NREL is a national laboratory of the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, operated by the Alliance for Sustainable Energy, LLC.

Solar Industry Update

David Feldman National Renewable Energy Laboratory Presented at: National Summit on RPS Session: Outlook for Renewable Energy Technologies: Technology and Cost Projections November 6, 2013

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2008 2009 2010 2011 2012 2013P 2014P 2015P

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ROW

India

Japan

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U.S.

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Q1'13 projections vs. Q3 '13 projections

Europe ROW India Japan China U.S.

Global PV Demand

• BNEF predicts that in 2013 for the first time more PV will come on-line globally than wind – both around 35 GW

• Continued increase in global installations expected through 2014

• As European demand declines, U.S. & developing world markets expected to grow

Note: P = projection. Sources: data displayed represents the median figures from the following sources, New: BNEF (08/21/13, 09/26/13), Deutsche Bank (09/26/13), Goldman Sachs (09/30/13), Stifel Nicolaus (09/04/13) Old: BNEF (02/08/13, 03/29/13), Deutsche Bank (03/01/13), Goldman Sachs (01/03/13), Stifel Nicolaus (01/22/13).

Historic Projection

3

Global PV Manufacturing Capacity vs. Demand

• In 2012 global PV manufacturing had 109% more module capacity than necessary for demand

• Overcapacity is projected to remain through 2015

• Thin-film still projected to remain small portion of overall mfg. capacity

Note: P = projection Sources: data displayed represents the median figures from the following sources: Module mfg. capacity: GTM “WCM Database, September 2013.” Demand: BNEF (08/21/13, 09/26/13), Deutsche Bank (09/26/13), Goldman Sachs (09/30/13), Stifel Nicolaus (09/04/13)

Historic Projection

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Thin-Film Mfg. Capacity

c-Si Mfg. Capacity

Global Installation Additions

4

Module Efficiency

Graph and analysis courtesy of Carolyn Davidson, NREL, using data from California Solar Initiative database March 2013 (unpublished).

• Average efficiency of modules installed in CSI territory have gone up by ~1.5% in past 5 years

• Will need an acceleration of efficiency improvement to get to SunShot targets

• Third-party installers have historically been less likely to install high efficiency modules

• Controlling for capacity, time and incentive type, systems electing PBI employ 0.30% higher efficiency modules, on average, than ones that elect rebates

• Incentive structures could have impact on type of panel installed

• Many other factors also influence decision-making as well

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First Solar 2017 Roadmap

Sources: Corporate public filings

First Solar plans to cut their costs nearly in half in the next four years, again

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SunEdison 2016 Roadmap

SunEdison targets similar cost to First Solar

Sources: Corporate public filings

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Overall conclusion from roadmaps: industry is shooting for module costs to be $0.40/W or less in the near future – 25% margins would give a price of $0.50/W

• Not clear what efficiency goals are at this price

• With continued mfg. overcapacity expected by analysts, uncertain whether mfg.’s will spend money on new equipment

• Major cost reductions may have to come from “soft-costs”

Sources: GTM Research: PV Technology and Cost Outlook, 2013 – 2017 ( June 2013)

Best-In-Class Module Cost Reduction Q4 ‘12 – Q4 ’17 (GTM Estimate)

8

PV System Price by Country - 2012

Sources: IEA PVPS (01/18/13); Bundesverband Solarwirtschaft e.V. (BSW-Solar), August 2013. Currency conversion: http://www.oanda.com/currency/average; CSI Database, accessed 9/30/13.

• Reported U.S. residential prices in 2012 were significantly higher than other mature PV markets

• In particular, the higher priced U.S. markets were 2-3x the price of other countries

• China achieved low installation prices without the installation experience of places like Germany, Italy or even U.S.

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Typical Price

$2.19

$4.81

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System Pricing: California vs. Germany

Germany PV, < 10 kW

California PV, < 10 kW

9

PV System Price by Country - 2012

Source: IEA PVPS (01/18/13)

• U.S. commercial scale system prices also lagging other countries, with higher end prices up to 4x more expensive – though there is a large range

• Australia’s commercial & utility-scale business, which is reportedly in their nascent stages, have prices higher than their residential market segment

• In utility space, U.S. is much more comparable in price to other countries, though still on higher end

• U.S. utility-scale systems installed more efficiently than res./com. sectors, and potentially able to spread costs over more MW’s

