photovoltaic grid parity monitor for residential consumers - issue 3b

PV Grid Parity Monitor for residential

consumers

Financial Advisory Strategy Consulting Market Intelligence Policy Consulting

Leonardo ENERGY Webinar Series/ Madrid (Spain)

05 March 2015 at 17h30 CET

María Jesús Báez, Manager

[email protected]

Rocío Moya, Analyst

[email protected]

GPM 3rd Issue Residential Segment

• ECLAREON - CREARA

• Grid Parity Monitor (GPM)

- Introduction

- Definitions and Methodology

- Results

- Conclusions

Agenda

2

3

• Founded in Madrid in 2003

• Specialist in energy efficiency

and energy savings

• CREARA’s services:

- Consulting

- Engineering

- Management

- Training

Creara and Eclareon (Spain) merged their business to form Creara Energy

Experts and consolidate their leadership in sustainable energy services

• Opened in Madrid in 2005

• Management consultants in

smarter energy

• ECLAREON’s services:

- Policy consulting

- Strategy consulting

- Financial advisory

- Market intelligence

RECENT CORPORATE EVENTS COMPANY OVERVIEW

• ECLAREON-CREARA

• Grid Parity Monitor (GPM)

- Introduction

- Definitions and Methodology

- Results (Europe and Asia)

- Conclusions

Agenda

4

PV “grid parity” is the moment when the cost of generating PV

electricity is equal to the price paid for grid electricity

For the sake of simplicity

this report compares PV

LCOE with retail electricity

prices

In reality, depending on the

local self-consumption

regulation, a part of the PV

generation might be lost or

valued at a lower rate (100%

self-consumption ratios are

not attainable)

Note: * Levelized Cost of Electricity

Source: CREARA analysis

INTRODUCTION

Grid electricity price

PV electricity cost (LCOE*)

EUR ct /

kWh

Grid Parity

Years

Simplistic Illustration of PV Grid Parity

• Grid electricity is cheaper than

PV-generated electricity

- PV needs support

mechanisms (FiT, tax credit,

etc.)

• PV-generated electricity is

cheaper than grid electricity

- It is more convenient to self-

consume PV electricity than

to buy electricity from the

utility

5

The PV Grid Parity Monitor may well be one of the most

comprehensive analyses of PV grid parity to date

INTRODUCTION

Overview of PV Grid Parity Monitor

Objective

• To analyze the proximity of grid parity from the viewpoint of a residential consumer

- Total final costs of generating PV electricity with a 3kW/3.3kWp PV system are compared with

residential retail electricity prices

Methodology • It is based on a rigorous and transparent methodology

- This presentation includes a summary of the main assumptions and considerations

Geographical

Focus

• 5 potential markets in Europe: France, Germany, Italy, UK, and Spain

• 7 promising markets outside Europe: Australia, Brazil, California, Chile, Japan, Israel, and

Mexico

Frequency • It is recurrent: it will be updated every year to show the evolution of PV grid parity proximity

Inputs

• It uses real and up-dated data as inputs, not estimates

- Includes turnkey quotations of local PV installers from each of the countries under study

• It includes specific and detailed information per country (and city, when applicable)

- For example, the discount rate, retail electricity prices, and inflation

Source: CREARA

6

The PV Grid Parity Monitor is sponsored by renowned international

companies

Gold Sponsor

INTRODUCTION SPONSORS

7

The PV Grid Parity Monitor is supported by relevant partners

Partner Associations

Technical Partners Supported by

INTRODUCTION PARTNERS

8

LCOE of a PV system refers to the constant and theoretical

cost of generating PV electricity over the PV system lifetime

DEFINITIONS & METHODOLOGY

0

200

400

600

800

1.000

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

0

10

20

30

40

50

60

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

EUR ct /

kWh

EUR

8,800

9,000

Indicative Total Cost of a Small-Scale PV System

PV LCOE of the PV System


• PV Levelized Cost of Energy (LCOE)

accounts for all costs associated with a PV

system over its life

- These may include initial investment, O&M,

taxes, debt service, among others

• It assumes a constant value per year and is

expressed as cost per kWh

- It incorporates total PV electricity generated

over the system’s lifespan

• It considers the return required from the

investment, to discount future costs (and

production) to present

Initial Investment

Operating Expenses

Key:

9

For a specific PV system, PV LCOE is fixed as soon as the PV

system is built, but grid electricity prices are likely to increase

LCOE of PV Technology vs. Grid Electricity Price

0

5

10

15

20

25

30

2009S1 2009S2 2010S1 2010S2 2011S1 2011S2 2012S1

Years

EUR ct/

kWh

LCOE of PV technology


0

10

20

30

40

50

60

70

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

EUR ct/

kWh

Years of operation of the PV system


LCOE of a specific PV system

installed in S1 2012

LCOE of A SPECIFIC PV System Installed S1 2012 vs. Grid Electricity Price


DEFINITIONS & METHODOLOGY

10

11

RESULTS

Grid Parity proximity and regulatory support (mainly via net

metering or net billing) vary significantly from country to country

Positioning Matrix of the countries analyzed

0,0

0,2

0,3

0,5

0,6

0,8

- + Regulatory support to PV self-consumption

-

+

Gri

d P

ari

ty P

rox

imit

y

Australia

Brazil

Chile

France

Germany Italy Mexico

Spain

UK

California

Israel

Japan

Note: Data of 1st semester 2014

Source: CREARA Analysis

RESULTS BRAZIL

In Brazil, the reduction of electricity tariffs has pushed PV grid

parity further away

Note: * Compound Annual Growth Rate


BRL ct/

kWh

Standard Tariff

Grid tariffs

PV LCOE (avg.) -14.8%

-8.4%

BRL ct/

kWh

Standard Tariff

Grid tariffs


-6.2%

Past evolution of grid electricity price and PV LCOE

(SAO PAULO)


(ITACARAMBI)

• While in São Paulo PV

technology is still far from being

competitive against grid

electricity, in Itacarambi grid

parity could be reached sooner

- High installation prices and a

high discount rate still prevent

PV technology from being

competitive against grid

electricity

• The recently approved net-

metering regulation seems an

excellent instrument to foster the

PV self-consumption market

Assessment of Brazilian regulatory framework

for PV self-consumption

12

CAGR*

S1'09-S1'14

CAGR*

S1'09-S1'14

0

50

100

150

200

250

300

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1

0

50

100

150

200

250

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1

RESULTS CHILE

PV Grid Parity has already been reached in the residential

segment, albeit to different extents in different locations of Chile

CLP/

kWh

Standard Tariff

Surcharge tariff (Winter)

Grid tariffs


-9.3%

-8.1%

CLP/

kWh

Standard Tariff

Surcharge tariff (Winter)

Grid tariffs


-6.7%

-5.5%


(SANTIAGO)


(COPIAPÓ)

• Full Grid Parity has been reached

in Northern Chile, whilst in other

locations with lower irradiation

only partial grid parity has been

reached

- In Santiago, Grid Parity is only

partial since PV LCOE is only

competitive with the rate

applicable to excess

consumption in winter

• The net billing regulation, which

has recently been implemented

is, on a first evaluation, a proper

incentive to generate a PV self-

consumption market

Assessment of Chilean regulatory framework




13

CAGR*

S1'09-S1'14

CAGR*

S1'09-S1'14

0

50

100

150

200

250

300

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1

0

50

100

150

200

250

300

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1

RESULTS FRANCE

Low electricity prices still prevent Full Grid Parity from being

reached in France

EUR ct/

kWh

Standard Tariff

Grid tariffs


7.7%

4.9%

EUR/

kWh

Grid tariffs



(PARIS)


(MARSEILLE)

