2013-04-02 Minnesota Legislature Zindler 1

SOLAR MARKET UPDATE
MINNESOTA LEGISLATURE TESTIMONY
ETHAN ZINDLER, HEAD OF POLICY ANALYSIS 2 APRIL 2013, ST. PAUL, MN
/ / / / / / // / / /// / / / / / / / / / / / / / / / / / / /
MINNESOTA STATE LEGISLATURE, 2 APRIL 2013
BLOOMBERG NEW ENERGY FINANCE: 200 STAFF IN 13 OFFICES WORLDWIDE
London San Francisco
Europe (88)
Zurich New Delhi
Asia Pacific (24)

Beijing
North America (39)
New York Washington
Tokyo Hong Kong
Africa (29)
South America (5)
Singapore
Sao Paulo Cape Town Sydney
Objective: Be the definitive source of insight, data and news on the transformation of the energy sector.
/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013
Clean energy investment overview
Global solar trends
US solar trends
GLOBAL TOTAL NEW INVESTMENT IN CLEAN ENERGY

200412 ($BN)
20% $302bn -11%
$269bn
34%
$251bn
-2% 16%
45% $164bn $191bn $187bn
43%
48% $80bn $54bn
$114bn
2004
2005
2006
2007
2008
2009
2010
2011
2012
Note: Includes corporate and government R&D, and small distributed capacity. Adjusted for re-invested equity. Does not include proceeds from acquisition transactions
Source: Bloomberg New Energy Finance
NEW INVESTMENT IN CLEAN ENERGY BY TRADE BLOCK

200412 ($BN)
3% 14% 17% 20% 22% 25% 7% 5% 6% 7% 6% 6% 6% 9%
27%
26%
27% 35%
84% 77% 74% 73% 68% 66%
ROW BASIC OECD

68%
67% 57%
2004
2005
2006
2007
2008
2009
2010
2011
2012
Note: Excludes corporate and government R&D
NEW INVESTMENT IN CLEAN ENERGY BY SECTOR IN 2012 AND % CHANGE ON 2011 ($BN)
Solar Wind Biomass & Waste Small hydro Energy smart technologies Biofuels Geothermal Marine Other 9.03 7.35 3.24 2.81 1.58 0.19 0.06 76.56
137.68
-9%
-13% -28% 18% -33%
-50%
-41% 52% 84%
Note: Excludes corporate and government R&D
Global solar market trends
US solar market trends
DYNAMICS OF THE GLOBAL SOLAR SECTOR
Massive supply-demand imbalance with far more capacity available than

currently being demanded.
Plummeting equipment prices due to technology advancements and the

supply-demand imbalance.
Major demand coming from the EU in recent years with strong growth in
Japan (post-Fukushima) and China.
Commoditization of solar equipment with China now playing a dominant role

in manufacturing.
Consolidation, bankruptcies, and value destruction well underway. Trade skirmishes!
DEMAND VS. HISTORICAL AND PROJECTED MODULE PRODUCTION (GW)

60
Current cell manufacturing capacity Historical Future
50
40 30 20 10 2006 2007 2008 2009 Supply - crystalline silicon Supply - thin film non-silicon Demand - optimistic
Note: Supply scenarios based on continued 2012 utilisation rates.
2010
2011 2012 2013 2014 Supply - thin-film silicon Demand - conservative
2015
PV INSTALLATION BY YEAR, HISTORICAL AND CENTRAL FORECAST, 2007-2015 (MW)

Historical Forecast
52.1GW 45.6GW 36.7GW 28.7GW 30.2GW 18.2GW 6.6GW 7.7GW 2.8GW 2007 2008 2009 2010 2011 Western Europe Eastern Europe China India 2012 2013 Japan Rest of World 2014 USA 2015
Note: Few countries have yet finalised their 2012 data, hence the spread here. Table with all major countries in Appendix. The conservative forecast is the sum of the first quartiles of the spread between conservative and optimistic for each country.
Source: Grid operators, incentive programme administrators, industry associations, Bloomberg New Energy Finance
10
INSTALLED PV PER CAPITA, END OF 2012, CONSERVATIVE SCENARIO (W/PERSON)