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U.S. Installation Breakdown

• U.S. Installed 832 MW of PV in Q2 ’13, 1.5 GW in H1 ‘13

• Challenges maintaining growth rate in all sectors/states • Net metering and rate design in CA, CO, AZ,

TX • GTM reports that developers in HI had

difficulties with changing permit fees, state tax credits, and market saturation in some key geographies

• H1 2013 U.S. non-residential market was 11% less than H1 2012

• Other markets opening up could spur demand such as MN, GA, NY (50kW-200 kW systems)

• Cumulative U.S. PV is expected to exceed 10 GW in Q3/Q4 ’13 • A PV project will be installed, on average,

every 4 minutes

Note: “Next Four States”: NC, MA, HI, CO. Sources: GTM/SEIA : U.S. Solar Market Insight Q2 2013.

California

438

Arizona

90

New

Jersey

75

Next

Four

States*

141

Other

89

U.S. PV Installations by State (MWDC), Q2 '13

56 60 63 67 72 68 75 88 107 111 126 146 164 164 63 64 94 115 168 224 175 261

304 212 245

307 243 216

22 55 22

167 38 50

227

445

134

498 310

861

318 452

142 180 179

349 278

342

477

794

544

821

682

1,315

725

832

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U.S. PV Installations by Market Segment

Utility

Non-Residential

Residential

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2013 YTD System Price Distribution by Region (2.5 kW – 10 kW)

• Most prices reported between $4-$6/W, however in many states 20%-40% below $4/W Sources: CSI Database, accessed 09/30/13; MA SREC Program, accessed 09/30/13; Arizona Public Services, & Salt River Project, accessed 10/02/13; NJ SRP & REIP, accessed 07/31/13; NYSERDA (09/30/13) Note: NYSERDA actually represents all “residential” sector data, and is the simple average price per quarter. All other data is weighted by capacity.

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% of MW's installed, NY

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Cumulative Distribution, NY

Cumulative Distribution, NJ

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Massachusetts

% of MW's Inst.,

H.O. % of MW's Inst.,

3rd-party Cum. Distrib.,

H.O. Cum. Distrib.,

3rd-party

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Arizona

% of MW's installed

Cumulative Distribution

3rd-party

skew

Majority of

state 3rd-party

installs. Value

Pricing or

standard install?

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Installed Price ($/W)

California

% of MW's Inst.,

H.O. % of MW's Inst., 3rd-

party Cumulative Distrib.,

H.O. Cumulative Distrib.,

3rd-party

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3rd-Party System Ownership by Region

• 3rd-party ownership continues to dominate residential sector in several markets

• AZ & CA % have leveled off in past year – with continued sales of some host-owned systems

• New availability of residential loans

• Rebounding of housing market allow systems to be financed through mortgages or home equity loans

• Some customers may prefer owning system

Sources: CSI Database, accessed 09/30/13; MA SREC Program, accessed 09/30/13; Arizona Public Services, & Salt River Project, accessed 10/02/13.

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CA (0 kW - 25 kW) CA (25 kW - 2 MW)

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Utility Involvement in 3rd party ownership/distributed systems

• Utilities making strategic investment in distributed solar to diversify risk

• “On its face you would look at it and say distributed generation is a threat," said Nick Akins, chief executive of American Electric Power, in an interview.” But on the other hand we see it as an opportunity because our business is changing. There's no getting around it."

• SolarCity has formed partnerships with Direct Energy and Crius Energy Trust (both energy retailers) to finance projects for utilities’ customers

• Direct Energy and SolarCity sign $124MM deal to provide solar to Direct Energy’s business customers

• Crius has 230,000 customers in 9 U.S. states. SolarCity will now offer residential products to them

• Partnerships are designed to reduce SolarCity’s customer acquisition costs

• SolarCity also purchased Paramount Solar, a lead generation firm it had been working with, to improve customer acquisition as well

• Edison International, which owns SCE, announced in Aug. ‘13 it had bought SoCore Energy, a distributed solar developer focused on commercial rooftop installations

• In H1 ‘13, Edison International, Duke Energy and two other undisclosed utilities were part of a $42MM corporate investment in Clean Power Finance

• In May ‘13, the IPP Nextera, which owns mostly wind, natural gas and nuclear assets, acquired Smart Energy Capital, a commercial solar project developer

• Smart Energy Capital has been involved in 75 MW of PV deployment; Nextera operates 18 GW of energy assets

• Other utilities are investing in portfolios of projects (PG&E) or installing solar panels themselves (Dominion, PSE&G)

Sources: BNEF (09/11/13); Cleantech Finance (07/03/13), 09/23/13); Forbes (08/13/13); Greentech Media (05/16/13); Wall Street Journal (05/28/13).

