Seminar on Renewable Energy Technology implementation in Thailand Experience transfer from Europe

Transcription

1 Seminar on Renewable Energy Technology implementation in Thailand Experience transfer from Europe co-organised by the Delegation of the European Union to Thailand and the Department of Alternative Energy Development and Efficiency, Ministry of Energy Mass Scale Competitive Solar Power Sylvain Legrand, Solairedirect 5 th October 2012

2 Energy and solar markets outstanding dynamics: Assessing the (quasi unlimited) resources Solar energy is by far the largest available source of energy. The earth receives in just 1 (one) day the equivalent of the total proven reserves of oil globally (1.3 trillion barrels) Solar energy is the only energy source that is ubiquitous in large quantities, globally Solar energy can be exploited directly (solar heat for instance hot water geysers) or converted into electricity either mechanically through heat and turbines (Concentrated Solar Power) or electronically through photovoltaic (photon to electron) conversion, either crystalline silicon (89% of the market in 2011) or thin film (11%) Photovoltaic solar power is among the sources of energy with the lowest impact on the environment, as it is silent, low lying and requires little or no civil engineering. Its land use compares favourably with other renewables and only 0.2% of the earth s land mass (320,000 km²) would be necessary to supply the world s total power consumption (20,260TWh in 2008) 89,000 TW Available energy vs. global capacity 370 TW 15 TW Solar Wind Global Capacity Source: the MIT press, Stanford University, EIA The key raw material for the production of crystalline silicon cells and modules, silicon (Si), is the earth s second most prevalent element, representing 28% of the earth s crust or 38,000 trillion tons. It is also ubiquitous, so no silicon war is to be expected The challenge of photovoltaic solar power can therefore be set out as follows: how to convert two virtually unlimited resources (solar irradiation and silicon) to address mankind s ever growing need for energy

3 Electronics and the deflationary paradigm Photovoltaic solar power is the only electronic energy source as other forms of energy, whether fossil, nuclear or renewable, are exclusively mechanical, i.e. power is generated by turbines As with other electronic technologies, PV solar is subject to two key factors: (i) steadily, ever increasing efficiencies (Moore s law) and manufacturing advances and (ii) steep investment and pricing cycles. The increase in PV cell efficiencies evolves in a similar way as the capacity of microprocessors and memory chips : it is steady (on average 0.5% annually), confirmed over the long term (since the 1970s) and predictable until at least 2025 Aside from cell technology itself steady improvements are found in manufacturing: wafer thickness (reduced from 300 to 150µ over the last decade), automation and economies of scale, as photovoltaics optimizes its process following the model of other industries (electronics, automotive ) Another important factor is massive investment and pricing cycles. While silicon is indeed quasi unlimited, its conversion into polysilicon requires heavy investments, with a lag time of 2 to 3 years (unlike cell and module manufacturing. Insufficient investment in the first part of the last decade led to bottlenecks, and polysilicon spot prices shooting from $20/kg in 2002 to $500/kg in 2008, before retreating to $23/kg in 2012 PV solar is a fundamentally deflationary technology impacted by investment cycles

4 Cost momentum brings about full competitiveness The deflationary character of solar photovoltaics is evidenced by the steady and massive cost cuts over a very long period of time. Crystalline silicon module prices have fallen by a factor of 95% in the last 30 years, from $16/W to $0.75/W, a 10.5% annual compound reduction, which has accelerated in the last four years due to cyclical reasons (lower polysilicon prices) Solar module price evolution divided by 20 over the last 30 years (in $/W) In 2008 solar LCOE (1) (Levelized Cost of Energy) for large-scale installations was in the $ /MWh range (depending on solar irradiation and financing costs), and has fallen to $125/155/MWh in 2012 with large scale systems breaking the $2/W mark (including development costs and BOS balance-ofsystem) Assuming a continuation of the 30-year trend (which is comforted by the fact that BOS costs are now decreasing fast), a level of $100/115/MWh is likely in 2015, with modules at $0.60/W, BOS at $0.40/W and total project cost at $1.20/W, making then PV solar power the most cost effective source of energy globally (1) Cost of the energy-generating system including all costs over system lifetime Energy Source Generation costs (new generation only, best-in class players) Solar PV 100/ 120/MWh (2012) CSP Onshore wind Offshore wind Mini hydro 140/ 250/MWh 55/ 90/MWh 120/ 200/MWh 80/ 120/MWh Energy Source Biomass Fuel (DG) Coal (imported) Nuclear (EPR) Gas (exc. Shale) Generation costs (new generation only, best-in class players) 100/ 150/MWh 120/ 200/MWh 70/ 90/MWh 70/ 90/MWh 70/ 90/MWh