• Low electricity prices still

prevent Full Grid Parity for being

reached in France

• Currently, FiTs in France do not

incentivize the PV self-

consumption market

- BIPV systems are being

fostered over BAPV

- Self-consumption will gain

relevance provided that FiTs

are being reduced and

electricity becomes more

expensive

Assessment of French regulatory framework




14

CAGR*

S1'09-S1'14

CAGR*

S1'09-S1'14

0

10

20

30

40

50

60

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1

Peak Tariff

Off-Peak Tariff 9.4%

0

5

10

15

20

25

30

35

40

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1

Standard Tariff

7.7%

4.9%

Peak Tariff

Off-Peak Tariff 9.4%

RESULTS GERMANY

Despite the low irradiation levels in Germany, full grid parity has

been reached throughout the country

EUR ct/

kWh Standard Tariff

Peak Tariff

Grid tariffs


7.7%

9.1%

EUR ct/

kWh Off-Peak Tariff Standard Tariff

Peak Tariff

Grid tariffs


9.4%

10.4% 12.5%


(BERLIN)


(MUNICH)

• Low PV installation prices, a low

discount rate and high retail

electricity prices compensate low

irradiation levels for Germany to

reach full Grid Parity in the

residential segment

• The EEG FiT scheme fosters the

self-consumption market in an

efficient way, as FiTs for small-

scale systems are currently lower

than the retail electricity price

Assessment of German regulatory framework




15

CAGR*

S1'09-S1'14

CAGR*

S1'09-S1'14

0

10

20

30

40

50

60

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1

0

5

10

15

20

25

30

35

40

45

50

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1

RESULTS ITALY

In Italy, full grid parity has been reached and the market is driven

by a regulation that fosters self-consumption

EUR ct/

kWh

Grid tariffs PV LCOE (avg.) -16.7%

EUR ct/

kWh



(ROME)


(PALERMO)

• Thanks to competitive PV system

installation costs, high irradiation

levels and expensive grid

electricity prices, PV Grid Parity

has already been reached in the

residential segment in Italy

• The Scambio Sul Posto (SSP) net-

metering mechanism allows users

with PV systems under 200 kW to

obtain credits

- It is expected that the

methodology used to calculate

the credit amount will be

modified soon

Assessment of Italian regulatory framework for

PV self-consumption

Note: * Tiers correspond to different consumption levels **Compound Annual Growth Rate


16

CAGR**

S1'09-S1'14

CAGR**

S1'09-S1'14

0

5

10

15

20

25

30

35

40

45

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1

Standard Tariff (tier 2)*


Standard Tariff (tier 4)* 2.0%

3.2%

1.7%

Standard Tariff (tier 1)* -3.5%

0

5

10

15

20

25

30

35

40

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1



Standard Tariff (tier 4)* 2.0%

3.2%

1.7%

Standard Tariff (tier 1)* -3.5%

RESULTS MEXICO

In Mexico, PV is already competitive against grid electricity for

DAC consumers

MXN/

kWh

Standard Tariff

DAC Tariff

Grid tariffs


8.9%

7.8%

MXN/

kWh

Standard Tariff

DAC Tariff


8.9%

5.7%


(MEXICO CITY)


(HERMOSILLO)

• An excellent opportunity exists for

PV technology among DAC

consumers

- DAC consumers are

households with high electricity

consumption (about 500,000

potential clients in Mexico)

• Mexico´s Government introduced

at the end of 2013 an in-depth

energy reform

- The market is now open to the

private sector for both energy

generation and energy retailers,

an opportunity for the expansion

of the PV market

Assessment of Mexican regulatory framework




17

CAGR*

S1'09-S1'14

CAGR*

S1'09-S1'14

0

1

2

3

4

5

6

7

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1

0

1

2

3

4

5

6

7

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1

RESULTS SPAIN

Grid parity has been reached in Spain, but regulatory support is

still needed to develop the market

EUR ct/

kWh

Off-Peak Tariff

Standard Tariff

Peak Tariff


7.9%

7.8%

4.4%

EUR ct/

kWh

Off-Peak Tariff

Standard Tariff

Peak Tariff

Grid tariffs


4.4%

4.4%

1.1%


(MADRID)


(LAS PALMAS)