450 400 350 300 Italy 250 Czech Republic 200 150 100 50 India 0 0 10,000 Bulgaria France Japan Denmark Portugal UK USA South Korea Canada Romania Netherlands 20,000 30,000 40,000 50,000 GDP per capita Belgium Germany
Greece
Spain
Australia
Israel
China
Note: GDP per capita adjusted for purchasing power, in 2011 $
Source: World Bank, Bloomberg New Energy Finance
11
ANNUAL COSTS OF TARIFFS AS SHARE OF GDP VS PV ELECTRICITY PRODUCTION AS SHARE OF CONSUMPTION, END OF 2011
Annual costs as share of GDP 0.45% 0.40% 0.35% 0.30% 0.25% 0.20% Spain
Czech Republic Germany
Italy
0.15% 0.10%
0.05%
Greece
Ontario France
0.00% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Share of PV electricity production of overall electricity consumption Bubble size representing 5GW cumulative PV capacity at end of 2011
Source: Bloomberg New Energy Finance, Eurostat, Canadian Statistics
12
CRYSTALLINE SILICON MODULE SPOT PRICE, 200812

($/W)
4.50 4.00
Four years
-75%
3.50
3.00
2.50
2.00 1.50 1.00 0.50
0.00 2008
2009
2010
2011
2012
Note: Prior to 11 July 2011 the index collated module prices without differentiating between mono and multi crystalline
Source: Bloomberg New Energy Finance Solar Spot Price Index
13
SPOT PRICE OF C-SI MODULES, 2 JANUARY 2012 4 MARCH 2013 ($/W)

1.2 1.0 0.8 0.6 0.4 0.2 0.0
09 Apr
23 Apr
13 Aug
27 Aug
10 Sep
07 May
21 May
24 Sep
26 Mar
12 Mar
08 Oct
22 Oct
05 Nov
19 Nov
03 Dec
17 Dec
31 Dec
13 Feb
27 Feb
11 Feb
2012
2013
Multicrystalline silicon module (c-Si)
Monocrystalline silicon module (c-Si)
Note: Dates represent first day of the week for which the price has been averaged, ie 8 August represents quote for the week 8-14 August. Data available here.
Source: Bloomberg New Energy Finance Module Spot Index
25 Feb
04 Jun
18 Jun
02 Jan
16 Jan
30 Jan
14 Jan
28 Jan
02 Jul
16 Jul
30 Jul
14
CHINESE MULTICRYSTALLINE SILICON MODULE PRICE BUILD-UP, MARCH 2013

S
0.094 Module 0.050 0.25 0.003 -0.03 -0.07
Spot price $0.68/W
Cell
Ingot & Wafer
0.13
$0.40/W
0.010 0.03
0.14 0.005
-0.08 0.06
$0.91/piece
Polysilicon
0.09
-0.04
$16.6/kg SG&A per W Best-in-class margin per W
0.03 Processing cost per W Depreciation per W
Note: Assumes 5.6g of silicon per watt of wafer. Processing cost based on SEC filings of quoted companies, publically available reports, various discussions and analyst estimates. SG&A represents sales, general, administration and R&D.
15
FORECAST COSTS FOR GROUND MOUNTED PV PROJECTS, 2010-2020 (2012 $/W)

