Investment Dynamics in Solar Photovoltaics - The Journey so far and beyond
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Transcript of Investment Dynamics in Solar Photovoltaics - The Journey so far and beyond
Investment Dynamics in Solar Photovoltaics –The Journey so Far and Beyond
Sivapriya Ramakrishnan, Research Analyst
Business and Financial Services, Energy and Power Systems
20th October 2009
2
Focus Points
Solar Photovoltaic Market Trends in 2008
Geographic Differences
Impact of the Economic Downturn
Investment Trends
Trends in 2008
Trends in 2009
Major Drivers
Resurgence of Germany and Japan
Concluding Thoughts
3
Solar Photovoltaic Market Trends – The Boom in 2008
� Additions in new installations primarily driven by the Spanish demand (accounting for more than 45.0 percent)
followed by the Germany and Japan.
60.8
35.3
31.0
21.2 22.5 23.427.0
37.6 34.3
24.9
0.0
5000.0
10000.0
15000.0
20000.0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Year
Cu
mu
lati
ve I
nsta
lled
Cap
acit
y (
in M
W)
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Gro
wth
Rate
(%
)
Cumulative Photovoltaic Power Installed (MW) Growth Rate (%)
Solar Photovoltaics Market: Annual PV Installations (Global), 1998-2008 Maximum growth in
installations
Led by spurt in
installationsin Spain
Why did installed capacity almost double in 2008?
� New markets opened up in Europe which included France, Belgium, Portugal and Czech Republic
� Crude prices were spiraling and reached dizzying heights which quickly directed the global attention towards
clean technology.
Note: All figures rounded; the base year is 2008. Source: Frost & Sullivan
4
Geographic Differences
Note: All figures rounded; the base year is 2008. Source: Frost & Sullivan
U.S. - Extension of ITC
Japan – Falling market share
Germany - One of the largest markets,
introduction of EEG enhanced growth
China - PV market driven by
demand from German and
Spanish markets
Spain - leading PV destination
in 2008
Solar Photovoltaics Market: Geographic Highlights (World), 2008
South Korea - emerged as the
4th largest in terms of solar PV
installations
Italy - Combination of net
metering and premium
tariffs encouraging solar
energy
5
Effects of the Economic Downturn
� Uncertainty regarding the implementation of
ITC
� Slackening demand
Note: All figures rounded; the base year is 2008. Source: Frost & Sullivan
U.S.
China Italy
� Feed-in tariff program manages to sustain
the market
� Slump in demand in U.S., Spain, reduces
scope for China
Germany
� Stagnation in demand due to recession and
reduced feed-in tariff
� Looks to gain leadership in 2009
Spain
� Cap on installations to be a major roadblock
in terms of market growth
Japan
� Government incentives set to bridge falling
exports
� The drop in crude oil prices after peaking in July 2008,
has marginally reduced the focus on solar PV.
� Shrinking of the Spanish market implies oversupply in
the global market. Adding on to diminishing margins
could be the impact of reducing prices of solar modules.
500.0 460.0
2511.0
2008 2009 2010
Solar Photovoltaics Market: Installed Capacity (Spain), 2008-2010
Insta
lled C
apacity
(MW
)
Slump due to imposed cap and revised feed-in
tariffs
6
Investment Trends
7
Trends in VC Investment in 2008
Growth of SolarGrowth of Solar
Q-o-Q ContributionQ-o-Q Contribution
Technology Preferences Technology Preferences
Maximum investments secured by clean technology in
2008.
Composition of solar technologies spiked to 40.0 percent.
Maximum investments secured by clean technology in
2008.
Composition of solar technologies spiked to 40.0 percent.
Signs of meltdown visible in Q4 2008, the effects of which
have spilled over to Q1 2009.
Signs of meltdown visible in Q4 2008, the effects of which
have spilled over to Q1 2009.
Solar photovoltaics accounted for almost 70.0 percent in total solar technologies investment.
Thin-film PV and crystalline PV are considered promising investment opportunities
Solar photovoltaics accounted for almost 70.0 percent in total solar technologies investment.
Thin-film PV and crystalline PV are considered promising investment opportunities
North America leads in the number of deals with Europe close behind.
2008 saw a rise in follow-on rounds due to capacity expansion.
North America leads in the number of deals with Europe close behind.
2008 saw a rise in follow-on rounds due to capacity expansion.
Note: All figures rounded; the base year is 2008. Source: Frost & Sullivan
0.0
2.0
4.0
6.0
8.0
10.0
2002 2003 2004 2005 2006 2007 2008
Year
Investm
ents
in
Cle
ante
ch
($ b
illio
n)
0.0
10.0
20.0
30.0
40.0
50.0
Com
postio
n o
f S
ola
r (%
)
Investments in Cleantech Composition of Solar Investments
Solar Photovoltaics Market: Investment in Cleantech (World), 2008
Largest contribution is
from solar
Geographic TrendsGeographic Trends
8
Top Venture Capital Investment Deals of 2008
Note: All figures rounded; the base year is 2008. Source: Frost & Sullivan
CompanyDeal Value ($ Million)
Stage InvestorsS.No
1
2
4
5
Nanosolar Inc 300.0 Follow-onEDF Energies Nouvelles, AES Solar, Riverstone
Holdings, Energy Capital Partners, the Carlyle Group, and others
Solyndra Inc 219.0 Follow-onVirgin Green Fund, Rockport Capital,
Argonaut Ventures, RedPoint Ventures, CMEA Ventures, and others
Solar Photovoltaics Market: Venture Capital Investment in Solar Photovoltaics (World), 2008
OptiSolar Inc 130.0 Follow-on Undisclosed
Sulfurcell Solartechnik GmbH
134.0 Follow-onIntel Capital, CPE, AIG Investments, Zouk Ventures, BankInvest Group, and others
Location
U.S.
