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Solar Energy Society of AlbertaThe Sun is Rising in Canada

2013-09-26

Jared Donald, P.Eng, MBAPresident

Conergy Canada

1

Introduction to Conergy

Introduction to CanSIA

Global energy growth installed capacity of PV – development and future forecast

Current costs of solar PV

What this all means for Alberta

Drivers for solar in Alberta

LCOE

Recent Alberta pool prices

Premium value of solar in Alberta

Solar can be the lowest cost option for some Alberta businesses

Example of fully loaded “value” of solar from NE USA

What will it take for solar to bring the value to Alberta

Table of Contents

2

Conergy facts and figures

$ 660 m turnover in 201242Countries 29Branches 5Continents around 1,200Employees

2Module factories 2Mounting systems productions2.5 Gigawatts of solar energy 500Megawatts of solar parks 14Years of

experience

O U R W O R L D I S F U L L O F E N E R G Y

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Conergy‘s global footprint

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National trade association for the Canadian solar industries:| Representing approximately 650 corporate Members nationwide, with 50

Members based in Alberta. Our mission and strategic objectives:| Facilitate and promote the responsible and sustainable growth of solar

energy across Canada through strengthen the Canadian solar industry, developing solar markets, and removing market barriers.

CanSIA membership:| Provides value in three key areas: policy and advocacy, industry capacity

development, and profile building and networking.

Introduction to CanSIA

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| Ontario Policy Activities and Consultations | Long Term Energy Plan (LTEP) (PV + ST)| Conservation First (PV + ST)| Regional Planning and Siting consultation| Large Renewable Procurement )(LRP) | FIT 3 Program (DRAFT) Rules consultation| Proposing Solar PV Distributed Generation Task Force| Ontario Energy Board: Smart Grid Advisory Committee

Policy and Research Activities

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Policy and Research Activities

| National Policy and Research Activities | Alberta: Alternative and Renewable Energy Framework (PV + ST)| Quebec: Public consultation on energy issues| Nova Scotia: Community FIT (consultation expected) | CSA: Product and performance standards committees| Solar Thermal Position Paper for Policy Makers

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0

200

400

600

800

1000

2000 2010 2020 2030 2040 2050Years

OthersPVSolar ThermalBioWindNuclear PowerGasCoalOil

Prim

ary

ener

gy c

onsu

mpt

ion

EJ/a

Source: RWE Energiebericht

Global energy demand is ever-increasing

8Source: US Energy Information Administrationc

Global energy demand is ever-increasing

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Annually installed Gigawatts peak worldwide

Global installed capacity is now >100GW

Source: IHS Research

68

20

2832

35

42

48

2008 2009 2010 2011 2012 2013E 2014E 2015E

10

Global renewable energy production by region

Source: IEA

11

Overview LCOE vs. energy tariffs in Europe

Private homes incl. all taxes

TWh500 TWhYearly energy demand

Source: Global Engineering & Services, Corporate Business Development

1212ENF China Price Report – September 2013

Solar PV is making up a significant portion of all new RE generation because of the rapidly dropping cost curve

1313Navigant Consulting, Inc., Photovoltaics in Ontario, January 2009

$1.75/W to $3.25/W

Installed costs of solar are dropping much faster than market estimates only 4 years ago

14

Commercial Projects in Western Canada

Current installed PV totals around 3.2 MW in Alberta

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"It has been our objective to continue to make progress on environmental enhancement for two reasons. One, because we have a responsibility as global citizens and two because we need to have the social license to continue to develop our resources"

- Hon. Joe Oliver, Canada’s Minister of Natural Resources (CBC, September 2013).

i) Social License ii) Reducing GHG emissions and iii) Renewing Infrastructure.

There are strong policy drivers for greater PV adoption in Alberta

i)

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i) Social License ii) Reducing GHG emissions and iii) Renewing Infrastructure.

There are strong policy drivers for greater PV adoption in Alberta

ii)

Pembina Institute

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Largest expected reduction in emissions was to come from carbon capture and storage – of the initial four pilot projects funded two were cancelled in 2012

www.pembina.org/pub/2295 ; http://globalnews.ca/news/400661/alberta-not-meeting-governments-own-emissions-targets/

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i) Social License ii) Reducing GHG emissions and iii) Renewing Infrastructure.

There are strong policy drivers for greater PV adoption in Alberta

Infrastructure Renewal: “The electricity sector is expected to invest$293.8 billion from 2010 to 2030 to maintain existing assets and meetmarket growth” – Conference Board of Canada, 2011.

And Western Canada is no different:

• AB: 17 coal-fired plants close over next 15 to 20 years (Calgary Herald, 09/2013).

• BC: Premier Clark rules out 26.4% hydro rate increase (Globe & Mail, 09/2013).

• SK: Carbon Capture & Storage project complete but $3m over budget (Leader Post, 09/2013).

