Solar Goes Corporate Conference - SEIA | Solar Energy Industries ... are Costs Headed (Shi… ·...

Where are Solar Costs Headed?

Solar Goes Corporate Conference

MJ Shiao

Director, Solar Research

[email protected]

February 2016

1Solar Costs - Solar Goes Corporate

News/Online

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The Road Ahead – The Future for U.S. Solar Looks Increasingly Bright

U.S. Annual Installed Capacity by Market Segment (MWdc)

0

5,000

10,000

15,000

20,000

25,000

2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E

An

nu

al In

stal

lati

on

s (M

Wd

c)

Residential Non-Residential Utility

Source: GTM Research/SEIA U.S. Solar Market Insight


Residential Solar

On-site PV for home or domestic use, including single- and multi-family homes (where solar offsets tenant loads)

Housekeeping – How GTM Research Defines the Market

Utility Solar

PV either owned/operated by a regulated utility OR with a utility offtaker OR leveraging wholesale market

transactions to deliver power to an offtaker

Non-Residential Solar, i.e., “Commercial” Solar

PV with a non-residential, non-utility offtaker – typically referred to as “commercial and industrial”


ITC Extension Breathes New Life into the U.S. Market

0.0

5.0

10.0

15.0

20.0

25.0

2014 2015E 2016E 2017E 2018E 2019E 2020E

An

nu

al In

stal

led

Cap

acit

y (G

Wd

c)

Pre-ITC Extension Post-ITC Extension

10 GW of additional demand

Rushed projects spillover into 2017

Source: GTM Research/SEIA U.S. Solar Market Insight Q3 2015

The Effect of ITC Extension on U.S. PV Installed Capacity (GWdc)


It’s Been a Tale of Two Markets – Non-Residential vs. Utility

Source: SEIA/GTM Research U.S. Solar Market Insight Q3 2015

U.S. Non-Residential vs. Utility Annual Installed Capacity, GWdc

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E

Inst

alle

d C

apac

ity

(GW

dc)

Non-Residential Utility


The Drivers for Utility Solar are Diversifying

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

Operating Pipeline*

Inst

alle

d C

apac

ity

(GW

dc)

RPS Voluntary Procurement PURPA Merchant Retail Procurement

Source: GTM Research Next Wave of Utility Procurement 2016 (forthcoming)

Primary Procurement Driver for U.S. Utility Installed Capacity (as of December 2015)

Over 50% of pipeline from

non-RPS projects


Why? Simply because Prices are Falling

$0

$25

$50

$75

$100

$125

$150

$175

$200

2008 2009 2010 2011 2012 2013 2014 2015

PPA

Pri

ce (

$/M

Wh

)

Contract Execution DateSource: GTM Research

U.S. Utility-Scale PV PPA Prices by Contract Execution Date and Project Size


$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

2007 2008 2009 2010 2011 2012 2013 2014 2015E

Turn

key

EPC

/In

stal

ler

Pri

ces

($/W

dc)

Residential Commercial Utility

Primarily Driven by the Rapidly Falling Capital Costs

Source: GTM Research

U.S. National Turnkey EPC and Installer PV System Pricing ($/Wdc)

>55% reduction in pricing over

past 5 years


Today’s PV Costs – Where are We?

Source: GTM Research PV Balance of Systems 2015

U.S. National Turnkey EPC Price Breakdown by Component, 2015E

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

Non-Residential Rooftop Utility Single-Axis Tracker

Co

mp

on

ent

Pri

ce (

$/W

dc)

Modules Inverters Electrical BOS Structural BOS Direct Labor Engineering, Permitting Misc., Overhead, Margin


Many Pathways to Reduce PV Hardware Costs

Module

Inverter and Skid

Structural BOS

DC Electrical BOS

AC Subsystem

PV Modules

• Continued production scale in

China and non-tariff markets

• Polysilicon continues to push

towards cash costs

• Innovations throughout wafer,

cell, materials production

• Cost reductions for high

efficiency and advanced

monocrystalline products

• New form factors and product

types (bifacial, glass-glass, etc.)

PV Hardware BOS

• New entrant competition

create price pressure

• Move towards decentralized

architectures (e.g., string

inverters, single-row tracking)

• High efficiency modules

reduces BOS prices

• Push towards high DC voltages

(i.e., 1500 Vdc systems)

• Integrated products


U.S. Utility Single-Axis Tracking PV System Turnkey EPC Price Breakdown by Component, 2015


But Let’s Manage Expectations…

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.502

00

9

20

10

20

11

20

12

20

13

20

14

20

15

E

20

16

E

20

17

E

20

18

E

20

19

E

20

20

E

PV

Mo

du

le A

SPs

($/W

dc)

Source: GTM Research PV Pulse Feb 2015

U.S. PV Module Average Selling Prices* ($/Wdc)


