IHS. Presentation. Solar Now Turkey Three-year outlook for solar energy cost developments

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1 IHS Presentation Three-year outlook for solar energy cost developments ihs.com Josefin Berg, Senior Analyst, +33 () ,

2 Key takeaways PV generated electricity in Europe: less than a third of the 28 cost Component price declines + local installation efficiencies Turkey: unique position of starting at low system costs

3 Europe PV Cost Dynamics

4 Real 211 per MWh PV generation prices approach whole-sale power Historical Prices of New Build Power Generation in Europe Wholesale Power Prices CCGT Onshore Wind Solar PV - North Europe Solar PV - South Europe Notes: Analysis excludes cost of carbon and any financial distorters. Europe here is based on the average between France, Germany, Italy and the United Kingdom. Wind analysis excludes grid-connection costs and imbalance costs 4

5 MW Europe PV boom driven by few markets Europe PV Demand Germany Italy UK France Greece Belgium Spain Eastern Europe Rest of Europe 5

6 FIT /kwh having a big gap between incentives and prices FIT trends of select PV markets LCOE trend Germany UK Italy France 6

7 /W Local conditions determine CAPEX levels PV CAPEX levels evolution Germany Italy UK France

8 CAPEX is a main parameter to lower the generation cost, but not the only one WACC O&M Lifetime CAPEX Capacity Factor Impact of +/-1% relative variation of inputs on solar PV required price Lifetime: sign long-term PPAs and maintain the system for 25+ years CAPEX: shop around for minimal upfront investment, without compromising quality. Location will determine gridaccess costs Capacity Factor / Solar resources: the location will highly impact the revenues 8

9 Evolution of CAPEX components

10 /W Low revenues increase sensitivity to component prices Germany average system prices (>1 MW) Module Inverter BOS EPC/Labour 1

11 /W Modules on the way to becoming a commodity Global average module ASPs Local price variations: Turkey: Premium on locally produced modules EU: Floor price on Chinese produced modules

12 /W Inverters also slated for price drops Global average inverter ASPs Local price variations due to grid requirements and needs for smarter inverters

13 Index Turkish labour costs contribute to low CAPEX IHS Labour cost index (212) Italy Germany Spain Turkey 13

14 Impact on Turkey

15 /W Turkish PV systems make sense when CAPEX is below 1.3/W Est. required CAPEX for Turkey PV Systems below 1.3/W = Project IRR at 5% - 7% At capacity factor of 15% Based on full FIT revenue, not taking into account electricity savings from self-consumption Lower CAPEX necessary if systems are planned to be sold to investors No local content ($.13/kWh) Full local content ($.2/kWh) Local manufacturers can charge a total.2/w premium on components 15

16 /W Turkish PV systems CAPEX reported 1-1.5/W Est. required CAPEX for Turkey PV Low CAPEX for a new market Competition for few projects Low incentives = less volatile market Expected stable CAPEX over next years Growing demand = increased efficiency, but unlikely to reflect in final system price tag No local content ($.13/kWh) Full local content ($.2/kWh) 16

17 ihs.com/solar Solar solutions from trusted experts IHS Solar solutions provide market forecasts, technology trends, and supply chain analysis to advance client strategies in global solar markets. Leverage expertise from: ihs.com/solar Our analysis provides unrivaled, global coverage of upstream and downstream solar markets with industry benchmarks for supply chain metrics, pricing forecasts, and solar demand. IHS Customer Care: Americas: +1 8 IHS CARE ( ); CustomerCare@ihs.com Europe, Middle East, and Africa: +44 () ; Customer.Support@ihs.com Asia and the Pacific Rim: ; SupportAPAC@ihs.com. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage or expense incurred by reliance on information or any statement contained herein. For more information, please contact IHS at customercare@ihs.com, +1 8 IHS CARE (from North American locations), or +44 () (from outside North America). All products, company names or other marks appearing in this publication are the trademarks and property of IHS or their respective owners.

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