• MB: Without $20 billion mega project Manitoba Hydro can’t meet demand (CBC, 08/2013).

iii)

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Canadians feel thatreducing fossil fuel reliance(66%), creating more cleanenergy jobs (74%) andreducing carbon pollution(67%) are top or highpriorities.

- Harris Decima (July, 2012)

83% of Canadians strongly orsomewhat agree with settingaside a portion of our oilwealth to help us prepare for aclean & renewable future.

- Harris Decima (July, 2012)

92-97% strongly orsomewhat support solar toproduce electricity (withonly 3-5% opposing).

- Innovative Research Group, Inc. (2011, 2012) & Ipsos Reid (2008, 2009, 2010):

In Canada solar energy has broader social acceptance than any other energy source.

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At the Solar West trade show in Calgary on October 4th CanSIA will present early details of a policy paper that will go to government which include many of these items…

Solar West 2013: Morning Plenary, 09:15 to 10:30, Friday October 4

The role of solar energy is accelerating in Western Canada and momentumand industry capacity is building rapidly. But at the provincial level, whatare the policies and programs that will move solar energy technology fromthe periphery into the mainstream?

The Solar West 2013 morning plenary session will feature industry leaders,experts and key representatives of government to discuss how from apolicy perspective, Western Canada can harness the region's largestproven energy reserve and create a significant developed resource. Thesession will address questions including:

• What is the status of renewable energy policy in the region?• What key drivers are most affecting energy policy decisions today?• What are the available solar energy policy options and are they suitable?• How could new solar energy policy be implemented?

LCOE / Grid Parity of PV-Systems will change the PV market

| Strong cuts in feed-in tariffs around the world and continuing decrease in PV system prices lead to a faster change of the global PV market as originally expected.

| Investments in PV systems will amortize faster by economization of self-produced and consumed kWh instead of fed-in kWh.

| This will further support a trend towards higher self-consumption via optimized PV systems designs, intelligent management of energy consumption and integration of energy storage devices.

„Max kWp“ „Optimized kWh“

Source: Conergy Sytem Engineering

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$

kWh

The calculation of LCOE considers all costs of electricity production with a PV system over lifetime

The LCOE formula made simple

RESIDENTIALRESIDENTIAL COMMERCIALCOMMERCIAL INDUSTRIALINDUSTRIAL

Self-Consumer ("Prosumer") Utility / IPP

Residential electricity retail

price

Residential electricity retail

price Commercial

electricity priceCommercial

electricity price

Generation cost (LCOE) of

traditional peak power plants + cost of CO2

Generation cost (LCOE) of

traditional peak power plants + cost of CO2

BENCH-MARKSBENCH-MARKS

Yearly running expenses

Projected energy yieldwith degradation

LCOE PV kWhLCOE

PV kWh

Source: Global Engineering & Services, Corporate Business Development

Initial invest

Discounting term

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Systemprice$/kWp

Specific yield

kWh/kWp

O/M Costs$/kWp/a

Operating timeyears

The sensitivity of the LCOE input parameters is high – variance of the assumptions influences the LCOE

Financing(%, WACC, etc.)

LCOEQuality

& Service

| Location specific: Irradiance, angle, azimuth, shading, etc.

| System specific: Performance Ratio, degradation, etc.

| Reliability and Durability| Service Concept & Service

Performance | Financing conditions and services

| Attractive pricing

LCOE influencing input parameters

Levelized Cost Of Electricity (LCOE) as function of Specific Yield and Turnkey System Price

Operating time 25 years, degradation: 0.5%/a (c-Si technology), O&M costs 25 €/kWp/a + 2% p.a., 100% own capital, discounting-factor: 5.2%

GER

N - AFRAB

Source: Global Engineering & Services, Corporate Business Development

$1.35/Wp

$1.62/Wp

$1.89/Wp

$2.16/Wp

$2.43/Wp

$2.70/Wp

$2.43/Wp install $0.16/kWh LCOE

Diesel fueled electricity generation

$1.82/Wp install $0.13/kWh LCOE

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Installed costs of solar are dropping much faster than market estimates only 4 years ago

Navigant Consulting, Inc., Photovoltaics in Ontario, January 2009

$1.75/W to $3.25/W

Scale is required to drive costs down – sales acquisition, per project profit, project administration…

DOE SunShot Initiative

27Source: Compiled from historical ‘pool price’ reports from the Alberta Electricity System Operator. Available at: http://ets.aeso.ca/

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Solar provides valuable peak hour support to Alberta system

Average on-peak electricity prices in Alberta and Ontario

Source: May 2013 – National Energy Board (Canada)

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Pool Price vs. Retail Price

Near FutureSolar is getting much closer to being economic on utility scale projects trading in the power pool, but we are not quite there – need something else

Economically viable todayLarge remote power applications using diesel as primary fuel source

Highly positive returns on fuel cost savings only

Commercial and industrial consumers with daytime and weekend load profiles can purchase solar PV today at price equivalents below what they are currently paying for electricity

Self Consumption is key Finance mechanisms are in place to allow day 1 cash flow

positive projects

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New architecture – mini-grid for diesel offset

Source: SMA Fuel Save Controller 1.0

31Source: IEA PVPS Task 11 - PV Hybrids and Mini Grids

New architecture – utility mini-grid

Diesel Offset is perfect market today and provides excellent returns today

$0.35/kWh fuel cost$3/W installed costStandard O&M and insurance12.7% IRR and 7 year payback PLUS future capital cost offset

Applications that make sense today:• Work camps• Mining operations• Remote communities

Solar is cost competitive today, but needs to be behind the meter for self consumption

Because it defines what energy demand can be supplied by the PV system and how much energy is left to be fed into the grid.