5 Volume momentum turns solar into the mainstream New additional solar capacity ( , in MW) A parallel momentum has been built on volumes, with a steady, massive growth (not one year of decline in volumes) from 0.5 MW in 1981 to 27,700 MW in 2011, a 43% compound annual growth. Over the last decade demand growth has been powered by environmentally-driven incentive schemes in Europe (Germany, Italy, Spain, France ) and more recently, as solar becomes cost competitive, by demand in energyhungry emerging countries (China, India, South Africa ). Supply has mostly come from Asian producers except for polysilicon where key players remain in Europe and North America 30,000 25,000 20,000 15,000 16,533 29,157 Assuming a continuation of the 30-year trend, the volume of new installations could reach 117 GW in 2015, a level consistent with the current increase in polysilicon capacities, and 700 GW in 2020 (about 3% of global power production then) 10,000 5,000 1,085 1,419 1,470 2,487 6,254 7,357 As a result of this dual cost/volume momentum, solar power is set to become a major, fully competitive, component of the global energy mix, starting in Europe Asia Americas China MEA RoW

6 The rise and fall of the European feed-in tariffs Market dynamics European market split in 2011 (in MW and %) While the solar PV market globally was driven by off-grid installations until the late 1990s, grid-connected systems have powered the increases in volumes ever since as a result of government programs, first in Japan, then in Germany (2000), and later on the US and other European countries, where feedin tariffs were adapted on basis of the model of the German EEG law: Spain (2004), Italy (2006), France (2006), Belgium (2007), the Czech Republic (2008) and the UK (2010) The European schemes developed after 2004 in the context of the fight against global warming with the Kyoto protocol, the 3x20 European Union objective (carbon emissions and renewables) France 1,671 (8%) Greece 426 (2%) United Kingdom 784 (4%) Belgium 974 (4%) Spain 372 (2%) Czech Republic 321 (1%) Rest of Europe 623 (3%) Italy 9,284 (42%) The FIT systems proved a very powerful tool to jump start markets, but government-set purchase prices and fast decreasing costs proved a dangerous combination, leading to an unsustainable boom with European installations reaching 21.6 GW in 2011, making solar power the largest source of new energy capacity ahead of gas and wind This drove governments to severely curtail incentives: Spain (2008), Germany ( ), Czech Republic (2010), France ( ), Italy ( ) and the UK ( ), generating massive industry protests. The legacy of the system is a massive overload of excess costs for the rate payer ( 25bn per annum Europe-wide for only 2% of power generated) Germany 7,485 (34%) 70% tariff cut in 4 years (now as low as 135 /MWh) 67% tariff cut in 2 years and freeze 40% tariff cut in 1 year (now as low as 116 /MWh) 34%-70% tariff cut in 1 year (now as low as 105 /MWh)

7 The European energy transition paradigm The European energy transition paradigm saw three momentous events for solar PV in Europe: (i) a sharp reduction in feed-in tariffs, (ii) a drastic fall in PV systems costs and (iii) the Fukushima nuclear disaster. The foundations are laid for a sustainable market based on a new paradigm: the energy transition Initiated in Germany and relayed in France over the last 12 months, the energy transition has three major components: (i) a (more or less speedy) exit from nuclear and fossil fuels, (ii) the concurrent development of renewables and energy efficiency and (iii) the empowerment of local communities in what is essentially the transformation of a centrally-run electrical system to a system with millions of distributed sources of generation The energy transition comes with major changes in building (with new energy positive regulation to be enforced in Europe by 2020) and transportation (with the development of electric vehicle infrastructure), and is expected to generate large numbers of green jobs While the energy transition is difficult to implement with expensive and/or heavily intermittent renewable energy sources, competitive solar becomes a natural answer to implement this transition as European states suffer from very strict budgetary constraints With over 50 GW of PV connected throughout the continent, intermittency is already causing local power overflow in certain regions, and imbalances that disrupt wholesale power markets in the summer months. Smart grids are therefore a necessity, combining solar power aggregation, grid integration optimization, demand response and energy efficiency,

