investment dynamics in solar photovoltaics - the journey so far and beyond

Investment Dynamics in Solar Photovoltaics –The Journey so Far and Beyond

Sivapriya Ramakrishnan, Research Analyst

Business and Financial Services, Energy and Power Systems

20th October 2009

2

Focus Points

Solar Photovoltaic Market Trends in 2008

Geographic Differences

Impact of the Economic Downturn

Investment Trends

Trends in 2008

Trends in 2009

Major Drivers

Resurgence of Germany and Japan

Concluding Thoughts

3

Solar Photovoltaic Market Trends – The Boom in 2008

� Additions in new installations primarily driven by the Spanish demand (accounting for more than 45.0 percent)

followed by the Germany and Japan.

60.8

35.3

31.0

21.2 22.5 23.427.0

37.6 34.3

24.9

0.0

5000.0

10000.0

15000.0

20000.0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Year

Cu

mu

lati

ve I

nsta

lled

Cap

acit

y (

in M

W)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Gro

wth

Rate

(%

)

Cumulative Photovoltaic Power Installed (MW) Growth Rate (%)

Solar Photovoltaics Market: Annual PV Installations (Global), 1998-2008 Maximum growth in

installations

Led by spurt in

installationsin Spain

Why did installed capacity almost double in 2008?

� New markets opened up in Europe which included France, Belgium, Portugal and Czech Republic

� Crude prices were spiraling and reached dizzying heights which quickly directed the global attention towards

clean technology.

Note: All figures rounded; the base year is 2008. Source: Frost & Sullivan

4

Geographic Differences


U.S. - Extension of ITC

Japan – Falling market share

Germany - One of the largest markets,

introduction of EEG enhanced growth

China - PV market driven by

demand from German and

Spanish markets

Spain - leading PV destination

in 2008

Solar Photovoltaics Market: Geographic Highlights (World), 2008

South Korea - emerged as the

4th largest in terms of solar PV

installations

Italy - Combination of net

metering and premium

tariffs encouraging solar

energy

5

Effects of the Economic Downturn

� Uncertainty regarding the implementation of

ITC

� Slackening demand


U.S.

China Italy

� Feed-in tariff program manages to sustain

the market

� Slump in demand in U.S., Spain, reduces

scope for China

Germany

� Stagnation in demand due to recession and

reduced feed-in tariff

� Looks to gain leadership in 2009

Spain

� Cap on installations to be a major roadblock

in terms of market growth

Japan

� Government incentives set to bridge falling

exports

� The drop in crude oil prices after peaking in July 2008,

has marginally reduced the focus on solar PV.

� Shrinking of the Spanish market implies oversupply in

the global market. Adding on to diminishing margins

could be the impact of reducing prices of solar modules.

500.0 460.0

2511.0

2008 2009 2010

Solar Photovoltaics Market: Installed Capacity (Spain), 2008-2010

Insta

lled C

apacity

(MW

)

Slump due to imposed cap and revised feed-in

tariffs

6

Investment Trends

7

Trends in VC Investment in 2008

Growth of SolarGrowth of Solar

Q-o-Q ContributionQ-o-Q Contribution

Technology Preferences Technology Preferences

Maximum investments secured by clean technology in

2008.

Composition of solar technologies spiked to 40.0 percent.

Maximum investments secured by clean technology in

2008.

Composition of solar technologies spiked to 40.0 percent.

Signs of meltdown visible in Q4 2008, the effects of which

have spilled over to Q1 2009.

Signs of meltdown visible in Q4 2008, the effects of which

have spilled over to Q1 2009.

Solar photovoltaics accounted for almost 70.0 percent in total solar technologies investment.

Thin-film PV and crystalline PV are considered promising investment opportunities

Solar photovoltaics accounted for almost 70.0 percent in total solar technologies investment.

Thin-film PV and crystalline PV are considered promising investment opportunities

North America leads in the number of deals with Europe close behind.

2008 saw a rise in follow-on rounds due to capacity expansion.

North America leads in the number of deals with Europe close behind.

2008 saw a rise in follow-on rounds due to capacity expansion.


0.0

2.0

4.0

6.0

8.0

10.0

2002 2003 2004 2005 2006 2007 2008

Year

Investm

ents

in

Cle

ante

ch

($ b

illio

n)

0.0

10.0

20.0

30.0

40.0

50.0

Com

postio

n o

f S

ola

r (%

)

Investments in Cleantech Composition of Solar Investments

Solar Photovoltaics Market: Investment in Cleantech (World), 2008

Largest contribution is

from solar

Geographic TrendsGeographic Trends

8

Top Venture Capital Investment Deals of 2008


CompanyDeal Value ($ Million)

Stage InvestorsS.No

1

2

4

5

Nanosolar Inc 300.0 Follow-onEDF Energies Nouvelles, AES Solar, Riverstone

Holdings, Energy Capital Partners, the Carlyle Group, and others

Solyndra Inc 219.0 Follow-onVirgin Green Fund, Rockport Capital,

Argonaut Ventures, RedPoint Ventures, CMEA Ventures, and others

Solar Photovoltaics Market: Venture Capital Investment in Solar Photovoltaics (World), 2008

OptiSolar Inc 130.0 Follow-on Undisclosed

Sulfurcell Solartechnik GmbH

134.0 Follow-onIntel Capital, CPE, AIG Investments, Zouk Ventures, BankInvest Group, and others

Location

U.S.