Because (in combination with the generation profile of the PV plant) it defines two important parameters characterizing the effectiveness of the PV system in its residential or commercial application.

In the past only the self-consumption was an important parameter as every self consumed kWh was rewarded under most incentive programs.

But today with decreasing incentives both parameters must be considered in order to optimize a PV plant for a specific residential or commercial application.

Self-consumption and Autarky are not applicable for solar powerplants!

SELF-CONSUMPTION AUTARKY (LEVEL of)(aka. Self-Sufficiency)

Source: Global Engineering & Services, Corporate Business Development

Importance of Self-consumption – behind the meter

| SC relates self-consumed energy to the generated pv energy.

| SC determines what energy proportion you can use from thesystem.

Egrid

Esv

EPV

Ees

SC =E

Esv

PV

Esv– self consumed energy

EPV – generated pv energy

15-20 $ct/kWh 8-15 $ct/kWh

Esv Ees

35%

Source: Global Engineering & Services, Corporate Business Development

How can I optimize Self-consumption?

1. Decrease PV-System size

Increases Self-consumption

Decreases Autarky

2. Use load management

Simple (Manually, radio controlled energy sockets, etc.)

Intelligent residential appliances (white ware becomes “smart”)

Integrate new technologies to increase consumption (heat pumps, water heating)

Home Energy Management System (HEMS)

3. Integrate energy storage systems

Battery-System (Li-Ion or Lead-Acid)

Heat storage (e.g. by heating rod)Source: Global Engineering & Services, Corporate Business Development

65%

Aut

arky

resi

dent

ialh

ome

0%

100%

Energy Management Systems (EMS) completely changes the value proposition for solar and other intermittent sources

2012 2013 2014 2015 2016 2017 2018 2019 2020

Tech

nica

l Sol

utio

ns

Simple Load-Management (manual, controlled energy sockets, etc)

First intelligent „white ware“

First residential storages

Integration of EMS with other smarthome applications

Premium „white ware“ is „smartgrid ready“

Standardization of protocols

Residential storage becomes ready for mass market

Sto

rage

Lo

ad m

anag

emen

t

Price degression for Li-Ion storage

1300 $/kWh 650 $/kWh 400 $/kWh 250 $/kWh

30%35%

55%

80%

E-Mobility Storage

Source: Global Engineering & Services, Corporate Business Development

How Conergy Analyses Self-consumption

Source: Global Engineering & Services, Corporate Business Development

If the conditions are right, large scale microGen projects are in the money now

1. Load profile that fits solar production profile

2. Site has sufficient ability to support PV system without upgrades

3. Building owner can commit to at least 15 years on an energy contract

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Levelized value of solar ($/MWh), by location

Source: The Value of Distributed Solar Electric Generation to New Jersey and Pennsylvania Clean Power Research

“The Value of Distributed Solar Electric Generation to New Jersey and Pennsylvania”

40Source: The Value of Distributed Solar Electric Generation to New Jersey and Pennsylvania Clean Power Research

“The Value of Distributed Solar Electric Generation to New Jersey and Pennsylvania”

• Solar is seeing significant growth across the world

• Prices are decreasing at astonishing rate, but leveling out now

• LCOE for solar in Alberta is at retail grid parity TODAY for very specific applications

• Diesel offset systems show great financial returns TODAY

• Solar energy on Alberta grid is more valuable than other generation sources given current pool dynamics

• Greatest future cost reductions will occur through installation scale and industry learning

• Energy Management Systems are getting close to being market ready

• Solar provides real value in incremental load growth / offset for system planners

• Social license for Alberta

Solar will be an important part of Alberta’s generation mix and there are real opportunities today, but support is needed to realize potential

• Policy framework recognizing the benefits of solar PV

• Utility scale

• Micro-Generation

• Streamlined permitting processes (really good already for small scale,

especially in municipalities like Calgary)

• Recognition and adoption or adaptation of utility business models as

behind the meter installations grow (not unlike storage or even energy

efficiency)

What is needed to grow the PV sector in Alberta

Jared DonaldPresident

Conergy Canadaj.donald@conergy.ca

888.489.3701, ext. 88004386

O U R W O R L D I S F U L L O F E N E R G Y