs

• Gain Scale: Largest solar energy service provider in North America– Over 30MWs of 100% renewable electricity installed since 2004– Largest solar panel purchases for the US market– 160 Employees in 5 offices (California, Colorado, New Jersey, and Maryland)

• Raise Financing: Strongest financial position of any solar services provider – Over $180M in arranged shelf financing– Over $30M in equity financing

3/8/2007 38

What SunEdison is doing

• Assessing the value of solar to utilities and consumers:– Ratepayers, Utility, Industry, State/Local gov’t, Federal gov’t– Utility savings: Energy, Capacity, T&D Investment, Reliability– Local Economic Development: Tax Revenue– Environmental Benefits: particulate emissions, water usage, etc

• Debunking Myths– US has the lowest energy prices among OECD countries– There is not enough space to supply the nation with solar power– Solar power will always need incentives– Solar power makes the grid unstable– Solar power is maintenance-free– Coal is a low cost, stable energy source– Nuclear energy is the lowest cost energy source

• Developing a supply/demand curve– For solar to grow folks need to continue to invest, for this to happen we

have to show that there is demand for the product – more than just studies

Question 1:

How important is achieving grid parity, what price per installed Watt does that represent,

and when will we get there?

What are the best tools (other than the ones you are currently pursuing) to accelerate the

point of crossover?

Higher Efficiency – Manufacturing Scale – Vertical Integration Next-generation Technologies – Policy and Incentives

Financial Innovation – New Business Models

Question 2:

What would slow the achievement of grid-parity?

What economic risks persist for wider commercialization of distributed solar?

Question 3:

What opportunities exist in financialinnovation to accelerate grid-parity?

What opportunities exist in delivery innovation to accelerate grid-parity?

(e.g. Building-integrated PV, New Construction vs. Retrofit)

Question 4:

How are emerging low-cost global producersgoing to impact the drive to grid-parity?

How are non-US customers and government incentive programs going to impact the drive

to grid-parity in the US?

Question 5:

Beyond economics, what are the remaining obstacles to faster deployment of PV?

How will they be addressed?

Question 6:

How will solar at grid-parity impact the broader energy and electricity market?

Audience Questions:

MIT Energy Conference 2007 -Solar Power: A Path to Grid Parity?

Moderator - Travis Bradford, President, Prometheus Institute

1. Manufacturing - Dick Swanson, President and CTO SunPower 2. Technology - Charlie Gay, VP & GM Solar Group, Applied Materials3. Policy - Rhone Resch, President SEIA 4. Financing/Integration - Jigar Shah, CEO SunEdison

Special Thanks to the student organizers: Keith Peltzman - Eerik Hantsoo - Joel Conkling - Anthony Fotopoulos - Carlos Molina