Commercial Potential for US Photovoltaics Fundamental Review and Discussion. Prepared For: World Future Council s Renewable Energy Payments Forum

Transcription

1 Commercial Potential for US Photovoltaics Fundamental Review and Discussion Prepared For: World Future Council s Renewable Energy Payments Forum

2 Who is Nexant? Overview Private Company Spun-Off from Bechtel in Engineers, Business Consultants, Scientists Acquired ChemSystems, Petrochemical Development Group, Resources2Energy and others Policy, Economic, Research, Design, Engineering, and Project Management Services Technical Competency Electric power, oil, coal and natural gas Petroleum refining, chemical and polymer manufacture Biofuels and biochemistry Renewable energy and nuclear Energy efficiency and carbon management Global Reach 2007 Marketing Presence Asia/ ME 20% 11% Emerging Markets 43% Americas Principal Offices: San Francisco, Washington DC, New York, London Europe 26% Other Locations: Houston, Tokyo, Bangkok, Phoenix, Madison, Boulder, Dusseldorf, Beijing, and Shanghai

3 Nexant Experience in Solar Some Recent Work Current Solar Thermal Photovoltaics Engineering and Economic Evaluation for 62 and 125 MW Solar Power plant for a large Independent Power Producer (IPP) in Arizona Consulting Engineer Enhanced oil recovery using solar steam for production well for a Multi National Oil Company Solar Integration with Merchant Combined Cycle Power Plants for two different sites and projects. Technology and Economic Evaluation of Global Polysilicon Markets for Photovoltaics Technical Advisor Technology selection for 30MW installation (CSP vs Thin Film vs PolySi) Feasibility and Capital Cost Study for new Middle East Polysilicon plant build Efficiency of Plan and System Design Study on behalf of applicants for $35mm implementation loan Strategic Advisor Assist Retail Producer During Net Metering Discussions with Utility Grid. Engineering Design Market Feasibility Financial Review / Structures Commercial Strategy Supply Sourcing Strategy Business Development Government & Utility Support Manufacturers Grid and Utility System Owners Researchers Governments Investors 2

4 And because Nexant engages in projects for major federal government customers including: - U.S. Department of Energy, - Environmental Protection Agency - United States Agency for International Development (USAID) - National Aeronautics and Space Administration (NASA) We remain on the forefront of new policies and issues facing solar energy generation We provide a conduit for meaningful exchange between commercial industry and government and We have experience translating incentives and opportunity into commercial success. 3

5 Why Photovoltaics? 4

6 Global Energy Demand is an Incredible Driver for Solar Power GLOBAL ENERGY DEMAND IN TWh Goal 1: Replace dependence on Fossil Fuels Goal 2: Fill Energy Gap with Supply from PV TWh Full PV capacity converted to electricity is not even 1% of Global energy demand. Fossil fuels are running out leaving renewables like solar as the only alternative Liquids Coal Nat Gas Nuclear Unmet Demand Global energy demand Solar Grade Capacity Solar Grade Capacity Source: Nexant Year TWh

7 PV is currently more expensive than other forms of energy UNSUBSIDIZED PV VERSUS STANDARD ENERGY (Global Basis) Solar PV Cost Average grid cost convergence $kwh Grid Price (oil 100$/bbl) Most governments have programs in place to help subsidize PV and encourage industry growth. 0.1 Grid Price (oil 80$/bbl)

8 The global production of photovoltaic cells has kept pace with the demand but the production is already shifting to the Far East GLOBAL PRODUCTION OF PHOTOVOLTAIC CELLS Photovoltaic cell production set to accelerate over the next few years Production is growing with demand at 44% CAGR since 2000 and this growth is set to continue. The shift in production to the Far East will also continue to accelerate 3000 NAFTA PRODUCTION OF PV CELLS BY COUNTRY 2006 Taiwan 5% Spain 4% Norway 2% M W 2000 CAGR = 40-45% China 11% USA 10% Japan 43% Source: Nexant Source: Nexant 2008 Germany 25% Japan expected to give up 50% of share as the EU and China begin to gain ground for PV production. 7

