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Norwegian Industry Participation in the International Solar Market

Magnus Sletmoe Dale

(magnus.dale@multiconsult.no)

International Solar Day

Oslo, 28 February 2019

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Scope & Methodology

• Norwegian firms known to operate in the international solar market surveyed on core activity, market presence and outlook.

• Responses from 38 firms coupled with internal knowledge on the market. Corporate figures non-exhaustive unless otherwise stated.

• Our general definitions of market segments:- Utility-scale: Larger, grid-connected solar installations- Commercial and Industrial (C&I): Solar systems supplying power to

businesses for partial or full self-consumption- Mini/micro grids: Solar (hybrid) systems connected to isolated grids

serving localized group of customers- Floating: Floating solar PV installations feeding into the grid- Domestic systems: Solar applications with residential or domestic

end use, including residential rooftop installations.

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Norwegian solar firms revenues and FTE count overview

Norway Europe ROW

• Full-time employees* >1 200 >350 >2 100

• Revenues (BNOK)** ~1.3 ~3.9

• Share of RES sector ~12 % ~34 %

Norwegian firms employ 3 700+ in the solar market, ⅔ of these abroad. REC Solar dwarfs peers internationally, employing around 70% of non-European FTEs. The solar market

represents more than ⅓ of Norway’s international RES revenues.

Source: Multiconsult, firms. *Based on Multiconsult industry survey. **Revenues retrieved from Menon report 76/2018 commissioned by Norway Export Credit for 2017 and exclude power and heat sales.

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4Note: Based on Multiconsult industry survey for exports and overseas sales in last 3 years. Non-exhaustive. Source: Multiconsult, firms.

Norwegian solar firms market presence overview

Norwegian companies in the solar business sell goods and servicesto more than 50 markets across all regions.

1

3

14

23 13

X Number of markets

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Equipment/product supply Integration/EPCDevelopment/ownership

AdvisoryPublic bodies/

agencies/clustersInstitutional

Utility-scale

Commercial & Industrial (C&I)

Floating

Mini/micro grids

Domestic systems

Norwegian Industry Participation in the International Solar MarketValue chain

RENEFA

Norway hosts a diverse set of companies targeting the international solar market. These extend across all value chain segments and into key submarkets.

IntegrateRenewables

Note: Arrows indicate presence in adjacent segments. Placement by Multiconsult assessment may not fully reflect extent of firms’ operations. Intra-ownership not accounted for. Overview not exhaustive. Source: Multiconsult, firms.

(2019)

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Utility-scale solar

Market Size

• ~59 GW global newbuilds in 2018*

Relative Maturity Relative Homogeneity

Key Market Dynamics

• Cost declines, oversupply and scale shape supply/demand balance. China major market.

• Demand remains dependent on politicalsupport and auction schemes.

• Grid integration, financing and political risks frequent challenges in developing markets.

• Relative maturity and homogeneity of the market means scale and cost drive competitiveness.

Source: Companies, Multiconsult. Photo by Access Power. *Market size for 5 MW+ PV installations by courtesy of IHS Markit.

Case Study : Norwegian Crystals

• Manufacturer of mono-crystalline silicone.• About 100 employees, headquartered in Oslo

with production facilities in Glomfjord.• Annual revenues increased by more than

fourfold 11 MUSD in 2014 to 45 MUSD in 2017.

• Currently in expansion phases, raising production capacity from 400 MW to 3.5 GW in the future, betting on increase of mono-crystalline silicon in PV cell manufacturing.

Case Study : Aega

• Owns portfolio of 8 operational solar plants totaling 8 MW in Italy operating under feed-in-tariffs.

• Typically invests in projects sized ≤5 MW.• Other Norwegian firms such as AEM shares

similar business model and geographic presence.

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Commercial and industrial solar (C&I)

Source: Photo of Grove Mall, Windhoek, Namibia sourced from SPS Africa. *Market size for ongrid installations by courtesy of IHS Markit. **TH Energy

Case Study : Aventa Solar

• Sells solar collectors and water heating systems.

• Thermosiphon concept based on polymer collectors patented for Europe in July 2017.

• Approved as supplier to UNHCR for water heating systems in refugee camps.

Case Study : Kube Energy

• Solar systems for humanitarian organizations in off-grid locations, with track-record working with UN, World Bank and range of NGOs

• Offers range of financing options, including PPA, lease and turnkey.

• Track-record from across East Africa and other regions.

Market Size

• ~32 GW global newbuilds in 2018* • 130 MW+ C&I projects identified across Africa**

Relative Maturity Relative Homogeneity

Key Market Dynamics

• Strong potential in markets with high power tariffs and unreliable supply. Net-meteringschemes can further boast attractiveness of C&I investments.

• Lack of financing options and awareness among business owners hamper growth.

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Floating solar

Case Study : OceanSun

• In commercialization phases of 0.5 MW floating system.

• Design with flexible surface membrane for increased wave and wind resilience.

