copyright and disclaimer...4 global pv nameplate capacity, q1 2016 and expected by year end...
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This publication is the copyright of Bloomberg New Energy Finance. No portion of this document may be photocopied, reproduced, scanned into an electronic system or transmitted, forwarded or distributed in any way without prior consent of Bloomberg New Energy Finance. The information contained in this publication is derived from carefully selected sources we believe are reasonable. We do not guarantee its accuracy or completeness and nothing in this document shall be construed to be a representation of such a guarantee. Any opinions expressed reflect the current judgment of the author of the relevant article or features, and does not necessarily reflect the opinion of Bloomberg New Energy Finance, Bloomberg Finance L.P., Bloomberg L.P. or any of their affiliates ("Bloomberg"). The opinions presented are subject to change without notice. Bloomberg accepts no responsibility for any liability arising from use of this document or its contents. Nothing herein shall constitute or be construed as an offering of financial instruments, or as investment advice or recommendations by Bloomberg of an investment strategy or whether or not to "buy," "sell" or "hold" an investment.
COPYRIGHT AND DISCLAIMER
13 September 2016, SPI, Las Vegas
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Note: A conservative and optimistic forecast has been developed for each country. It is unlikely that all countries will come in at the conservative or optimistic end, so for the global forecast, conservative is sum of conservative country forecasts + 25%*(sum of optimistic minus conservative forecasts). Global optimistic forecast is sum of conservative country forecasts + 75%*(sum of optimistic minus conservative forecasts).
Source: Bloomberg New Energy Finance, grid operators, industry associations, incentive programme managers.
PV NEW BUILD, 2009-2015 -- CONSERVATIVE FORECAST
7.7GW
18.2GW
28.4GW29.8GW
41.7GW45.0GW
56.0GW
68.3GW73.2GW
82.2GW
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Western Europe Eastern Europe Japan USA China India Rest of World
13 September 2016, SPI, Las Vegas
3
Note: A conservative and optimistic forecast has been developed for each country. It is unlikely that all countries will come in at the conservative or optimistic end, so for the global forecast, conservative is sum of conservative country forecasts + 25%*(sum of optimistic minus conservative forecasts). Global optimistic forecast is sum of conservative country forecasts + 75%*(sum of optimistic minus conservative forecasts).
Source: Bloomberg New Energy Finance, grid operators, industry associations, incentive programme managers.
PV NEW BUILD, 2009-2015 -- OPTIMISTIC FORECAST
7.7GW
18.2GW
28.4GW29.8GW
41.7GW45.0GW
56.0GW
72.0GW79.2GW
89.7GW
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Western Europe Eastern Europe Japan USA China India Rest of World
13 September 2016, SPI, Las Vegas
4
GLOBAL PV NAMEPLATE CAPACITY, Q1 2016 AND EXPECTED BY YEAR END (GW/YEAR)
9179 80
90
136
98 94 96109
160
Polysilicon Ingot Wafer C-Si cell C-Si module
Q1 2016 Q4 2016
Source: Bloomberg New Energy Finance
Approximate global 2016 module demand
13 September 2016, SPI, Las Vegas
5
Source: Bloomberg New Energy Finance
BENCHMARK CAPEX OF 1MW GROUND-MOUNTED FIXED-AXIS PV PROJECT, 2010-2015 AND FORECAST TO 2025 (2015 $/W (DC)
1.85
0.580.37 0.28
3.24
1.310.97
0.79
2010 2015 2020 2025Module Inverter Balance of plant EPC Other
13 September 2016, SPI, Las Vegas
6
AVERAGE 2015 OFFTAKE PRICE FOR WIND AND SOLAR PPAS BY SIGNING DATE, 2010-Q1 2016
Source: Bloomberg New Energy Finance, FERC EQRs
13 September 2016, SPI, Las Vegas
7
US SOLAR BUILD, HISTORICAL AND FORECAST (GW)
Source: Bloomberg New Energy Finance Notes: Further details on methodology are provided in Appendix A. (1) For more net metering changes in California, see our 22 December 2015 Analyst Reaction, California net metering rules survive (mostly) intact
1.9 3.2 4.1 4.4
8.0 7.1 7.3 8.0 8.0 8.1 8.2 1.0 1.1
1.3 1.3 1.5
1.7 1.8 1.8 1.5
1.3 2.2
2.6 2.6 3.1
3.6 3.8 4.0 3.4
3.2 4.9
6.3 7.6
12.0 11.1
11.9 13.2 13.5 13.8
13.2
0
2
4
6
8
10
12
14
16
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Utility Commercial & industrial Residential
13 September 2016, SPI, Las Vegas
8
