solar3.0 roadmap from policy to profitability
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Making Solar Happen
Solar3.0 - A Path from Policy to Profitability A National Platform for Process Innovation to Scale DG solar PV
Intersolar N.America San Francisco, CA
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
Our Initiatives Scalable
Local best practices
National
impact
Performance`
Interconnect
Financing
Workforce
Permitting
Installation
Our Board Entire Value
Chain
Systems
Approach
Our Partners Collaborative
Consortium
2
About SolarTech
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
Overview
• Current U.S. market landscape
• Solar 1.0 Solar 2.0 Solar3.0
• The Solar3.0 Platform
• Tipping Points
• A (proposed) path from Policy to Profitability
• Q&A
3
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
U.S. Solar Market Growth Through 2015
0
1000
2000
3000
4000
5000
6000
7000
2005 2006 2007 2008 2009 2010 2011 2012e 2013e 2014e 2015e
Meg
awat
ts (
MW
dc)
PV Installations Forecast
Year Q1 SEIA/GTM Research: Q3 2011 Solar Market Insight
4
Market Uncertainty
•1603 & Solyndra hangovers
•Excess Capacity
•Trade dispute
•Election year POLITICS
•Confused Consumers
•Fractured marketplace
Solar3.0 Program Goal Inject stability & Market Direction
•Efficient local markets through standards, best practices
•Provide lower prices and more predictable transactions to consumers
• 2012 – We face multiple challenges with fragmented solution paths
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
Average Installed System Costs Continue to Decline (many reasons)
SEIA/GTM Research: Q3 2011 Solar Market Insight
5
Greentech Media Report (Q111 vs Q112)
•Drops across all sectors = $4.44/w average across markets
•Res - $5.89, Commercial $4.53, Utility $2.90 / W
Making Solar Happen
Tipping point - The event of a previously rare phenomenon becoming rapidly and dramatically more common
- Wikipedia
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
What is “Main St. USA” waiting for? • Residential PV break-even
installed price in 2008 assuming
full retail net metering, state
incentives and 30% ITC.
• Residential PV break-even
installed price in 2015 assuming
full retail net metering and 30%
ITC.
Source: Denholm, Margolis, Ong, Roberts “Break-Even Cost for Residential Photovoltaics in the United States:
Key Drivers and Sensitivities” NREL 12/2009
7
Making Solar Happen
The people who are crazy enough to think they can change the world are the ones who do.
- Apple’s “Think Different” commercial, 1997
Imagine “Going Solar”?
- SolarTech’s “4th Solar Leadership Summit”, 2012
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
2012 Landscape: “The TOTAL PRODUCT does NOT yet Exist”
• Fragmented Market
– Solar is SOLD (not Bought)
– Solar industry access is
confusing
– Customer Acquisition costs
$2500+
• Lead generation sites yield
1-2%
• Direct conversion rates are
10-15%
– Inefficiencies across the
enterprise
– Few economies of scope &
scale
9
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
“Solar3.0” - A pathway to industry scale
(Scale Markets)
(Create Markets)
(Capture Markets)
Solar 2.0 Technical Innovation
Fed Policy
RES/RPS
REC’s
SB1, CSI,AB32
Products
Technology
Innovation
Commercialization
Solar 1.0 Policy Innovation
Phase 3.0 Business
Innovation
Processes
Productivity
Scale
“Total Cost of
Ownership”
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
Solar 1.0 Policy
Innovation
Fed Policy
RES/RPS
REC’s
SB1,
CSI,AB32
http://www.dsireusa.org/
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
Solar 2.0 Technology
Products
Technology
Innovation
Commercialization
http://cleanedge.com/research/state-index
•Comparative benchmarking of clean-energy activities
•Analysis of technology, policy, and financing trends / state
•Data on which clean-tech sectors are expanding by market
•Insight on each state's relative strengths and weaknesses
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
Program Overview 1000+ Communities
90+ Utilities, 500+ PV Installation
Companies
1600 electrical and code officials trained
30,000 industry stakeholders
8 state target, organic adoption beyond
Phase 1
Needs Analyses
Phase 2
Developmen
t Phase 3
Implementati
on
Non-Hdwr BOS costs as % of Installed Costs
2012
<30%
2013
<20%
2014
<10%
Phase 4
Market Impact
$2.85M Funding to Reduce Non-Hardware BOS Soft Costs by 50% by 2014
A National Platform for Process Innovation in Solar PV
http://solar30.org/
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
“Solar3.0” - A pathway to industry scale
Processes
Productivity
Scale
“Total Cost of Ownership”
