Paris, june 20th, 2012Introduction
Marie-Ange Verdickt
Research Manager and SRI, Financière de l’Echiquier
Alastair GIFFIN,
President club Energy Insead
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President club Energy Insead
Jean-Christophe PRUVOST,
V-President club Sustainable & Business Insead
Are pleased to welcome Amaury KORNILOFF,
Founder of Solaire Direct
About : About : About : About : doesdoesdoesdoes the the the the photovoltaicphotovoltaicphotovoltaicphotovoltaic technolologytechnolologytechnolologytechnolology stillstillstillstill have a future ? have a future ? have a future ? have a future ?
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Solar power generation: beyond feed in tariffs
INSEAD Alumni association ConferenceJune 20 th, 2012
Solairedirect at a glance
Key figures
N°°°°1 solar power operator in France with ~120 MW of installed capacity (2011)
Created in 2006 / now 300 employees worldwide
Revenues of € 213 m in 2011
€500m raised in financing since 2007 (including €200m in 2011)
Activities
Solairedirect’s principal activity is to develop, finance, build and operate solar parks and rooftops through SPVs in which it ultimately retains a minority stake (usually less than 20%) showing Solairedirect’s long term commitment
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Markets
StrategyBecome the first solar engineering company / power generator to develop competitive solar power through market-priced Power Purchase Agreemen ts (PPA) and integrate widely solar power in local energy mix.
20%) showing Solairedirect’s long term commitment
Solairedirect’s objective in the long-term is to sell solar electricity
Utility-scale installations: ground-mounted solar parks
Energy positive building: professional and residential rooftop installations
Solairedirect’s shareholding structure
Shareholding structure Shareholding structure
Several rounds of capital raising completed in the past:
� 1st round: €6m raised in March 2007
� 2nd round: €20m raised in November 2008
A range of investor profiles with different investmentstrategies demonstrating Solairedirect’s attractivity:
Vernier Participations(Macif, UMR and AGPM)
6.3%
Avenir Sol (OFI Group)1.2%
Founders18.9%
Aster Capital
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Shareholders’ involvement enabling access to industrialpartners (Schneider Electric), local authorities (CDC) andclients (mutual insurance companies)
� VCs, mutual insurance companies, industrials
___________________________Notes: *o/w FIP Expansion I, II & III: 9.7%
**o/w Smart Energy: 2.95%
Demeter24.5%
Techfund*24.3%
Aster Capital(Schneider Electric
Ventures)17.3%
Solairedirect a worldwide company operating on 4 con tinents
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PolysiliconWafer
& CellsModules&Systems
Project Development Financing EPC O&M Sale of
energy
An integrated business model geared for grid parity transition
� Vertical integration allowing cost optimization and returns along the value chain: products, designs, installs and operates PV structures
Upstream Downstream
Solar energy value chain
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Sale of energy
� Grid parity environment and PPA model means a change in the final client
Grid parity (PPA)Feed in-tariff
StatePower utilities
Industries
Municipalities
Solairedirect: a differentiating business model bas ed on key competitive advantages
Integratedbusiness model
Lower EPC cost
Optimal reliability and
Best-in-class systems cost
competitiveness
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Non-recoursefinancing model
Optimal reliability and bankability
Reduced risk
Service-orientedapproach
Low-cost financing(low WACC)
More value for the kWh
Solairedirect a Worldwide proven model
Solairedirect leads the National Solar Mission bidd ing process in India and shows the way to grid paritySolairedirect was selected on December 2nd by the Government of India as the best bidder in the second round of bidding for the National Solar Mission with a rate of 7.49 Rs/kWh (109 €/MWh) for a 5 MW project in Rajasthan
Solairedirect launched the first solar PPA in Europe at mark et-based pricesEster is a pioneering scheme, the first market-based solar PPA in Europe,featuring an extremely competitive pricing mechanism, bringing together a localgovernment and industry players.F
RA
NC
EIN
DIA
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Solairedirect and mining industrySolairedirect signed the first spot market based Purchase Agreement’s(PPA) towards to the Mining Industry.
7.49 Rs/kWh (109 €/MWh) for a 5 MW project in Rajasthan
IND
IAS
OU
TH
ER
N
AF
RIC
A
Solairedirect won preferred bidder status for two South African solar projects for a total of 18 MWSolairedirect SA was successful in the bids to develop solar photovoltaicprojects at Aurora and Vredendal with a contracted output of 9.0 MW and 8.8MW respectively. This bid is part of he second phase of government’sRenewable Energy Independent Power Producer Programme (REIPPP)
A track record of 6 years of operating & industrial excellence
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Why solar power changes it all – in 6 points
1. A ressource that is bigger than any else
(1 day = 100% of all worldwide oil
reserves), more than 38 000 billion tonnes
of silicium…
3. The only electronical energy (non
mechanical) , with open technologies and
a Moore law with increasing efficiency
since 1970.
2. The only energy that exists in large
quantities everywhere in the world,
without significant advantage for any
specific country.
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-
5 000
10 000
15 000
20 000
25 000
30 000
1981 1985 1990 1995 2000 2005 2010
-
2
4
6
8
10
12
14
16
18
1981 1985 1990 1995 2000 2005 2010
of silicium… since 1970.