3.24 0.18 0.41 0.50
2.65 0.18 0.41

0.50 0.21 1.35 1.59 0.15 0.32 0.27 0.12 0.73 1.55 0.15 0.31 0.26 0.11 0.72 1.52 0.14 0.30 0.25 0.10 0.72 1.47 0.14 0.29 0.25 0.10 0.70 1.40 0.13 0.28 1.34 0.13 0.28 0.23 0.09 0.61 1.28 0.13 0.27 0.23 0.08
0.30
1.85
0.24 0.09
0.65
1.23 0.12 0.26 0.22 0.08
1.19 0.12 0.26 0.22 0.08
0.57
0.54
0.52
2010
2011 2012 Module
2013 2014 2015 2016 2017 2018 Inverter Balance of plant EPC
2019 2020 Other
Note: Based on experience curves for each component. Methodology here http://bnef.com/Insight/1954 though charts updated January 2013
16
FORECAST COSTS FOR RESIDENTIAL PV PROJECTS, 2010-2020 (2012 $/W)

4.64 0.52 0.64 0.67 0.41 2.41 0.28 1.76 4.16
0.81
0.63 0.68 2.95 0.52 0.60 0.65 0.26 0.91 2.75 0.43 0.58 0.63 0.24 0.87
2.59 0.36
0.56
0.61
2.44 0.31 0.54 0.59 0.21 0.79
2.28 0.26 0.53 0.57 0.20 0.72
2.15 0.22 0.52 0.56 0.19 0.66
2.04 0.20 0.51

0.55 0.18 0.61
1.95 0.18 0.49 0.54 0.17 0.57
1.88 0.16 0.49 0.53 0.17 0.54
0.23 0.84
2010
2011 2012 Module
2013 2014 Inverter
2015 2016 BOP
2017 2018 EPC
2019 2020 Other
Note: Based on experience curves for each component. Methodology here http://bnef.com/Insight/1954 though charts updated January 2013
17
SMALL PV SYSTEM COST IN JAPAN, GERMANY AND CALIFORNIA, $/W

9.0 8.0 7.0
6.0
5.0 4.0 3.0 2.0
1.0
0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 Average sub-10kW German system cost Japanese residential system cost average Average California residential system cost Chinese multicrystalline silicon module price
Source: BSW-Solar, California Solar Initiative filings, JPEA, Bloomberg New Energy Finance
18
GLOBAL CRYSTALLINE SILICON CELL MANUFACTURING CAPACITY (MW/YEAR)

61.1GW
53.2GW
8,294
1,476 7,147
9,344 1,666 7,747 42,303
29GW
6,953 856 4,205 16,944
36,253
14.8GW
10.1GW
2.4GW
1,292 438 36
5.3GW
2,095 36 952 2,193
3,290 116 1,632 5,036
4,936 466 2,057 7,300
2006
2007
2008
2009
2010
2011
2012
China
Taiwan
Korea
Rest of world
19
PV MODULE PRODUCTION BY COUNTRY, 2010-12 (%, GW)
18.1 2.7% 12.0% 1.3% 1.4% 2.1%
29.7 2.4% 1.0% 0.6% 0.7% 1.3%
30.1 2.6% 6.3% 7.4%
1.2% 0.3% 0.1%
9.4% 9.1%
12.7%
10.9%
Taiwan
11.2%
12.9%
Spain
India United Kingdom South Korea Norway Germany 71.1% Japan
64.3% 54.7%
USA
China
2010
Note: Geography calculated by company headquarters, not manufacturing capacity location
2011
2012
Source: Company reports, Bloomberg New Energy Finance estimates and enquiries
20
c-Si CELL PRODUCTION BY COUNTRY, 2010-12 (%, GW)
20.7 2.4% 4.3% 9.5% 10.8% 0.3% 0.4%
23.0 3.0% 3.2% 8.6% 7.5% 0.4% 1.7%
27.4 2.7% 4.0% 7.6% 2.6% 15.3% India South Korea Norway USA Japan Germany 67.8%
17.9% 18.1%
54.3%
57.8%
Taiwan China
2010
2011
2012
21
POLYSILICON PRODUCTION BY COUNTRY, 2010-12 (%, TONNES)