3.0 Tipping Points – High Priority Markets 2.9 Connect Private Capital & Human Capital 2.8 Mass Market products – “Plug-in-Play” 2.7 Micro-Grid proof points 2.6 Integrated Architectures: RE + NG + EE 2.5 Empowering Consumer Choice 2.4 Broader Access to Lower Cost Capital 2.3 Relentless Soft Cost reduction 2.2 Unified Messaging, Aggregate Demand 2.1 Market driven solutions
Solar 2.0 Technology
Solar 1.0 Policy
Innovation
Fed Policy
RES/RPS
REC’s
SB1,
CSI,AB32
Products
Technology
Innovation
Commercialization
Phase 3.0 Business
Innovation (Scale Markets)
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
2.1 Shift to Market driven solutions Phase 3.0 Business
Innovation (Scale Markets)
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
2.2 Unified Messaging, Aggregate Demand
Phase 3.0 Business
Innovation (Scale Markets)
Solar Most Popular Energy by Far “All of Above” But Major Partisan Divide on Other Energy
Source: Lazard (2011)
+85.3%
+15.7%
+93% +93% +73%
+94.7% +56% +24% +62%
+62%
+29%
+18%
+24%
+31%
+88% +77% +32%
+15% +28%
+13%
+24% +4%
+38% +1% +68%
+58% +84%
+67%
Solar
Natural Gas
Wind
Nuclear
Oil
Biofuels
Clean Coal
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
Headlines Say One Thing …
2.2 Unified Messaging, Aggregate Demand
Phase 3.0 Business
Innovation (Scale Markets)
Why the Clean Tech
Boom Went Bust
Economic Slowdown Challenges
Renewable Energy
Clean-Energy Aid Racks Up Losses
*In instances where the data was split-sampled and aggregate data was not
available, the sample with the higher %yes was used.
… Americans Are Thinking Another
There is majority support for a measure to increase renewable energy standards in every state.
Summer 2011
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
2.2 Unified Messaging, Aggregate Demand
Phase 3.0 Business
Innovation (Scale Markets)
Clean,
renewable
energy
Clean
energy
75 72
10
20
30
40
50
60
70
80
90
Renewable
energy
Thermometer Ratings (Mean Rating)
Sustain.
energy
Green
energy
74 70 68
“Clean, renewable energy” is seen very positively – that
phrase tends to resonate most strongly.
Phrase %80-100
Clean, renewable energy 52%
Clean energy 52%
Renewable energy 47%
Sustainable energy 43%
Green energy 44%
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
2.3 Relentless Soft Cost reduction Phase 3.0 Business
Innovation (Scale Markets)
•With rapid decline in hardware costs, reducing
soft-cost is becoming increasingly important
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
$22
$24
1980 1985 1990 1995 2000 2005 2010
Avera
ge M
od
ule
Pri
ce (
2010 $
/Wp
)
2005 2010 Note
ASP $4.04/W $2.40/W in 2010 Avg installed system price decreased ($1.70/W)
Relative module price decline = 96% of the total decline PV system price
What’s left?
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
2.3 Relentless Soft Cost reduction Phase 3.0 Business
Innovation (Scale Markets)
1) Choose installer
2) Finance PV system
3) Permit, Inspect
-
4) Install, Interconnect
There is more to a system than
hardware
5) Monitor
performance
$$$
• In the U.S., the process of selecting an installer
through operating a PV system can add significant
time and cost to project completion.
• Inefficient supply chains, O&M, and delays can
also increase cost.
Need for standardization and automation
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
2.3 Relentless Soft Cost reduction Phase 3.0 Business
Innovation (Scale Markets)
21
$-
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
Baseline Solar 3.0 Goal
In
sta
lled
Co
sts
(2
01
1$
/W
dc)
Non Hardware Balance of System Costs:
Baseline and Solar 3.0 Goals by 2014
Source: Ardani et al. Quantifying Non-hardware Balance of System Costs for Photovoltaic Installations in the United states Using a Combined Annual Expenditure-Labor Hour productivity Approach. National Renewable Energy Laboratory. 2012.
$1.52
$0.80
Installation
Labor
Customer
Acquisition
System Design
All Other
“Soft”
Costs
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
2.3 Relentless Soft Cost reduction Phase 3.0 Business
Innovation (Scale Markets)
Solar30.org
Portal
Cities
Code Officials
Building Inspectors
PV Installers
PV Developers
Utilities
States
Industry Partners
Local/State Fire Marshals
Q3 – Q4 Plan • 100 communities selected
• Monthly webinars
• Leadership event
• Solar 3.0 Tool Kit Update 2
• Inspector/Installer workshops
• Affiliate-led workshops
• Solar 3.0 scorecard 1
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
2.4 Broader Access to Lower Cost Capital Phase 3.0 Business
Innovation (Scale Markets)
Balanced understanding of uncertainty in the performance,
reliability, and safety of components/systems optimized for
appropriate risk and cost.
