life after the itc - mdv-solar energy industries...
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Life After the ITC Solar Focus 2014
Yuri Horwitz, Sol Systems
Shayle Kann, GreenTech Media
Lidija Sekaric, Department of Energy
Ralph Mannion, Kingspan Energy
Moderator:
Forecasting 2017
Shayle Kann
Senior Vice President, Research
Greentech Media
MDV SEIA Solar Focus
November 2014
How Far Will System Prices Fall?
Source: GTM Research/SEIA U.S. Solar Market Insight 4
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E
Insta
lled P
rice (
$/W
)
Residential Commercial Utility
2014-2017 Price Reduction: 21%-27%
Price Reductions Won’t Come From the Module
Source: GTM Research 4
58%
10%
42%
30%
0%
10%
20%
30%
40%
50%
60%
70%
2010-2013 2014-2017Sourc
e o
f R
esid
ential S
yste
m
Pri
ce R
eduction
Module Price Reduction
BOS Price Reduction
$4.84 $4.11
$3.66 $3.38 $3.12 $2.89 $2.66 $2.46 $2.32
$0.00
$2.00
$4.00
$6.00
2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E
Re
sid
en
tia
l In
sta
lled
Price
($
/W)
So What Happens in 2017?
Source: GTM Research/SEIA U.S. Solar Market Insight 4
0
2,000
4,000
6,000
8,000
10,000
12,000
2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E
Insta
llations (
MW
dc)
U.S. PV Market Forecast, 2011-2018E
Residential Non-Residential Utility
Thank You!
Shayle Kann
Senior Vice President, Research
Greentech Media
Questions? Visit www.gtmresearch.com
Or contact [email protected]
energy.gov/sunshot
energy.gov/sunshot
Life After ITC SEIA/MDV Panel
Dr. Lidija Sekaric
Solar Energy Technologies Office
energy.gov/sunshot
• Deutsche Bank (Oct. ’14): PV is at grid-parity in 10 states and by 2016 the number of states could increase to 47 (with 30% ITC)
• At 10% ITC, PV will still be competitive in 36 states
• Lazard’s Sept. ’14 LCOE reports similar numbers, w/ utility-scale PV at $0.06/kWh by 2017 (w/ 10% ITC)
Source: Bloomberg (10/29/14); Lazard, “Lazard’s LCOE Analysis – Version 8.0” (Sept. 2014).
8
Two Analyst Reports Show PV Competitiveness to
Traditional Generation
2017 (10% ITC)
Offshore
Next-gen
w/ CC
Unsubsidized Levelized Cost of Energy Comparison
energy.gov/sunshot Source: T. James, et al. NREL Internal Cost Model.
PV Utility-Scale System Pathway to SunShot
energy.gov/sunshot
PV Residential-Scale System Pathway to SunShot
Source: T. James, et al. NREL Internal Cost Model.
energy.gov/sunshot
PV Manufacturers’ Cost
Sources: Corporate public filings.
11
$0.00
$0.25
$0.50
$0.75
$1.00
$1.25
$1.50
$1.75
$2.00
$2.25
Q1'10
Q2'10
Q3'10
Q4'10
Q1'11
Q2'11
Q3'11
Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
Q1'14
Q2'14
Man
ufa
ctu
rin
g C
ost
(N
om
inal
$/W
) First SolarSuntechYingliTrinia SolarCanadian SolarHanwha SolarOneJinko Solar
energy.gov/sunshot
Average System Pricing by Size & Region 100 kW – 500 kW & 500kW – 2 MW
H1 ‘14 MW: (100-500kW) CA H.O. (29); CA 3rd-P (14); MA H.O.(3); (500kW-2MW) . CA H.O. (18); CA 3rd-P (17); MA H.O.(8). Sources: CSI Database, accessed 07/02/14; MA SREC Program, accessed 07/09/14. Note: MA does not report whether a system is 3rd-party owned therefore it was estimated using the “applicant entity” or “installer” for the following organizations: SolarCity, CPF Capital, SunRun, Vivint, Sungevity.