154000 7.4% 11.0% 18.6% 19.5% 20.2% 15.4% Taiwan UK Japan 0.5% 1.3% 1.3% 215000 1.9% 1.4% 8.9% 0.3% 0.6% 205000 2.0% 4.9% 9.2%
18.5%
28.3% 32.0% 25.0%
Other Norway South Korea Germany China
USA
29.9%
20.9% 21.0%
2010
2011
2012
22
INVERTER PRODUCTION BY GEOGRAPHY, 2010-12 (%, GW AC)

23.0 3.7% 25.6 4.3% 17.0% 17.6% 13.7% Rest of the world 21.5% China Other Europe USA Germany
10.0%
21.4%
47.2%
43.4%
2011
2012
Note: here DC-DC optimiser production has been converted into AC, which is estimated to be 85% of DC, Geography calculated by company headquarters, not manufacturing capacity location
23
Q4 2012 LEVELIZED COST OF ENERGY FOR SELECT TECHNOLOGIES

CSP - tower & heliostat CSP - parabolic trough + storage Wind - offshore CSP - parabolic trough Fuel cells CSP - tower & heliostat w/storage PV - c-Si Biomass - anaerobic digestion PV - c-Si tracking Biomass - gasification PV - thin film Geothermal - binary plant Biomass - incineration Wind - onshore Landfill gas Municipal solid waste Geothermal - flash plant Large hydro Small hydro Nuclear Natural gas CCGT Coal fired Natural gas CCGT w/CHP
0 50 100 150 LCOE Range 200 250 300 350 400 450 500
Current Mid
Source: Bloomberg New Energy Finance, EIA
24
Global solar market trends
US solar market trends
25
TOTAL NEW US INVESTMENT IN CLEAN ENERGY, 2004-12 ($BN)

70 60 50 40 30 20 10 0 10.6 17.1 32.1 43.3 43.0 32.8 43.5
44.2
65.4
2005
2008
2011
2004
2006
2007
2009
2010
Note: Shows total clean investment in the US across all asset classes (asset finance, public markets, venture capital/private equity), as well as corporate and government R&D and small distributed capacity. Values include estimates for undisclosed deals and are adjusted to account for re-invested equity.
2012
26
US CUMULATIVE RENEWABLE CAPACITY (GW)

100 90 80 70 60 50 40 30 20 10
85.7
68.9
54.8
60.4 2.9 14.4 2.9 40.1
3.1 14.7
43.5 2.8 13.9 1.6 25.3
2.9 14.3 2.0 35.6
3.0 14.5 4.9
8.0
Geothermal
Biomass & waste
46.6
59.8
Solar Wind
2008 2009 2010 2011 2012

27
US ELECTRICITY GENERATION BY FUEL TYPE, 2007-12 (%)

100% 80% 60% 40%
20%
Other Renewables (including hydro) Natural gas

Nuclear Oil
0%
2007 2008 2010 2011 2012
2009
Coal
Note: Contribution from Other is minimal and consists of miscellaneous technologies including hydrogen and waste. Values for 2012 are projected, accounting for seasonality, based on latest monthly values from EIA (actual data available through October 2012).
28
PRIMARY ENERGY CONSUMPTION VS. GDP, 1990-2012