4. A logarithmic decrease of costs (-10% per
year since 1980), despite of cycles and an
ultra-commoditized industry.
specific country.
5. An exponantial volume increase (+43%
per year since 1980, with no decreasing
year) thanks to an endless race for new
and cheaper investments.
6. One of the cheapest power in the
world…from 2014, with competitivity
advantage wich will keep on growing till
2025 at least
Module average price (in $/W, source:
Goldman Sachs)
Worldwide annual installations (in MW,
source: EPIA)
Energy source Generation costs (new generation only,
best-in class players)
Solar PV (Solairedirect) 100/120 €/MWh (2012)
65/80 €/MWh (2014)
CSP 140/250 €/MWh
Onshore wind 55/90 €/MWh
Offshore wind 120/200 €/MWh
Mini hydro 80/120 €/MWh
Biomass 100/150 €/MWh
Fuel (DG) 120/200 €/MWh
Coal (imported) 70/90 €/MWh
Nuclear (EPR) 70/90 €/MWh
Gas (exc. shale) 70/90 €/MWh
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• Long term power purchase agreement for the sale of solar power at market prices to the regional energy companies
• Financing is contributed by both public and private sources
Shareholders:
Public (Region
etc.) and
Private
(Solairedirect
etc.)
ESTER (SEML)
Public local
authority
Controls
Ester
Capital
2
1
2 Other investors in equity
(market operators;
The new distributed utility paradigm: introducing E ster
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• Smart grid and demand response services to accommodate large quantities of solar into the grid
• Establishment of manufacturing facilities to supply the solar projects (local content approach)
• Creation of a SEML (public-private company) withthe aim of empowering the community, carryingout the regional ambitions in solar power andinvesting in SPVs
SPV 1 SPV 2 SPV 3 …
Subscribers ,
CDC, institutional
investors
etc.
Banks
Investment politic in
capital
Pro
ject
fin
an
cin
g
Off taker
(Market operators,
suppliers etc.)
Off taker …
Equity or Bonds
PPA
Regional
industrial
project
(upstream)
Mo
du
les
1
3
3
(market operators;
institutional etc…
The commodity trap, a dead end for most existing so lar players
� The commodity trap in PV mirrors that of other commoditized electronic products, such as DRM and flat panel displays (Darwinian selection pro cess out of which just a handful of companies survive)
� The “ smile curve” offers an accurate description of the commodity tra p. No differentiation –and sustainable margins – can be expected except in the very upstream part of the value chain (polysilicon) and in the very downstream – pow er generation
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Power
generation
Commodity trap
Assessing the capacity of existing solar players to mutate into the world of competitive solar
� The crystalline cell/module manufacturers are being severely threatened: the new entrant premium keeps putting pressure on prices. The weake st players (with higher costs, excess debt or insufficient financial backing) are going o ut of business,. Over time this part of the value chain only promises meagre margins to the very best players
� The thin film module manufacturers are seeing their competitive advantage vanish while efficiencies remain significantly lower than crysta lline silicon. Most of them are unlikely to survive
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� The downstream value chain (distributors, developer s, EPC contractors and installers) is destabilized by the much lower feed-in tariffs (pre ssures on the margins, inventory write-offs). The advent of the post feed-in tariff, PPA-d riven model is bound to eliminate most small-size players, as two key factors will emerge: (i) t he ability to inspire trust to off-takers as part of long term contracts and (ii) the capacity to rai se project debt and equity in an increasingly strained financial environment
The 4 key drivers in the business of competitive so lar power
1. Ability to contract PPAs
2. Privileged
relationships with local
public and private
stakeholders, and access to
prime locations (land and
rooftop) and grid connections.
local content a privileged tool
3. Best-in-class EPC costings,
with a permanent view to minimize
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1. Ability to contract PPAs generating the highest value through
value-added (smart) grid services and
financial engineering, and helping the
off-takers reap all the advantage of
competitive solar power
with a permanent view to minimize
module, BOS, development and other
costs, preferably through some form
of vertical integration with one or
several of the most competitive
upstream players
4. Access to abundant,
lowest cost capital thanks
to risk control that equates
solar projects with bond-like
annuities
A likely new solar Business model
� The two solar paradoxes: (i) most solar companies go out of business at the very same time solar is becoming competitive, and (ii) the resulti ng concentration seems at odds with the distributed nature of solar power generation (cf. J eremy Rifkin’s “peer-to-peer” vision of the so-called energy democracy)
� The ongoing paradigm change is indeed likely to ush er the age of new solar Business model:
1. Who can underwrite GWs of PPAs for maturities of up to 30 years and beyond?
2. Who can inspire the trust of governments and key local stakeholders to establish long term public/private partnerships, and develop the sufficient clout with governments to influence
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public/private partnerships, and develop the sufficient clout with governments to influence planning, construction, infrastructure and energy regulation?
3. Who can develop GWs of projects on the ground and on rooftops over the long term?
4. Who can integrate the manufacturing value chain and sustain cost leadership?
5. Who can inspire trust to pension funds and the like to raise billions of euros with the lo west IRRs?
6. Who can develop the mass marketing of solar-based power?
7. Who can develop the smart grid platforms and aggregate millions of intermittent sources of energy?
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