Note: Sunrun cost includes outsourced installation, which is more expensive. Source: BSW-Solar, JPVEA, Solarchoice.au, company filings, Bloomberg New Energy Finance
CAPEX FOR RESIDENTIAL SYSTEMS IN DIFFERENT COUNTRIES, NOMINAL $/W
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016
Germany California Japan Chinese multi module Australia (3kW) Vivint SolarCity Sunrun
13 September 2016, SPI, Las Vegas
9
Source: Bloomberg New Energy Finance, EIA
CHANGE IN AVERAGE PRICE OF ELECTRICITY (C/KWH) FOR RESIDENTIAL CUSTOMERS, APRIL 2015-APRIL 2016
NV
H
I M
S
NM
RI
ME
TX
FL
NH
C
T MA IL
M
O
TN
NC
S
C
NJ
OK
N
Y IA
CO
K
Y OR
G
A CA AR
LA
W
I IN
N
E
AZ
ID
AL MT
WY
DE
U
T O
H
VT DC
KS
M
N
ND
S
D
MD
PA
VA
A
K
WA MI
WV
-12%
-9%
-6%
-3%
0%
3%
6%
9%
12%
Typical escalator within a residential PV lease or PPA
Solar contracts increased at a higher rate than retail power in over 30 states
13 September 2016, SPI, Las Vegas
10
Source: Bloomberg New Energy Finance, Company filings
QUARTERLY INSTALLATIONS OF TOP THREE RESIDENTIAL PV VENDORS, Q1 2014-Q2 2016 (MW)
67 90 120 149 139 168 203 221 184 201 20
37 49
50 46 66
61 59 55 61
35 34
37 37 42
56 68
60 65
21%
32%
40% 37%
34%
42% 47% 44% 46%
0
100
200
300
400
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2014 2015 2016
SolarCity Vivint Sunrun Market share of top 3 vendors
13 September 2016, SPI, Las Vegas
Unique analysis, tools and data for decision-makers driving change in the energy system
sales.bnef@bloomberg.net
MARKETS Renewable Energy Energy Smart Technologies Advanced Transport Gas Carbon and RECs
SERVICES Americas Service Asia Pacific Service EMEA Service Applied Research Events and Workshops
Ethan Zindler ezindler@bloomberg.net Twitter: @EthanAll support.bnef@bloomberg.net
1 Confidential
Financing the Resource Revolution
All Hands Meeting April 2016
CONFIDENTIAL
GENERATECAPITAL
BACKGROUND ON THE RESOURCE REVOLUTION UNDERWAY
3 Confidential
The emergence of 3 billion new middle-class consumers will fuel future demand.
Global middle class1 (Billions of people)
2010 2020 2030
4 Confidential
Commodity prices have increased sharply since 2000, erasing all of the declines of the 20th century.
2012 2012 2012
5 Confidential
Demand for most resources has grown strongly since 2000, a trend that is likely to continue to 2030.
6 Confidential
Resource price volatility is at an all time high, with the exception of energy in the 1970s.
Annual price volatility1 (Percent)
7 Confidential
The world’s critical resources are inextricably linked
ENERGY
WATER
FOOD LAND
MATERIALS
8 Confidential
The Resource Revolution opportunity is measured in the trillions of dollars
9 Confidential
Resources are delivered via infrastructure, and technology has changed how we build it
UTI
LITY
CA
PITA
L
• $500M+ projects • Government regulated monopolies • Socialized costs • Guaranteed capital recovery rates • 10 years for permitting, construction,
commissioning
• Large scale loan from major banks • Government guaranteed equity return
• $50K+ projects • Small to medium sized players that are a mix
of regulated and unregulated • Performance based recovery rates • 1 years for permitting, construction,
commissioning
• Project finance or asset backed lending from specialty finance firms
• Increasing interest from traditional capital sources
OLD WORLD Monolithic, centralized, regulated, big, inflexible
NEW WORLD Decentralized, networked, modular, flexible
TECH
• Commodity output • Established technology
• Commodity output • Established technology, but players have less
experience and scale – not yet “bankable”
INTRODUCTION TO GENERATE CAPITAL
11 Confidential
Capital markets remain shallow for middle market infrastructure despite established successful models, meaning outsized returns
Venture CapitalHigh growth focus,
proprietary differentiation, high
loss rate, idiosynchratic success
Traditional Bank FinancingKnown economic benefits,“commodity” markets,highly replicable
Low
High
High
Project FinanceSolutions producing proven economic benefits across multiple sectors over long
time periods
Return
Funding gap
Risk
12 Confidential
Developers need a different type of capital partner from most who are in the market today
We provide long-term, value-added partnerships with developers based on standardization, trust and domain expertise 1. FLEXIBILITY – developers need different types of capital at different times, and we are uniquely