U.S. Utility Central Inverter and 1-Axis Tracker Installed Costs ($/Wdc)

*Delivered, duties paid post-2012

$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

$0.35

$0.40

20

12

20

13

20

14

20

15

E

20

16

E

20

17

E

20

18

E

20

19

E

20

20

E

Inst

alle

d C

ost

s ($

/Wd

c)

Inverters Trackers

80% reduction in just 4 years

~20% reduction in the coming years

30%-40% cost reductions


Soft Costs are Still Important in Non-Residential and Utility PV

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

Residential Non-Residential Utility

EPC

/In

stal

ler

Pri

cin

g ($

/Wd

c)

Hardware Soft Costs

Source: GTM Research PB Balance of Systems 2015

U.S. National Turnkey EPC / Installer Installation Pricing ($/Wdc), 2015

Includes installation labor,

design, engineering,

permitting, interconnection

fee, logistics, EPC margin and

other project costs

Doesn’t include financier /

developer fees and margins,

land costs, interconnection /

grid upgrades O&M


Misc., Overhead

and Margin

Design, Engineering, Permitting, …

Direct Installation

Labor

Direct Installation Labor

• Pre-engineered, modular and integrated products (e.g., PV

module + inverter + tracker package with pre-wired BOS)

• Reduce the number of required BOS components

• Focus on installation safety and “fool-proof” components

Other Soft Costs

• Pre-engineered, integrated products

• More transparent utility planning and state permitting

Our cost stack doesn’t include Land Acquisition, Grid

Upgrades, Developer Fees, Cost of Capital, Long-term O&M

Soft Cost Reduction Pathways


U.S. Utility Single-Axis Tracking PV System Turnkey EPC PriceBreakdown by Component, 2015


Where are PV Prices Headed?


U.S. Utility Fixed Tilt PV System LCOE with System Price Variation Only, 2012 – 2020E BAU System

Parameters 2016 2020

System Size 10 MW 10 MW

System Type Tracker Tracker

ITC (%) 30% 30%*

System Price

($/Wdc)**$1.50 $1.18

WACC (%) 6.6% 6.6%

Escalator (%/yr) 0% 0%

Asset Life

(years)25 25

Performance

(MWh/MW/year)2,220 2,220

*Assumes commence construction in 2019 for simplicity**Turnkey EPC price

$0

$20

$40

$60

$80

$100

$120

2012 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E

Imp

lied

PPA

(R

eal $

/MW

h)

ITC Pre-Extension ITC Extension Low Scenario


Still Many Other Parameters to Flex to Reduce Costs

$0.0

$20.0

$40.0

$60.0

$80.0

4.0%4.5%5.0%5.5%6.0%6.5%7.0%7.5%

LCO

E ($

/MW

h)

Weighted Average Cost of Capital

$0

$30

$60

$90

$120

$150

10 15 20 25 30 35 40 45

LCO

E ($

/MW

h)

Years

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

2,000 2,100 2,200 2,300 2,400

LCO

E ($

/MW

h)

System Performance (MWh/MW/year)

$56.0

$58.0

$60.0

$62.0

$64.0

$66.0

$2,500 $5,500 $8,500 $11,500

LCO

E ($

/MW

h)

Annual O&M Cost ($/Year)


Utility PV LCOE Sensitivity - Weighted Average Cost of Capital, 2016E


Utility PV LCOE Sensitivity – System Performance, 2016E


Utility PV LCOE Sensitivity – Asset Life, 2016E


Utility PV LCOE Sensitivity – O&M Costs, 2016E


The Value of Solar is Evolving

PV Project

Utility / Corporate Offtaker

Project Revenue ($/MWh)

Must-take provision

Energy (MWh)

Performance / behavior guarantee Expanding and Compensating Solar-Plus’ Value

• Offset on-site demand charges / time-of-use arbitrage

• Provide islanding, backup capability

• Relieve local congestion / meet local capacity

requirements

• Ancillary market benefits like reactive power injection,

frequency response

Storage and Other Technologies

Headwinds – The Value of Solar is Under Threat

• Net metering and rate reforms in 40+ states

• Raised fixed charges, demand charges, compensation of

net metering below retail rates, non-export

• Changes to PURPA QF terms, schedules and values


A Huge Opportunity Ahead – But Only if We Get it Right Today

-

20.0

40.0

60.0

80.0

100.0

120.0

20

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01

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20

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E

20

20

E

Cu

mu

lati

ve C

apac

ity

(GW

dc)

Residential Commercial Utility


Cumulative U.S. Installed PV Capacity (GWdc)

Interested in other GTM Research products and services? Please visit www.gtmresearch.com or contact [email protected]

Thank You!

February 2016

Solar Goes Corporate Conference - SEIA | Solar Energy Industries ... are Costs Headed (Shi… ·...

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