• System prices in the above states, of the above sizing, fell on average 5 – 25% between 2013 & ’14 YTD
• Consistent declines experienced over 5 years
12
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
2009 2010 2011 2012 2013 2014 YTD
Avg
. Sys
tem
Pri
ce (
No
min
al $
/WD
C)
100 kW - 500 kW
CA, Host-owned
CA, 3rd-party
MA, Host-owned
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
2009 2010 2011 2012 2013 2014 YTD
Avg
. Sys
tem
Pri
ce (
No
min
al $
/WD
C)
500 kW - 2 MW
CA, Host-owned
CA, 3rd-party
MA, Host-owned
energy.gov/sunshot
Systems Installed Without Incentives
• CA distributed PV installations continue to grow, however majority of them are now doing so without CSI incentives (more than 100 MW in Q2 ‘14)
• In Arizona, many systems that are installed without incentives
Sources: CA: CSI Database, accessed 10/01/14; GTM/SEIA Q4 2013 U.S. Solar Market Insight. AZ: APS & Salt River Project (SRP), accessed 10/06/14. Dataset segmented by “incentive type”; all projects listed as “non-incentive”, “non-incentive residential”, or “non-incentive commercial” assumed to have received non incentives.
13
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
50
100
150
200
250
Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
Q1'14
Q2'14
% o
f To
tal Q
uar
terl
y In
stal
lati
on
s
Qu
arte
rly
Inst
alla
tio
ns
(MW
)
California
CSI Installs Non-CSI, CA Distributed CSI % of Total
0%
20%
40%
60%
80%
100%
120%
0
10
20
30
40
50
60
70
Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14
% o
f To
tal Q
uar
terl
y In
stal
lati
on
s
Qu
arte
rly
Inst
alla
tio
ns
Arizona
APS & SRP w/ incentives APS & SRP w/o incentives
% of capacity w/ incentives
energy.gov/sunshot
U.S. Utility-Scale Solar Projects (> 5MW)
14
• Large-scale PV and CSP plants face challenges with anticipation of ITC step-down
Note: As of 10/23/14.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Q1'10
Q2'10
Q3'10
Q4'10
Q1'11
Q2'11
Q3'11
Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
Q1'14
Q2'14
Q2'14
Cap
acit
y (G
WA
C)
PV - Under ConstructionPV - OperatingCSP - Under ConstructionCSP - Operating
energy.gov/sunshot
Sources of Utility-Scale PV Costs – LCOE vs. Upfront Costs
• There are a significant amount of hardware and business operations that contribute to the upfront cost of utility-scale PV
• However, equally important to the competitiveness of PV is the cost of financing these systems
– A required 9% rate of return represents 42% of a PV system’s LCOE – Reducing financing costs to inflation would be the equivalent of cutting all hardware costs
Sources: NREL internal cost modeling. Note: numbers quoted in $2013.
Module 36%
Inverter 7%
Installation Materials
19%
Labor 12%
Permitting & Commissioni
ng 8%
Land Acquisition
2%
Site Preparation
3%
Installer Profit & OH
8% Sales Tax
5%
Utility ground mount (Fixed axis) $1.80/W
Hardware Costs, $0.029
Upfront Soft Costs, $0.016
O&M, $0.019
2.5% Financing,
$0.020
9% Financing,
$0.027
$0.00
$0.02
$0.04
$0.06
$0.08
$0.10
$0.12
LCOE - utility ground mount
LCO
E (2
01
3$
/kW
h)
15
energy.gov/sunshot
Sources of Residential PV Costs – LCOE vs. Upfront Costs
• The potential impact on the LCOE of residential rooftop PV is greater due to its current higher required rate of return
• Reducing financing costs to 2.5% could reduce 32% of LCOE
Sources: NREL internal cost modeling. Note: numbers quoted in $2013.
Module 21%
Inverter 10%
Installation Materials
19% Labor 9%
Permitting & Commissioni
ng 3%
Supply chain costs 6%
Installer Profit & OH
29%
Sales Tax 3%
Residential Rooftop $3.29/W
Hardware Costs, 4%
Upfront Soft Costs, $0.043
O&M, $0.030
2.5% Financing,
$0.037
9% Financing,
$0.074
$0.000
$0.050
$0.100
$0.150
$0.200
$0.250
LCOE - Residential Rooftop
LCO
E (2
01
3$
/kW
h)
16
energy.gov/sunshot
Comparison of annual payment between residential PV systems, financed under a PPA or loan, and retail rates
• Solar-specific loan financing is growing in the United States
• LCOE of loans was found to be 19%-29% lower than LCOE of PPA’s due largely to the higher cost of capital for TPO
Source: “Banking on Solar: An Analysis of Banking Opportunities in the U.S. Distributed Photovoltaic Market,” NREL, forthcoming.