Quadrillion Btu GDP ($bn)
105
14
90 75
60
12 10
8
Other Hydro
Natural gas
Nuclear Petroleum Coal
45
30 15
6
4 2
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
GDP
Note: Values for 2012 are projected, accounting for seasonality, based on latest monthly values from EIA (actual data available through September 2012). GDP is real and changed; 2012 value is based on economic forecasts from Bloomberg Terminal.
Source: Bloomberg New Energy Finance, Bureau of Economic Analysis, US EIA
29
SHALE GAS EXTRACTION BREAK-EVEN PRICE, BY US PLAY ($/MMBTU)
1 April 2013 Henry Hub $4.03/MMBTU
Note: Assumes 15% equity IRR. UK assumes $8m Drilling & Completion cost; 2000-4250 mcfd dry production (per Marcellus and Eagle Ford); 20% royalty rate; usual tax treatment
Source: Bloomberg New Energy Finance; Various
30
AVERAGE WIND PPA PRICE RELATIVE TO WHOLESALE REGIONAL PRICES, 2004SEPT 2012 ($/MWH)
100 90 80 70 60 50 40 30 20 10 0 2004 2005 2006 2007 2008 ERCOT West 2009 2010 2011 2012 PJM West MISO (Illinois Hub)
Southwest Power Pool
California
PPA price (signing date)
Note: Price indices are calculated by averaging the hourly price at ISO hubs throughout a 24-hour day. Quarterly rolling averages are used to eliminate outliers. Small sample size accounts for some variation in PPA prices in 2011 and 2012.
Source: Bloomberg New Energy Finance, FERC
31
MIDWEST RPS SUPPLY-DEMAND (TWH)

45
40 35 30 25 20
15 10 5 0
Wind generation in region (commissioned or financed)
Non-binding programmes Binding programmes
2010
2012
2014
2016
2018
2020
Notes: Demand is split into regions in the Midwest with binding RPS programmes (Iowa, Minnesota, Missouri) and regions with non-binding programmes (North and South Dakota, Oklahoma). Supply is based purely on wind capacity in these states, comprised of capacity commissioned (or having secured financing) as of July 2012.
32
AVERAGE PURCHASING PRICE BY OFFTAKER, ALL PROJECTS 2011H1 2012 ($/MWH)

0 5 10 15 20 25 107 100 76 76 73 72 66 64 61 57 57 55 54 54 52 51 47 46 44 43 42 41 39 38 38 37 35 35 35 34 32 30 26 23
New England Power Southern California Edison Snohomish County PUD Pacific Gas & Electric NV Energy Arizona Public Service Appalachian Power Tennessee Valley Authority CA Dept of Water Resources Associated Electric Coop First Energy Solutions Corp PacifiCorp Omaha Public Power District Idaho Power Company Bonneville Power Admin San Diego Gas & Electric Exelon Nebraska Public Power District S.California Pub Power Authority Public Service Coof Colorado NorthWestern Energy Northern States Power American Electric Power Great River Energy Oklahoma Gas and Electric NEPOOL Basin Electric Power Coop Minnesota Power Public Service Co of Oklahoma PJM NYISO SPP Southwestern Pub Service Co MISO 0
Merchant rates
25
PPAs
50
75
100
125
Reporting projects
Note: Includes wind, biomass and geothermal PPAs. Does not include solar PPAs. Only includes offtakers purchasing energy from two or more projects
33
SOLAR PPA PRICES BY SIGNING DATE, H2 20082011 ($/MWH)

250
Eurus Energy Avenal Park, Sand Drag, & Sun City Plants First Solar Agua Caliente First Solar Topaz First Solar Silver State North Sempra Mesquite Solar I BP Long Island
200
Iberdrola San Luis Valley 11 solar PPAs executed via CA RAM
150
Sempra Copper Mountain
Fotowatio Apex AES Ilumina Cogentrix Alamosa
Fotowatio Spectrum NextEra Hatch