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US Solar PPA Price (Utility Projects)

* Represents aggregation of three projects in California. Source: BNEF H2 2013 NA PV Outlook.

• PPA prices have continued to decline due to intense competition among solar developers

• Macho Spring was signed for $58/MWh however benefits from a $27/MWh state tax credit

• As states near RPS targets and RFP’s taper out, PPA’s are becoming harder to find

341 MW

32 MW

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Feb-08 Jul-09 Nov-10 Apr-12 Aug-13 Dec-14

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Signing Date

*

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>200 MW >100 MW >10 MW

685

578

257

109

148

61

118

75

121

30 28

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Large PV, In Operation (> 1 MW)

Note: PV Capacity is quoted in Watts AC. Sources: SEIA Major Solar Projects, 02/05/13; GTM/SEIA U.S. Solar Market Insight Q3 2012

35

Total (MW) Operating 2,387 Under Construction 2,870 Under Development 18,877

10

15

17

20

10

16

>200 MW >100 MW

>10 MW

2,290

227

108

100

40

89

33

Large PV, In Construction (> 1 MW)

>2,000 MW

Note: PV Capacity is quoted in Watts AC. Sources: SEIA Major Solar Projects, 02/05/13; GTM/SEIA U.S. Solar Market Insight Q3 2012

Total (MW) Operating 2,387 Under Construction 2,870 Under Development 18,877

10

20

19

17

>1,000 MW >250 MW >25 MW

12,708

1,183

1,858

67

964

136

719

Large PV, In Development (> 1 MW)

>10,000 MW

70

60

423

68

155

75

Note: PV capacity is quoted in watts AC. Sources: SEIA Major Solar Projects, 02/05/13; GTM/SEIA U.S. Solar Market Insight Q3 2012

84

Total (MW) Operating 2,387 Under Construction 2,870 Under Development 18,877

25

36

40

30

49

18

U.S. Large CSP Pipeline (> 1 MW)

Note: CSP capacity is quoted in watts AC. Sources: SEIA Major Solar Projects, 02/05/13; GTM/SEIA U.S. Solar Market Insight Q3 2012

364 922

3,089

75 110

1,150

8 280 805

200

75

2 5

In Operation In Construction In Development

Trough Tower Linear Fresnel Dish-engine/Micro Total Operating 510 5 5 4 524 Under Construction 815 502 0 0 1,317 Under Development 1,439 3,790 5 10 5,244

• 2 of 7 projects under construction have storage (6 & 10 hrs.) • 2 of 18 operating projects have storage (0.5 & 3 hrs)

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Capacity Additions to Satisfy Solar RPS Carve-outs

• 16 states (and D.C.) have a solar carve-out in their RPS • By 2028 states are required to produce ~16 TWh’s of solar - ~11 GW

• Represents 0.4% of U.S. electricity sales • ~4GW in Southwest (~1.6 GW installed as of Q3 ‘12)

Southwest

Atlantic

Midwest

Sources: RPS: DSIRE RPS Spreadsheet120612, Retail Sales: 2011 EIA

AZ

CO

NM

NV DC DE

MA MD NC NH

NJ

NY PA OH

IL

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Total RPS Targets of all 29 States with Laws

• Solar is incentivized beyond carve-out through total RPS targets • Solar carve-out is a small portion of the total RPS goals

• 16 TWh solar carve-out vs. 370 TWh’s by 2020 (10% of U.S. electricity sales) • If California, which has no solar carve-out, satisfied additional RPS requirements from 2012-2020 through

solar installations, it would represent ~22 GW • CO ~7GW (solar carve-out 1.1 GW) • NV, NM, AZ ~2 GW • Other regions more likely to use larger % of Wind (and some RPS’s have % req. for other technologies)

• Other factors may push solar installations beyond RPS targets

Sources: RPS: DSIRE RPS Spreadsheet120612, Retail Sales: 2011 EIA. Assumed capacity factor 1,400 kWh/kW

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David Feldman Senior Financial Analyst

National Renewable Energy Laboratory

202-488-2231

david.feldman@nrel.gov

Thank You