Financing PV technology

Eleni Despotou/Pieterjan VanbuggenhoutEuropean Phtotovoltaic Industry Association

Brussels, 20 June 2011

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Outline

• Photovoltaics: state-of-the art

• The Solar Europe Industry Initiative

Photovoltaics: State-of-the art

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2010… an extroardinary year for photovoltaics

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Global breakdown in 2010

Global cumulative installedcapacity in 2010 => 39.5GW

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Market evolution – different scenarios until 2020

36 GW/y - 12 %

17 GW/y - 6 %

10 GW/y - 4 %

2.4 %

1.15 %

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The real generation cost of photovoltaic electricity:• Capital expenditure (€)• Operation & Maintenance (€)• Total Production (kWh)

Levelised Cost of Electricity (LCOE): €/kWh

What about the cost?

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LCOE [€nominal/kWh]0.40

0.35

0.30

0.25

0.20

0.15

0.10

0.05

0.002020

0.19

0.08

2019

0.19

0.08

2018

0.20

0.08

2017

0.21

0.09

2016

0.22

0.09

2015

0.24

0.10

2014

0.25

0.16

0.11

2013

0.27

0.12

2012

0.29

0.13

2011

0.32

0.14

2010

0.36

The generation cost of PV in Europe is expected to decline by around 50% until 2020

European PV LCOE range projection 2010 – 2020

Source: EPIA/ A.T. Kearney / Phoenix Solar LCOE model; various input sources

Band of LCOE reflects:• Four different system

size segments• Crystalline Silicon and

Thin Film technologies• Differences in national

installed system and operations cost

• Differences in national irradiation

• Different WACC for different countries considered

• VAT for residential segment

Thanks to Phoenix Solar for granting permission to EPIA to use existing cost model !

The Solar Europe Industry Initiative

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Goal of the Solar Europe Industry Initiative

Source: EPIA and EU PVTP, SEII Implementation Plan 2010-2012

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Four different project types

1. Industrial technology development

2.Manufacturing facilities

3.Generation capacities

4.Solar resource forecasting and monitoring

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TYPE 1: Industrial technology development

What is it?• pilot-line demonstration• equipment and product standardisation • building-integrated photovoltaics (BIPV)• novel technologies• technical concepts for very high levels of grid penetration• printed photovoltaics• novel applications of nanotechnology for enhanced performance• “PV/smart-grid units”

Financial details• 100% equity or grants • 5-50 M€ per project• payment upfront, exit in 5-7 years

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TYPE 1: Industrial technology development

Typical issues• Difficulty for start-ups to raise capital• Technology development risk

How to tackle this?• Joint private/public R&D programs• Grants• ARPA-E program in the USA (see http://www.arpa-e.energy.gov):

financing dependent on proven ability to attract private capital for next phase

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TYPE 2: Manufacturing facilities

What is it?• new manufacturing facilities• strong impact on the economics of solar PV • strategic relevance for the presence and competitiveness of the European

manufacturing industry

Financial details• Corporate Finance: Equity/Debt ratio - 20/80 or higher• 50 to 250 M€• 10 to 15 years typically

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TYPE 2: Manufacturing facilities

Typical issues• Availability of debt • High cost of capital• Price pressure, reduced margins and missed sales targets. In the worst case

scenarios losses could amount to values in the order of 90% of the asset.

How to tackle this?• Soft or competitive loans• Loan guarantees• Other forms of securitisation

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TYPE 3: Generation capacities

What is it?• for technologies ready for commercialisation but with little or no field track

record, for which the perceived financial risk is still high• portfolio-of-installations approach to realise more installations in different

locations

FINANCIAL DETAILS• Project Finance: Equity/Debt - 30/70 or higher• 10 up to 120 M€• 20 years typically

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TYPE 3: Generation capacities

Typical issues• Debt for technologies which are considered not ‘bankable’ is either too

expensive or not available• Returns for equity investors on these projects are likely to be uneconomical

due to lower leverage• Technology risk: lower performance ratio than expected in the budget,

consequently lower energy, hence cash, generated by the project (worst-case losses are expected to be less than 30%)

How to tackle this?• Different financial solutions, such as soft loans or loan guarantees• Most banks would accept a 1-2 year successful operation as a sufficient

track record• Revolving facilities in order to make the financing instruments as effective

as possible

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TYPE 4: Solar resource forecasting and monitoring

What is it?• solar resource evaluation (also by means of real-time satellite data)• solar irradiation prediction models • statistical methods for PV plant behaviour prediction exploiting also artificial

intelligence (AI) techniques• fault detection techniques based on both deterministic plant modelling and

AI

FINANCIAL DETAILS• Corporate Finance + EU grants: Joint private/public partnership. EU Grants

50-70% of the investment costs should be expected.• 10 to 25 M€• typically 3-5 years

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TYPE 4: Solar resource forecasting and monitoring

Typical issues• Competition with open source similar products• What is the real interest to pay for these services? related to the

respective regulatory environment

How to tackle this?• Joint private/public partnership• EU grants of 50-70% of the investment costs

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www.epia.orgCredits pictures:BP Solar, Concentrix, First Solar,

Isofoton ,Photowatt, Siliken

Text: -Guido Agostinelli (GoodEnergies)-Fabrizio Bonemazzi (Enel Green Power)-Wim Sinke (EU PVTP)-Pieterjan Vanbuggenhout (EPIA)

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Global market forecasts until 2015

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The underlying installed system prices could go down by 40% in the coming decade

Projection of European installed PV system reference price range1)

(2010 to 2020; weighted technology mix per segment)

Installed system prices

[€nominal/Wp]

2020

1.30

2.08

1.34

2.16

2018

1.40

2.24

2017 2019

1.46

2.34

2016

1.521.70

2.70

2013 2015

2.44

1.81

2.84

2012

1.931.60

2011

2.07

3.18

2010

2.26

3.41

2.56

2014

3.00

1) Range across segments and PV technologies (c-Si and thin-film); includes harmonized, competitive standard margins for modules, BOS and installations; incl. administrative cost; VAT excluded

Source: EPIA/ A.T. Kearney LCOE model; various input sources

∆: - €/W 0.96 to- €/W 1.33

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Evolution of Global Annual PV Market

16.6 GW

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R&D across the entire PV value chain

Other BoSOther BoSInverterInverterModuleModule

Silicon / Silane

Silicon / Silane

Cell Cell WaferWaferPV Manu-facturing

Technology production

PV Manu-facturing

Technology production

PV system production

Decom-missioning& repower-

ing

Decom-missioning& repower-

ing

Power salesand VA services

Power salesand VA services

Operation & Mainte-nance

Operation & Mainte-nance

EPC / Installation

EPC / Installation

Site & Project

develop-ment

Site & Project

develop-ment

Project financeProject finance

PV project development and operation

• Thin film module• Thin film module

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A wide range of technologies…

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… for a large number of applications

Ground-Mounted PV

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Conditions for sustainable market growth

EPIA advocates for:

www.epia.org/publications

1 - A sustainable, market driven, support scheme

2 - Easy and transparent administrative process

3 – Fast and efficient gridconnection schemes