• Three pilots operating for more than a year in Norway and Singapore, including a 100 kW full scale pilot; additional projects in the pipeline.

Case Study : Moss Maritime

• Developing coastal solar concept involving “matrix” of floaters.

• In early R&D phases with first feasibility studies underway at SINTEF in Trondheim.

• Offshore pilot could see initial development starting summer 2020.

• In position to leverage wider EPCI capabilities from oil & gas in mother company Saipem.

Market Size

• ~500 MW installed in 2018*

Relative Maturity Relative Homogeneity

Key Market Dynamics

• Exponentially growing market with installed capacity from 10 MW to 1.1 GW in 2014-2018.

• Particularly attractive option in highly populated areas with limited land availability.

• French firm Ciel et Terre make up ~70% of floaters**; market dynamics further shaped by technology, hybridization and scale.

• Studies estimate >400 GW of technical potential worldwide.

Source: Photo of floating plant in Hainan, China, sourced from NRDC. *Report ”Where Sun Meets Water”, published Sep 2018 by the World Bank. **Multiconsult estimate.

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Solar mini/micro-grids

Source: Multiconsult, companies, media. Photo from 700 W micro-grid in Tanzania sourced from Permaculture. *Solar mini grids identified in “Measurement and estimation of off-grid solar, hydro and biogas energy”, IRENA 2018. **World Resources Institute (2017).

Case Study : Pixii

• Sells modular energy storage solutions.• Bidirectional convertor and battery solution

designed to improve grid stability.

Case Study : SunErgy

• Deal with authorities for electrifying 92 villages in Cameroon, with second project in Liberia now underway.

• ~40 employees working on site in Africa• Supply agreements with Eltek, shipping

equipment out of Norway.• Diverse revenue stream which includes power

sales, access to TV and internet access, select domestic systems and micro-financing.

Market Size

>320 MW*

Relative Maturity Relative Homogeneity

Key Market Dynamics

• Often politically favored for rural electrification. Increased regulatory planning, productive uses and subsidies/grants generally strengthen business case.

• But lack of financing, long-term revenue visibility and rise of domestic systems key inhibitors to growth.

• More than 100,000 mini-grids could be built by 2040 in Africa alone, according to estimates**

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Domestic systems

Source: Multiconsult, companies. Photos from Greentech and G. H. Davies.

Case Study : Otovo

• Established in 2016, Otovo matches house owners up with rooftop solar installers through interactive website.

• October 2018 saw Nysnø and KLP taking ownership positions in 100 MNOK funding round.

• Initially present in Norway and Sweden, the firm is now targeting the wider European market.

Case Study : Bright Products

• Offers range of products including SHS systems, lamps/lanterns and chargers.

• Major player with close to 200 MNOK in operational revenue in 2017.

• Targets off-grid and no-grid communities. • More than 2 million lamps used by more than

8 million customers; UNHCR a key client.

Relative Maturity Relative Homogeneity

Key Market Dynamics

• Wide range of products including solar home systems (SHS) to solar-driven heaters, lamps, pumps, chargers and other pico systems.

• Products often address basic energy needs of rural and poor populations.

• Digitalization and role of IT potential common denominator.

• Low maturity and low homogeneity means high potential for innovation and new solutions.

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53% of respondents

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Revenue expectations

Norwegian firms pursue bullish ambitions in the international solar market, with majority of respondents expecting ≥50% revenue increases in next five years

Note: *Includes respondents expecting 20%+ negative growth and those preferring “not to say”. Source: Companies, Multiconsult.

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Macro risk

Growth challenges

No one key challenge faced by Norwegian firms in the international solar market – but macro risks seem particularly important

Note: *Overall relevance = Share of respondents classifying challenge as “relevant” or “highly relevant”. Respondents tested for pre-defined set of challenges. Source: Companies, Multiconsult.

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16 pp.

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Conclusions

• Norwegian companies in the solar market sell to more than 50 markets worldwide, across all regions. Solar represents more than a third of Norwegian renewables revenues internationally*.

• These firms together employ more than 3,700 people, 2/3 abroad. Five firms employ 90% of all FTEs, underscoring the flurry of medium and small sized Norwegian players active in solar.

• Norway hosts a diverse set of players that expand across the value chain and into key solar market segments. A particularly rich set of players operate in tech supply segments, project development and ownership, floating solar and advisory services.

• A host of firms can trace origins to industry leaders such as REC Solar and Scatec Solar; others were established at intersection with other key national sectors, such as oil & gas and IT.

• Whereas cost and scale drive competitiveness in mature and homogenous markets, disruptive technology and innovation by Norwegian firms have potential to shake less established solar markets.

• Norwegian firms report composite risks internationally, with macro risks particularly prominent.

• Most expect 50%+ revenue increases internationally in next five years. Multiconsult believes continued national cooperation and holistic sectoral strategies be key to reach ambitions.

Source: Multiconsult, companies. Revenues figures retrieved from Menon report 76/2018 commissioned by Norway Export Credit for 2017 and exclude power and heat sales.

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Q&A