NRG Roadrunner
AZ CA CO NM NV NY PR
250MW 50 MW
100
Solar Reserve Crescent Dunes
Enel Stillwater
50
Estimated 2011 CA RFP shortlist (2016 delivery $7090)
0 Jul 08
Jan 09
Jul 09
Jan 10
Jul 10
Jan 11
Jul 11
Jan 12
Note: Does not include PPAs under 5MW. Banded PPA prices are pegged at the average price over the period of project operation. The California RFP resulted in 7.5TWh of shortlisted generation, of which about half was PV. California RFP price estimates are sourced from developers. Topaz PPA price estimate based on first-year total PPA revenues ($198.8m).
34
COPYRIGHT AND DISCLAIMER
This publication is the copyright of Bloomberg New Energy Finance. No portion of this document may be photocopied, reproduced, scanned into an electronic system or transmitted, forwarded or distributed in any way without prior consent of Bloomberg New Energy Finance. The information contained in this publication is derived from carefully selected sources we believe are reasonable. We do not guarantee its accuracy or completeness and nothing in this document shall be construed to be a representation of such a guarantee. Any opinions expressed reflect the current judgment of the author of the relevant article or features, and does not necessarily reflect the opinion of Bloomberg New
Energy Finance, Bloomberg Finance L.P., Bloomberg L.P. or any of their affiliates ("Bloomberg"). The opinions
presented are subject to change without notice. Bloomberg accepts no responsibility for any liability arising from use of this document or its contents. Nothing herein shall constitute or be construed as an offering of financial instruments, or as investment advice or recommendations by Bloomberg of an investment strategy or whether or not to "buy," "sell" or "hold" an investment.
35
THANKS!
ETHAN ZINDLER, EZINDLER@BLOOMBERG.NET TWITTERS: @ETHANALL
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SOLAR MARKET UPDATE

MINNESOTA LEGISLATURE TESTIMONY

ETHAN ZINDLER, HEAD OF POLICY ANALYSIS 2 APRIL 2013, ST. PAUL, MN

BLOOMBERG NEW ENERGY FINANCE: 200 STAFF IN 13 OFFICES WORLDWIDE

London San Francisco

Asia Pacific (24)

North America (39)

New York Washington

Tokyo Hong Kong

South America (5)

Sao Paulo Cape Town Sydney

/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

Clean energy investment overview

Global solar trends

/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

GLOBAL TOTAL NEW INVESTMENT IN CLEAN ENERGY

Source: Bloomberg New Energy Finance

/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

NEW INVESTMENT IN CLEAN ENERGY BY TRADE BLOCK

84% 77% 74% 73% 68% 66%

ROW BASIC OECD

Note: Excludes corporate and government R&D

Source: Bloomberg New Energy Finance

/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

Note: Excludes corporate and government R&D

Source: Bloomberg New Energy Finance

/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

Clean energy investment overview

Global solar market trends

US solar market trends

/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

DYNAMICS OF THE GLOBAL SOLAR SECTOR

Massive supply-demand imbalance with far more capacity available than

Plummeting equipment prices due to technology advancements and the

Commoditization of solar equipment with China now playing a dominant role

Consolidation, bankruptcies, and value destruction well underway. Trade skirmishes!

/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

DEMAND VS. HISTORICAL AND PROJECTED MODULE PRODUCTION (GW)

2011 2012 2013 2014 Supply - thin-film silicon Demand - conservative

Source: Bloomberg New Energy Finance

/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

PV INSTALLATION BY YEAR, HISTORICAL AND CENTRAL FORECAST, 2007-2015 (MW)

/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

INSTALLED PV PER CAPITA, END OF 2012, CONSERVATIVE SCENARIO (W/PERSON)

Note: GDP per capita adjusted for purchasing power, in 2011 $

Source: World Bank, Bloomberg New Energy Finance

/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

Czech Republic Germany

/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

CRYSTALLINE SILICON MODULE SPOT PRICE, 200812

Source: Bloomberg New Energy Finance Solar Spot Price Index

/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

SPOT PRICE OF C-SI MODULES, 2 JANUARY 2012 4 MARCH 2013 ($/W)

Multicrystalline silicon module (c-Si)

Monocrystalline silicon module (c-Si)

Source: Bloomberg New Energy Finance Module Spot Index

/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

CHINESE MULTICRYSTALLINE SILICON MODULE PRICE BUILD-UP, MARCH 2013

0.094 Module 0.050 0.25 0.003 -0.03 -0.07

Spot price $0.68/W

$16.6/kg SG&A per W Best-in-class margin per W

0.03 Processing cost per W Depreciation per W

Source: Bloomberg New Energy Finance