able to provide capital across that lifecycle
2. TRANSPARENCY – developers need to know what it takes to get capital, so our standardized process and developers’ visibility into it creates trust and value-added relationships while reducing risk
3. EFFICIENCY – developers need a quick “yes” or a quick “no” in order to continue with their businesses, so a standardized process and domain expertise in the capital partner is critical
13 Confidential
Customers don’t want to evaluate, buy, or manage technology; they want to use it
CUSTOMERS DON‘T KNOW HOW TO MANAGE TECH
CUSTOMERS DON‘T TRUST THE ROI
CUSTOMERS DON‘T SEE THE OPPORTUNITY
AS “CORE”
CUSTOMERS DON‘T KNOW HOW TO
EVALUATE THE TECH
CUSTOMERS DON‘T HAVE CAPITAL
20 POSSIBLE DEALS
BARRIERS
REMAIN WITH THE UTILITY 19 (PAYING AS THEY GO)
DEAL GETS THROUGH 1 CUSTOMER
VENDORS & DEVELOPERS SELLING A BUNCH OF GEAR
Infrastructure-as-a-ServiceTM resolves the common sales barriers and competes effectively with a utility
INSERT GENERATE CAPITAL
Infrastructure-as-a-ServiceTM
NO MONEY DOWN
PAY AS YOU GO
STANDARD CONTRACTS
STANDARD PROCESSES
STANDARD TECHNOLOGIES
MORE DEALS 3-10x
CUSTOMER
VENDORS & DEVELOPERS SELLING A BUNCH OF GEAR
15 Confidential
Many technologies will see the same trajectory that solar PV has had thanks to
standardization, repeatability and bankability (e.g., SunEdison and SolarCity)
Mature Programs (Standardized, repeatable,
scalable)
Frontier Categories (Proactive origination,
opportunistic deal-making)
Expe
cted
Cas
h-on
-Cas
h Re
turn
s (le
vere
d w
hen
avai
labl
e)
8%
15%
Origination & Underwriting
Emerging Programs (High standardization potential)
X
X
X
SOLAR PV 2005
SOLAR PV 2010
SOLAR PV 2015
16 Confidential
Generate Capital finances three large and growing themes of the Resource Revolution
Solar PV, wind energy, solar water heating Renewable Generation
Battery storage, building automation controls, HVAC, lighting, pumps
Resource Efficiency
Anaerobic digestion, biomass to energy, recycling Waste-to-Value
$
Subsectors
17 Confidential
Diversified portfolio of individual assets with financing,
securitization, and scaling flexibility
We underwrite with a disciplined focus on low-risk, high-yield opportunities in energy and resources
1. Contracted, fixed cash flows
2. High-credit counterparties
3. Delivering economic benefit to customers
4. Structured to manage risks we understand better than others
UNDERWRITING CRITERIA OUTCOME
18 Confidential
We systematically manage multiple types of risk
Performance Risk Mitigation
1. Maturity of technology At least 1-3 yrs of commercial deployment
2. Similarity between projects Preference for products vs. projects
3. Predictability of revenue Revenue not governed by externalities (e.g. weather)
4. Vendor viability Vendor is not sole source for parts of maintenance
5. Vendor geography Focus on US and to a lesser degree EU
Collection Risk Mitigation
6. End customer viability Aligned with investment period and return profile
7. Vendor credibility Reference checks and due diligence
8. Measurability of value Sensors, online access, clear reference case
9. End customer geography Price it in or hedge it out
10. Recovery in case of failure Transferable product with ability to redeploy
Market Insights & Opportunities Solar Power International September 13, 2016 Alex Klein GE Power Jigar Shah Generate Capital Ethan Zindler Bloomberg New Energy Finance Tanuj Deora Smart Electric Power Alliance
www.sepapower.org
Solar has grown, and utilities respond
MainstreamU,litySolarStrategies:• LargeScale
SolarPVinIRPs
• RedesigningRateStructures
• ExploringCommunitySolar
www.sepapower.org
All-in turn-key costs for solar PV in the US, 2015
Sources:SEPA“2015UBlitySolarMarketplaceSnapshot,”DatafromEnergySage&Mercatus
US prcing varies significantly by state, and is generally higher than many countries by as much as 50% in the residential market
• ResidenBalpricinghasbeenquotedaslowas$2.50/W
• FirstSolarexpects$1/Wforlargescaleby2017
www.sepapower.org
Primary utility response to NEM is fixed charges
4
www.sepapower.org
Community solar programs across the US
Solar Markets Overview Ethan Zindler Head of Americas Bloomberg New Energy Finance
Market Insights & Opportunities Ethan Zindler Head of Americas Bloomberg New Energy Finance Alex Klein Lead, Demand Creation GE Power Jigar Shah Co-Founder Generate Capital
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