Solar Power 2004

Glenn HamerDirector of Government Affairs & Business DevelopmentFirst Solar4050 E. Cotton Center, Building 6, Suite 68Phoenix, Arizona 85040ghamer@firstsolar.com602-414-9314602-350-0923 (cell)

World: Installed PV Grid-Connected Market 2004

Germany: 320+ MW Japan: 250 MW US: 65 MW (mostly California)

How do we change this dynamic and develop a real US market?

Must demonstrate and wherever possible quantify the value of PV. Consumer friendly interconnection and net metering (with certainty) Low interest financing. Focus on DISTRIBUTED attributes of PV. Certainly, insist on distributed

prong for any effort to promote renewables. Develop competitive markets where solar is available to electricity

consumers of all classes at attractive prices. If bridging subsidy is required to make solar attractive to consumers

design it so as to realize the “PV Dividend” at the earliest possible date. Focus on region where policy changes can yield significant sustainable

markets. Conclusion: the West – over 80 percent of the US market today.

Integrating Solar

Solar electricity strategically distributed throughout the community generates substantial public benefits – particularly in fast growing regions.

Shaves peak power. California Governor latched on to this attribute in unveiling his plan. Estimated that deploying 2.7 GW of PV would eliminate the need to build 36 natural gas peakers.

Reduces emissions – climate change. 2.7 GW displaces 50 million tons of CO2.

Healthy way to generate power. Reduces natural gas price volatility. Excellent way to generate power in urban and suburban areas. Reduces chances of grid failure. Sufficiently and properly deployed reduces or eliminates need for new T

& D. No water used in generation.

“PLEASE”

50 values for distributed generation evaluated. 48 positive, two neutral and zero negative

POLITICAL LOCATIONAL ENVIRONMENTAL ANTIDOTALHedge Against:

SECURITY EFFICIENCY (Market Technical)

Impact on local control of resources

Impact on local tax base "Renewable energy credits" and "green certificates" impact

Fossil fuel price volatility Impact on likelihood of system outages

Impact due to combined heat & power (CHP) configuration

Impact on "political capital"

Land use impact (e.g., T&D line rights of way)

Impact on NOx and SOx emissions levels

Future electricity price volatility

Impact on supply diversity

Impacts on competition and market power mitigation

Impact on achieving RPS goals

Impact on local property values

Impact on PM10 emissions level

Utility power outages Impact on power quality Impact on project carrying cost

Noise level impact Impact on CO2 emissions level

Utility load forecast uncertainty

Impact on utility grid VAR support

Impact on decision making time required

Impact on NIMBY-BANANA-NOPE- attitudes

Impact on other emissions levels (e.g., VOCs, mercury)

Uncertain reserve % requirements

Impact on likelihood & severity of terrorist attacks

Impact on project installation time (due to modularity)

Impact on local economic activity (e.g., job creation)

Impact on material input (e.g., solar panels replace some roofing)

Wheeling costs Impact on domestic fossil fuel use

Impact on # of available supply options (as DG markets & technologies mature)

Ability to impact urban load pockets

Healthcare cost impact related to emissions level changes

Future changes in environmenta regulations

Impact on fossil fuel import reliance

Impact on responsiveness to load growth (due to modularity)

Ability to impact suburban load pockets

Visibility impact due to emissions impact

Site remediation costs (current and future)

Impact on permitting time and cost

Ability to impact rural or remote loads

Impact on urban "heat islands" (e.g., shading ability)

Impact on operating life of grid components

Impact of DG fuel delivery system

Impact on consumptive water use

Impact on resale or salvage value of equipment

Visual impact Impact on water & soil pollution levels

(Limited) Derivation of Value Premium of Commercial PV Generated Electricity: Southern California

Conclusion of quantifying three of 48 benefits

Net metering is a “subsidy” to ratepayers. In other words, solar exceeds value of retail rate – particularly strong case for commercial installations.

Critical to quantify as many of other benefits as possible. “Solar Electricity Rate” – let’s determine value This is not the “S” word.

Market Structure Required to develop PV

Determine true value of PV – PLEASE Develop Solar Electricity Rate – incentivizes performance (retail rate net

metering as the floor). Develop competitive market. Low interest financing – at least what is available to utilities. Consumer friendly interconnection and net metering. If there is a bridge, properly design a temporary incentive program.

Could be modeled after Japan or Germany. Make price attractive to consumers of all rate classes to purchase solar.

Market Competition

Country is built on this principle. It does not exist for the electricity market although it does for almost every other product.

For PV to flourish it must be available to electricity consumers.

Long term, low cost financing

Objective: same low interest financing that is currently available to utilities.

Wringing out financing costs of capital intensive PV projects the easiest way to reduce the cost of solar to consumers.

Variety of ways to achieve. Accelerated depreciation lowers payback. Role of labs? Technology validation. Get financial community involved!

Consumer friendly interconnection and net metering

“Civil rights” issue for distributed resources. Guarantee net metering rate for at least 20 years.

Temporary Incentives -- Design

Incentives should phase to zero over time. Decline in a steady and predictable fashion. Incentives should all point in direction to squeeze costs and generate

most kWh. This means, decline in incentive, no cap. Bring in financial community to help drive down financing costs. Permit some room to adjust. Long-term PBI spreads out cost to ratepayers – would allow for more

MWs today and accelerate permanent cost reductions.

Temporary Incentives -- Design

10 year time period is ideal – five years is the bare minimum. Program should be of sufficient size to realize public benefits of a

distributed solar infrastructure. Unlimited: no constraint on activity. Moves technology along the

learning curve the fastest.

Temporary Incentives -- Design

One-size fits all RPSs’ are not friendly. Incentive program should be specific to distributed solar generation.

Distributed

Temporary Incentives -- Design

All should be eligible for solar generation – no rooftop discrimination.

WGA

30 GW of clean energy by 2015. Solar can be relevant in US faster than even the strongest advocates

believe. Solar champions on WGA. No better place for the industry to focus its efforts.

Is Big Market on the Way in the West?

CA: 2.7 GW on the table – an even more comprehensive plan may soon be unleashed.

AZ: EPS – moving towards, customer-friendly distributed program. NV: 2.4 multiplier for distributed PV, SolarGenerations. NM: RPS may be adjusted to promote distributed PV. HI: High electricity prices; dependent on oil; tax credit. CO: Ballot initiative. TX: Austin Energy – 100 MW – Big State. OR: Favorable political climate.

Summary

Value solar appropriately – focus on distributed elements. Competitive markets. Low interest financing. Consumer friendly interconnection and net metering with at least 20-

year term. Design “bridge subsidy” to maximize cost reductions. Focus on where efforts will make the greatest difference – West. Sustainable market!