Mature
industry
< Newer
industry
(ie. Solar)
Uncertainties (real or perceived) can lead to an
unnecessarily high assessment of risk and cost.
The Problem
Making Solar Happen 24
Source: Team Analysis
Solar as an Asset Class
Policy Risk
Development Risk
Construction Risk
Customer Risk
Resource Risk
Technology Risk
Operating Risk
Future State
• A standardized approach to risk:
• Construction, Solar resource
models, Technology, O&M
• Opportunity
• Broader participation of
lenders in Solar
• Facilitate the emergence of a
secondary market for Solar
debt
• Solar Securitizations, Solar Bonds
Current State
• Discrete risks in traditional lending
verticals are known (e.g., Auto, Real-Estate)
• Solar finance involves a unique
combination of risks in a single vertical
• No standardized way to analyze solar PV
project risks, consistent methods,
standardized risk asessment
• Most lenders struggle to efficiently
underwrite loans in this field
2.4 Broader Access to Lower Cost Capital Phase 3.0 Business
Innovation (Scale
Markets)
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
Why Solar as an Asset Class? Objectives
• Coordinated strategies to increase confidence, decrease risk, and improve flow of capital
• Ways to accelerate commercialization of new technologies through validation of system performance and reliability.
• Close gaps in model guidelines re. quantification of risk, capital formation, and bankability.
25
1:1 (Business-To-Business paradigm 2007-2012)
Development
• Sites
• Contract
• Partnerships
• Structure
• Economics
Construction
• Pre / Post
• Performance
• Commission
Wharehouse
• Insurance
• Final due diligence
• Risk / De-risk
Capital Markets
• Portfolio
• Ratings
• Cash Flow
Capital Market Drivers •~30-35% CAGR to 200GW+ by 2020(GTM)
•Low cost debt fuels expansion Today: ~$70bn/ year (<50% is debt financed) •2020: ~$375bn/ year
(~70-80% debt financed)
NEED - $1 trillion in cumulative debt issuance to fuel industry growth by 2020
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
26
1:Many (Scale)
• Over 6,500 banks or U.S. lending
institutions
• <5% are actively lending to Solar
projects
• A “participation gap” exists
• Methods, standards, resources, tools,
guidelines, skills or the capabilities to
efficiently diligence and underwrite
these loans does NOT exist AT SCALE
Standards + Methods = Scale
<300*
<5%
Total no. of
Banks in the
US
Banks actively
lending to Solar
projects
~6,500
Total US Banks vs US Banks actively lending to Solar
projects
Source: S. Ghaemmaghami & Prof. King “The Solar Risk
Project @ IQSS/ Harvard University “
Why does securitization matter 2012-2020?
•Closing the “participation gap” means: •Lower cost of capital •Improved terms •Lower prices for consumers •Subsidy free markets (cheaper,
better, faster)
Making Solar Happen
Who has $1,000,000,000,000?
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
$2.0
2005 2006 2007 2008 2009 2010 2011
Deposits
Loans
Cumulative Loans and Deposits for US
Community Banks*, 2005-Present ($T)
• Solar could represent
an attractive new
vertical for many
Community Banks
• Excess cash,
strong(er) balance
sheets, shortage of
quality, local, non-
traditional lending
verticals (e.g., Real
Estate)
* Commercial Banks with assets $200m-$10bn Source: Federal Reserve Weekly H8 Report Loans
excludes assets reclassified under FASB Statement 166; Team Analysis
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
A Holistic Approach is needed - Key Elements
• Program Framework - Chart a course towards ITC expiration
• Ratings - Understand how project/portfolio analysis is conducted, risks stacks are evaluated, quantified, and mitigated at various points in time
• Risk Stack - Facilitate the underwriting process w/consistent ways to backstop risk (policy, customer, performance, technology, construction, O&M , data analytics, and methods independent of market sectors.