17
Opportunities for Solar Loans
$0.142 $0.148 $0.162
$0.199
$0.255
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
5-yearLoan
10-yearLoan
20-yearLoan
20-yearPPA
SDG&ERes. Tier
2/3
LCO
E ($
/kW
h)
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
1 2 3 4 5 6 7 8 9 1011121314151617181920
Ye
arly
pay
me
nts
Years
5-year Loan
10-year Loan
20-year Loan
20-year PPA
SDG&E Res. Tier 2/3
LCOE of residential PV systems, financed under a PPA or loan, compared to retail rates
energy.gov/sunshot
• GTM/SEIA report that more than 1.5 GW of PV has been, or will be, used to finance publicly traded investment vehicles
• In Sept/Oct. ‘14 SolarCity launched several financial initiatives
• Launched its first residential loan product in eight states
• 30 year term of loan; rate as low as 4.5%; no penalties or fees for prepayments
• SolarCity’s CEO quoted saying loans may required $0.5B - $1.0B to finance in 2015
• Has filed to sell up to $200MM worth of solar asset-backed debt directly to the general public through their on-line platform (Common Assets)
• minimum purchase requirement is $1,000, maturities range from 1-7 years, and interest rates go up to 4%
• Nextera Solar Fund announced in Sept. ‘14 it would raise $426MM by selling shares in order to purchase more projects
• SunEdison filed papers in Sept. ‘14 to form second yield-co, this one focusing on operating projects in Asia and Africa
• NY Greenbank announced in Oct. ‘14 its first seven programs, which will provide $800MM in public and private funding over several years
• NYSERDA/LI PSEG this summer announced the introduction of on-bill recovering loan program that allows customers to repay loans through their electricity bills
Solar Finance
Sources: Bloomberg (10/08/14, 10/16/14); BNEF (09/10/14, 09/24/14, 10/17/14, 10/24/14); Forbes (10/08/14); GTM/SEIA Q2 ‘14 SMI; Seeking Alpha (10/15/14)
18
energy.gov/sunshot
Capital market participation requires…
Liquidity and Price Transparency
Consistency in
Cash Flows
Tools to Conduct
Due Diligence
Investor Confidence in
Asset Performance
Feedback from Rating Agencies
and Investors
energy.gov/sunshot
Project Goal
Expand availability of capital
Lower cost of capital
Reduce transaction cost, time to
access capital
Activities
Promote adoption by developers, financiers, law firms, etc.
Organize the industry around:
• Standard documents
• Best Practices
• Robust datasets
Conduct analysis to comprehend opportunities and barriers
NREL Public Access to Capital Projects (2012-14)
energy.gov/sunshot
ROOFTOP SOLAR CHALLENGE
SAME-DAY /
EXPEDITED
PERMITTING
Local Innovations to Make Solar Faster, Easier,
Cheaper }
FAST, ONLINE
INTERCONNECTION
} SOLARIZE
& FINANCING
PROGRAMS
CHICAGO, IL
CITY
BROWARD COUNTY,
FL
COUNTY
CONNECTICUT
STATE
PACIFIC NORTHWEST
REGION
energy.gov/sunshot
• Results suggest that 13-19% of the total PV price change from 2011 to 2012 might be attributed to improvements in permitting and other local regulatory processes
Source: Burkhardt, J., Wiser, R., Darghouth, N., Dong, C., Huneycutt, J. “How Much Do Local Regulations Matter? Exploring the Impact of Permitting and Local Regulatory Processes on PV Prices in the United States,” LBNL, 2014.
24
Impact of Permitting and Local
Regulatory Processes on PV Prices
energy.gov/sunshot
Augmented Reality Edition
SUNLAYAR, INC.
Sunlayar AR Edition could reduce solar soft costs by $0.31.
A cloud-based software platform architected by solar industry and technology veterans,
designed to digitize and pare down much of the workload (soft costs) needed across the
majority of the residential solar provider value chain.
energy.gov/sunshot
32
Lidija Sekaric SunShot Initiative
US Department of Energy
Thank you