• Grid parity has been reached both

in Continental Spain and in the

Canary Islands

- PV is already competitive

against the standard (no TOU)

retail electricity price

- The perception on regulatory

risks has negatively impacted

grid parity proximity

• It is essential that the Spanish

Government publishes a regulation

to enable PV self-consumers to

feed their excess generation into

the grid in exchange for a

compensation

Assessment of Spanish regulatory framework




18

CAGR*

S1'09-S1'14

CAGR*

S1'09-S1'14

0

5

10

15

20

25

30

35

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1

0

5

10

15

20

25

30

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1

RESULTS UK

PV technology is still far from being competitive against grid

electricity prices in the residential segment in the UK

GBP ct/

kWh

Off-Peak Tariff

Standard Tariff

Peak Tariff

Grid tariffs


1.4%

0.5%

2.1%

GBP ct/

kWh

Off-Peak Tariff

Standard Tariff

Peak Tariff

Grid tariffs


-0.6%

-0.7%

0.8%


(LONDON)


(PLYMOUTH)

• In the UK, PV Grid Parity is still far

from being reached

- PV LCOE has experienced a

considerable decrease since

2009 but system prices have

stagnated in the last two years

• The FIT scheme for small-scale PV

systems fosters the PV self-

consumption market in an efficient

way

Assessment of UK’s regulatory framework for

PV self-consumption



19

CAGR*

S1'09-S1'14

CAGR*

S1'09-S1'14

0

10

20

30

40

50

60

70

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1

0

10

20

30

40

50

60

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1

RESULTS USA

In California, Partial Grid Parity has been reached in the residential

segment

USD ct/

kWh

BaseTariff

Standard Tariff

High Peak Tariff

Grid tariffs


3.1%

3.7%

4.4%

USDct/

kWh

Off-Peak Tariff Standard Tariff

Peak Tariff

Grid tariffs


1.4%

4.4% 5.1%


(LOS ANGELES)


(SAN FRANCISCO)

• Both in Los Angeles and San

Francisco, PV LCOE of the most

competitive quotations is already

lower than the highest TOU

electricity rates

- PV self-consumption is an

attractive alternative for

consumers with a relatively high

proportion of electricity demand

during peak hours

• The Californian net-metering

system is a trendsetting policy on

how to promote PV self-

consumption in a cost-effective

way

Assessment of Californian regulatory

framework for PV self-consumption



20

CAGR*

S1'09-S1'14

CAGR*

S1'09-S1'14

0

5

10

15

20

25

30

35

40

45

50

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1

0

10

20

30

40

50

60

2009S1 2010S1 2011S1 2012S1 2013S1 2014S1

CONCLUSIONS

Main conclusions

• According to the study, in the first semester of 2014, the cost of PV generation as expressed by the

LCOE (Levelized Cost of Electricity) in the residential segment decreased in all of the cities

analyzed

- From a 28% annual decline in Australia to 5% in Spain, mainly as a result of the decreasing trend of

the cost of PV systems, driven by lower equipment prices (across the board) and increased

competition in emerging markets

• Results show that full grid parity has been reached in several countries

- This is the case of Chile (Copiapó), Germany, Italy, and Mexico for DAC consumers

• Even if Grid Parity (defined as the moment when PV LCOE equals retail electricity prices) has been

reached, regulatory cover is still necessary to foster the PV self-consumption market

- The Spanish case illustrates this rule very well: grid parity has been reached but with no

governmental support the market has failed to develop

• As 100% self-consumption is not likely to happen for a residential consumer, a proper valuation of

the excess of energy has to be performed to properly understand the business case of a specific

consumer

Source: CREARA

21

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The GPM is a Series of analyses that show the evolution of PV

competitiveness in different consumer segments: residential,

commercial, and utility-scale

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OVERVIEW of GPM reports

October‘12 May‘13 Feb’ 2015

March’14 May’15

Aug ’14 July’15

1ST ISSUE 2ND ISSUE 3RD ISSUE

RESIDENTIAL

COMMERCIAL

UTILITY SCALE

March’15 CHILE

April’15 MEXICO

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photovoltaic grid parity monitor for residential consumers - issue 3b

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