• Local/Regional Capital - Improve the process to access broader, lower cost capital pools through standardization\
• DATA - Access to system data, analytics, and methods to better quantify risk stacks: engineering performance, data collection, Operations & Maintenance, Technology, Financials
• Origination - Propose risk reduction solutions to reduce perceived and real project risk across the project delivery chain
• Backstop - Leverage models, analytics, data gathering efforts from National Labs to backstop ratings & risk` 28
Local $
Rating Agency’s
Performance Symposium – Intersolar NA 7/9/2012
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
2.5 Empowering Consumer Choice Phase 3.0 Business
Innovation (Scale Markets)
Create Demand Pull < 2014!!!
GTM Forecasts 21 GW of PV Module Capacity to Retire by
2015
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
2.6 Integrated Architectures: Renewables + Natural Gas + EE
Phase 3.0 Business
Innovation
(Scale Markets)
21st Century Clean Local Energy Architecture •IT enabled and automated
•Integrated supply/demand models •Smart grid applications
•Enterprise delivery systems •Open architectures moving energy information
across consumers, industry, cities, and utilities.
Architecture Challenges Ahead •Grid integration challenges
•Capacity factors / contribution •Interconnection •Dispatchability
•Impact on power markets, economics •Central vs. DG renewable delivery
http://www.nrel.gov/docs/fy12osti/53732.pdf
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
Trickle down energy innovation effect
2.7 Micro-Grid proof points Phase 3.0 Business
Innovation (Scale Markets)
Can military bases improve energy
generation and transmission via a new
system: Energy Surety Migrogrids™?
Vision: An energy surety system that
uses more small, renewable, and
distributed generation and storage
nearer the load (microgrid), with less
reliance on generation from big power
plants using a microgrid approach.
“Solar Energy is now a clean enabling technology. It’s simply all about clean
electrons now.”
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
2.8 Mass Market products “Plug-in-Play” Phase 3.0
Business Innovation
(Scale Markets)
•April 24,2012 •$5M for “plug-and-play” PV systems that can be purchased, installed and operational <1day •partnerships with universities, industry, utilities, and other stakeholders. •Part of a 5 yr program for an additional $20M ‘ask’ of Congress over the next four years
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
2.9 Connect Private Capital with Human Capital Phase 3.0 Business
Innovation (Scale Markets)
Who will train all these new workers?
State Cumulative
Capacity (MW)
Funding Needs Based on Market
Share ($M)
California 1,513.4 $25.5M
New Jersey 601.7 $10.1M
Arizona 383.2 $6.5M
Colorado 198.6 $3.3M
New Mexico 160.9 $2.7M
Pennsylvania 141.9 $2.4M
Nevada 141.0 $2.4M
New York 114.4 $1.9M
North Carolina
97.2 $1.6M
Florida 87.1 $1.5M
Rest of Nation
510.60 $8.6M
Total 3,950 $66.5M
Where’s the $$$?
How can we create a better match between private capital and
human capital?
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
2.9 Connect Private Capital with Human Capital Phase 3.0 Business
Innovation (Scale Markets)
Key Element and Relative Weighting %
Model Technical Simplicity
(7.5%)
Industry Participation
(35%)
Ease of Funding
(30%)
Long-Term Viability
(20%)
Replicable (7.5%)
Total Weighted
Score
Public/Private Partnership 5 10 2 4 6 5.7
Revolving Fund 3 5 7 10 8 6.7
Crowd sourcing 2 5 4 9 7 5.4
Highest Score Public/Private
Partnership Public/Private
Partnership Revolving
Fund Revolving
Fund Revolving
Fund Revolving
Fund
Sustainable Business Models (suggested) Next steps – Industry vetting
A joint collaboration of:
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
3.0 Tipping Point: High Priority Markets Phase 3.0 Business
Innovation (Scale Markets)
Making Solar Happen Proprietary & Confidential www.solartech.org Intersolar 2012
“Solar3.0” - A Market Based approach to accelerate grid parity for 46,016,325 people
Processes
Productivity
Scale
“Total Cost of
Ownership”
3.0 Tipping Points – High Priority Markets 2.9 Connect Private Capital & Human Capital 2.8 Mass Market products – “Plug-in-Play” 2.7 Micro-Grid proof points 2.6 Integrated Architectures: RE + NG + EE 2.5 Empowering Consumer Choice 2.4 Broader Access to Lower Cost Capital 2.3 Relentless Soft Cost reduction 2.2 Unified Messaging, Aggregate Demand 2.1 Market driven solutions
Phase 3.0 Business
Innovation (Scale Markets)
Solar 3.0 = Better Tools | Efficient Markets | Lower Costs
Making Solar Happen
Imagine “Going Solar”
- SolarTech’s “4th Solar Leadership Summit”, 2012
What does the U.S. solar industry look like at scale?
- Intersolar N.A, San Francisco CA 7/2012
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