U.S.
U.S
Germany
3 SoloPower Inc 200.0 Follow-on UndisclosedU.S.
9
Trends in VC Investment in 2009
Growth of SolarGrowth of Solar
Q-o-Q ContributionQ-o-Q Contribution
Technology Preferences Technology Preferences
Though solar was able to sustain the effects of the
recession in 2008 and Q1 2009, investor inclination towards
transportation and biofuels increased in the subsequent
quarters.
Though solar was able to sustain the effects of the
recession in 2008 and Q1 2009, investor inclination towards
transportation and biofuels increased in the subsequent
quarters.
Composition of solar technologies in clean tech in Q1 2009
was at 30%, Q2 saw a massive drop at 9.% and Q3 saw a
resurgence at 28.4%
Composition of solar technologies in clean tech in Q1 2009
was at 30%, Q2 saw a massive drop at 9.% and Q3 saw a
resurgence at 28.4%
Solar PV and concentrated solar technologies received
maximum investment.
Solar PV and concentrated solar technologies received
maximum investment.
North America continues to lead due to the new regulations and incentives.
North America continues to lead due to the new regulations and incentives.
Note: All figures rounded; the base year is 2008. Source: Frost & Sullivan
0.0
500.0
1000.0
1500.0
2000.0
Q1 2009 Q2 2009 Q3 2009
Year
Investm
ents
in C
leante
ch
($ m
illio
n)
Solar Investments Investments in Cleantech
Solar Photovoltaics Market: Investment in Clean Technology (World), 2009
Geographic TrendsGeographic Trends
10
Top Venture Capital Investment Deals of 2009
Note: All figures rounded; the base year is 2008. Source: Frost & Sullivan
CompanyDeal Value ($ Million)
Stage InvestorsS.No
1
2
4
5
SolFocus 77.6 Series CApex Venture Partners , NGEN, Yellowstone Capital , Demeter
Partners, affiliates of Advanced Equities, and others
Solyndra Inc 198.0 Follow-on Argonaut Private Equity, and others
Solar Photovoltaics Market: Venture Capital Investment in Solar Photovoltaics (World), 2009
Kovio 20.0 Series EBessemer, DAG Ventures, Flagship Ventures, Harris & Harris, JVP, KPCB, Mitsui Ventures,
Northgate Capital, Panasonic, Pangaea, and others
Arava 15.0 Follow-on Siemens
Location
U.S.
U.S.
U.S
Israel
3 Suniva 75.0 Series CWarburg Pincus, APEX Venture Partners, New Enterprise
Associates, HIG Ventures and Advanced Equities U.S.
11
Major Drivers
Investment BoostersInvestment BoostersInvestment Boosters
Commercialization likely to bolster market growth
Young industry hungry for capital
Government subsidies and
regulatory support
Falling prices of silicon make solar power competitive
Market growing at the 35.0 percent over past decade
Limited supply of conventional fuel
sources
Solar Photovoltaics Market: Investment Boosters (World), 2008
Note: All figures rounded; the base year is 2008. Source: Frost & Sullivan
12
Resurgence of Japan and Germany
• Top 3-5
With a favorable regulatory framework and Spain’s cap on
installations, Germany is likely to regain its global
leadership status. The enticing feed-in tariffs still continue
to be strongest driver. As the manufacturing hub of solar
installations, Germany is all set for 2009.
Instead of subsidizing the market, Japan’s government has
succeeded in reducing the prices of solar energy on par
with the domestic electricity rates. With an ambitious of
target of increasing the composition on solar energy in
electricity generation to 30.0 percent, Japan is well on
track.
Subsidies – None since 2005 Subsidies – Thriving on feed-in tariffs and subsidies
Prior market leadership in early 2000s Prior market leadership till 2007
Japan Germany
Past Position
Expected Growth in 2009
Past Position
Expected Growth in 2009
13
Mergers and Acquisitions
Attempt to foray into
Automobiles
Economies
of scaleCarve-outs
Acquisitions by
InvestmentFirms
Outlook for 2009
M&A Trends inSolar PV
Transitioning into eco-friendly vehicles
Strongest Driver for Acquisitions
Carve-outs by established players
Several renewables focused funds launched
Credit crisis leaves the industry high and dry
14
Concluding Thoughts
Oversupply and market contraction expected in 2009Oversupply and market contraction expected in 2009
R&D initiatives take off and penetration into other verticals expectedR&D initiatives take off and penetration into other verticals expected
Growth in start-ups with the sole focus of increasing technological efficiencyGrowth in start-ups with the sole focus of increasing technological efficiency
Markets in other geographies show potentialMarkets in other geographies show potential
Among clean technologies, solar is and will mostly like continue to be one of the favorite investment options. As new cost
effective manufacturing techniques are established in 2010 and solar cell efficiency increases, solar is expected to emerge
stronger as the recovery begins and financial markets regain status. However, as investment in new technologies such as
smart grid and alternate transportation gain momentum, solar PV faces serious competition.
Among clean technologies, solar is and will mostly like continue to be one of the favorite investment options. As new cost
effective manufacturing techniques are established in 2010 and solar cell efficiency increases, solar is expected to emerge
stronger as the recovery begins and financial markets regain status. However, as investment in new technologies such as
smart grid and alternate transportation gain momentum, solar PV faces serious competition.
Solar PV expected to regain growth as signs of recovery in most economies are visibleSolar PV expected to regain growth as signs of recovery in most economies are visible
15
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16
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