8 PV attractiveness for country The rise of the Sunbelt Emerging countries did not participate in the feed-in tariff driven solar boom of the 2000s, as the environmental motivation (fighting global warming) certainly did not make up for the much higher cost of solar High However since 2009, when cell and module prices started to collapse, several countries have started to consider solar schemes to contribute to their fast growing power needs: India, Morocco, China, South Africa, Thailand, Saudi Arabia In most cases the schemes have been implemented through government tenders with some form of reverse bidding, or alternatively PPA In India the second round of the JNNSM in December established a record bidding at $145/MWh for a project in Rajasthan. China for its part has implemented a feed-in tariff at a low level ($155/MWh from early 2012) As solar LCOEs fall below conventional sources of energy, the rationale becomes clear for market-based PPAs, especially as many countries reduce their power subsidies and bring up power rates. The PPA model is called for fast development in liberalized power markets such as Chile or Australia for instance Low Source: EPIA Country investment attractiveness As a result the solar installations should boom in those markets with the highest (i) power needs, (v) political stability High (ii) growth (iii) power prices (iv) irradiation (vi) bankability (vii) political ambition in solar/renewables

9 The policy challenges of mass-scale solar power generation Core issue: how to bring mass-scale deployment of solar power while fostering the country s economic development and bringing about local empowerment? Structure public and private PPAs with government, utilities and power users for maturities of 20 years and beyond Inspire the trust of governments and key local stakeholders to establish long term public/private partnerships, and develop the sufficient clout with governments to influence planning, construction, infrastructure and energy regulation Develop GWs of projects on the ground and on rooftops over the long term Integrate the manufacturing value chain and sustain cost leadership Inspire trust to pension funds and the like to raise billions of euros with the lowest IRRs Inspiring trust to local banks to finance solar projects with longer term debt (15 years or more) Develop the mass marketing of solar-based power Develop the smart grid platforms and aggregate millions of intermittent sources of energy

10 The key drivers in the business of competitive solar power 1 The ability to contract PPAs with off-takers (utilities or power users), generating the highest value through valueadded (smart) grid services and financial engineering, and helping the off-takers reap all the advantage of competitive solar power 2 3 The ability to establish privileged relationships with local stakeholders, both public and private (preferably through joint ventures which act as local empowerment tools and have access to prime locations (land and rooftop) and grid connections. Local content manufacturing (and green jobs) is a privileged tool to strengthen relationships and circumvent possible protectionist measures Best-in-class EPC costings, with a permanent view to minimize module, BOS, development and other costs, preferably through some form of vertical integration with one or several of the most competitive upstream players 4 Abundant, low cost capital. As PV solar is hugely capital intensive ( 10 needed for 1 of power revenues versus 6 for nuclear, 3 for wind and 2 for gas) securing low cost capital is critical, and can only be done through risk control that equates solar projects with bond-like annuities

11 Solairedirect, a global pioneer of competitive solar power France - PPAs at 0.11 /kwh annual construction target > 500 MW United States - PPAs at 0.11 /kwh, fixed price annual construction target: 125 MW China -dedicated to upstream Thailand annual construction target > 100 MW Chile - PPAs at 0.11 kwh Indexed on market price annual construction target: 100 MW South Africa - Awarded PPAs: at 0.13 /kwh annual construction target: 100 MW - Module assembly line (40 MW) India - Awarded PPAs: 0.11 /kwh) annual construction target: 120 MW Solar represents a compelling option due to its ease of installation in countries with electricity shortages

12 About Solairedirect Company founded in 2006, based in France, with the mission to bring fully competitive solar power to power users, utilities and communities around the world A leadership position in making solar power competitive globally: first Private PPAs (126 MW) signed at 108 /MWh in France, 130 $/MWh in Chile and Rs/MWh in India, and a roadmap to deliver solar power below 80 /MWh by 2014, at par with wholesale power prices in most geographies A unique combination of engineering and power generation expertise which is key to deliver competitive solar power : systems engineering and integration, project development, rooftop and ground-mounted system EPC and O&M, power contract structuring and grid engineering, community and public-private partnerships, structured finance A strong performance and track record: 120 MW in operation, 500 M raised in equity and project finance, 214 M consolidated revenues in 2011 with 9% net margin