U.S.

U.S

Germany

3 SoloPower Inc 200.0 Follow-on UndisclosedU.S.

9

Trends in VC Investment in 2009

Growth of SolarGrowth of Solar

Q-o-Q ContributionQ-o-Q Contribution

Technology Preferences Technology Preferences

Though solar was able to sustain the effects of the

recession in 2008 and Q1 2009, investor inclination towards

transportation and biofuels increased in the subsequent

quarters.

Though solar was able to sustain the effects of the

recession in 2008 and Q1 2009, investor inclination towards

transportation and biofuels increased in the subsequent

quarters.

Composition of solar technologies in clean tech in Q1 2009

was at 30%, Q2 saw a massive drop at 9.% and Q3 saw a

resurgence at 28.4%

Composition of solar technologies in clean tech in Q1 2009

was at 30%, Q2 saw a massive drop at 9.% and Q3 saw a

resurgence at 28.4%

Solar PV and concentrated solar technologies received

maximum investment.

Solar PV and concentrated solar technologies received

maximum investment.

North America continues to lead due to the new regulations and incentives.

North America continues to lead due to the new regulations and incentives.


0.0

500.0

1000.0

1500.0

2000.0

Q1 2009 Q2 2009 Q3 2009

Year

Investm

ents

in C

leante

ch

($ m

illio

n)

Solar Investments Investments in Cleantech

Solar Photovoltaics Market: Investment in Clean Technology (World), 2009

Geographic TrendsGeographic Trends

10

Top Venture Capital Investment Deals of 2009


CompanyDeal Value ($ Million)

Stage InvestorsS.No

1

2

4

5

SolFocus 77.6 Series CApex Venture Partners , NGEN, Yellowstone Capital , Demeter

Partners, affiliates of Advanced Equities, and others

Solyndra Inc 198.0 Follow-on Argonaut Private Equity, and others

Solar Photovoltaics Market: Venture Capital Investment in Solar Photovoltaics (World), 2009

Kovio 20.0 Series EBessemer, DAG Ventures, Flagship Ventures, Harris & Harris, JVP, KPCB, Mitsui Ventures,

Northgate Capital, Panasonic, Pangaea, and others

Arava 15.0 Follow-on Siemens

Location

U.S.

U.S.

U.S

Israel

3 Suniva 75.0 Series CWarburg Pincus, APEX Venture Partners, New Enterprise

Associates, HIG Ventures and Advanced Equities U.S.

11

Major Drivers

Investment BoostersInvestment BoostersInvestment Boosters

Commercialization likely to bolster market growth

Young industry hungry for capital

Government subsidies and

regulatory support

Falling prices of silicon make solar power competitive

Market growing at the 35.0 percent over past decade

Limited supply of conventional fuel

sources

Solar Photovoltaics Market: Investment Boosters (World), 2008


12

Resurgence of Japan and Germany

• Top 3-5

With a favorable regulatory framework and Spain’s cap on

installations, Germany is likely to regain its global

leadership status. The enticing feed-in tariffs still continue

to be strongest driver. As the manufacturing hub of solar

installations, Germany is all set for 2009.

Instead of subsidizing the market, Japan’s government has

succeeded in reducing the prices of solar energy on par

with the domestic electricity rates. With an ambitious of

target of increasing the composition on solar energy in

electricity generation to 30.0 percent, Japan is well on

track.

Subsidies – None since 2005 Subsidies – Thriving on feed-in tariffs and subsidies

Prior market leadership in early 2000s Prior market leadership till 2007

Japan Germany

Past Position

Expected Growth in 2009

Past Position

Expected Growth in 2009

13

Mergers and Acquisitions

Attempt to foray into

Automobiles

Economies

of scaleCarve-outs

Acquisitions by

InvestmentFirms

Outlook for 2009

M&A Trends inSolar PV

Transitioning into eco-friendly vehicles

Strongest Driver for Acquisitions

Carve-outs by established players

Several renewables focused funds launched

Credit crisis leaves the industry high and dry

14

Concluding Thoughts

Oversupply and market contraction expected in 2009Oversupply and market contraction expected in 2009

R&D initiatives take off and penetration into other verticals expectedR&D initiatives take off and penetration into other verticals expected

Growth in start-ups with the sole focus of increasing technological efficiencyGrowth in start-ups with the sole focus of increasing technological efficiency

Markets in other geographies show potentialMarkets in other geographies show potential

Among clean technologies, solar is and will mostly like continue to be one of the favorite investment options. As new cost

effective manufacturing techniques are established in 2010 and solar cell efficiency increases, solar is expected to emerge

stronger as the recovery begins and financial markets regain status. However, as investment in new technologies such as

smart grid and alternate transportation gain momentum, solar PV faces serious competition.

Among clean technologies, solar is and will mostly like continue to be one of the favorite investment options. As new cost

effective manufacturing techniques are established in 2010 and solar cell efficiency increases, solar is expected to emerge

stronger as the recovery begins and financial markets regain status. However, as investment in new technologies such as

smart grid and alternate transportation gain momentum, solar PV faces serious competition.

Solar PV expected to regain growth as signs of recovery in most economies are visibleSolar PV expected to regain growth as signs of recovery in most economies are visible

15

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