9 The global use of photovoltaic solar cells to generate electricity has been growing at over 40% a year since 2000 MWh GLOBAL INSTALLED PHOTOVOLTAIC ELECTRICITY GENERATION CAGR = 40-46% NAFTA Solar power installations driving the growth in cell production The global installation of solar generated electrical power has been rapidly growing in excess of 40% per year since Germany and Japan are the most important markets accounting for over 80% of the total demand for installed PV generation. Japan is quickly losing ground to Southern Europe. The USA is the third largest market for Photovoltaics accounting for almost 12% of the total market. INSTALLED PV ELECTRIC GENERATION (2006) China 1% Spain 2% USA 11% Other 5% Japan 30% Source: Nexant 2008 Growth in Photovoltaic solar cell is driven by government incentives The rapid growth of the use of PV solar cells to generate electricity is driven by the current demand for renewable energy projects. Large government incentives are necessary to develop a commercially viable solar electricity generation sector. Parity with grid costs is the aim. Source: Nexant 2008 Germany 51% 8

10 World of Photovoltaic Producers and Players (Sample Selection) Photovoltech Canadian Solar BP SunOasis Yingli New Energy Resource CEEG Shanghai Solar Energy Science China Solar Power China Sunergy Conenergy J A Solar Holdings Co. Jiangsu Linyang Solarfun Power Holdings Jiangsu Shunda Jiangsu Shunda PV Tech Jiansu Sunshine Group Jinggong (P-D) Shaoxing Solar Energy Technology LDK Solar High Tech Co. Nanjing CEEG PV-Tech Amonix Cypress Semiconductor Solec International Ningbo Solar Electric Power Perfect Energy Renesola Shenzen Topraysolar Suntech Power Trina Solar Limited Wuhan Rixin Technology Co. GiraSolar Q-Cells Schott Solar Shell Solar Solar Fabrik Solarwatt SolarWorld AG Xi'an Longji Silicon Industry Group Solon AG Yangguang Solar Sunways AG Free Energy Europe Wurth Solar GmbH Photowatt International Bharat Heavy Electricals Solems SA Central Electronics Ltd Tenesol Tata BP Solar india Aleo Solar Eurosolare BP Solar Helios ErSol Canon Ever-Q Fuji Electric Emcore Energy Photovoltaics, Inc. Entech Evergreen Sun Power Corporation United Solar Ovonics Hitachi Hoku Scientific Honda Kaneka Solartech Kyocera Matsushita Ecology Systems Mitsubishi Electric Mitsubishi Heavy Industries MSK Sanyo Electric Sharp Showa Shell Sekiyu BP DonhgHae KD solar Kyungdong Photovoltaic Energy LG Industrial System Co. Neskor Solar First Solar GE Solar United Solar Systems Corporation Currently there are over 150 PV manufactures globally with a reported total production of 3092 MWp in 2007 The top 25 producers by volume accounted for 95% of this production S-energy REC Wafer ScanWafer (REC) Abengoa Isofoton Big Sun Energy Del Solar E-Ton Solartech Co. Gintech Yingli Green Energy Motec Solar Sinonar Corp ICP Solar Technologies PV Crystalox Solar Sharp Akeena Solar Inc. GT Solar Schott Splar Solar Power Industry Corp Kaneka 9

11 Photovoltaics in the United States 10

12 Market Analysis: Polysilicon Demand World of Photovoltaic Producers: TOP 25 Photovoltaic Consumers (Polysilicon and Thin Film) Top 25 PV Producers Ranked by Capacity Sales Capacity Top 25 Culmulative Capacity:4796 MWp Top 25 PV Production: 2952 MWp (62% Utilization) Accounts for 95% of all revenue produced in MWp Sharp Source: Nexant 2008 Q-cells Suntech Kyocera Sanyo First Solar Motech Bp Solar Sun Power Deutsche Cell/ Solar-World China Sunergy Schott Solar JA Solar Mitsubishi Electrics Isofoton Evergreen/Ever Q Ersol E-Ton DelSolar Uni-Solar Photowatt Solland Scan cell (REC) USA Presence Kaneka Sunways 11

13 The North American photovoltaic market is expected to boom in the near future with government targeting an installed production capacity of 1717 MW by 2010 RISING PHOTOVOLTAIC (PV) MARKET NORTH AMERICA NEWLY INSTALLED SOLAR POWER CAPACITY TARGETS ( , MW) Source: Nexant 2008 NORTH AMERICA NEWLY INSTALLED SOLAR POWER CAPACITY TARGETS ( , MW) Source: Nexant 2008 CAGR ( ) 49% CAGR ( ) 17% The United States photovoltaic market is expected to grow substantially with the initiation of the Solar America Initiative program, this is expected to achieve a national PV capacity of 5-10 GW by North American PV markets are supported by a variety of programs and incentives, including green power/pricing, rebates and Renewable Portfolio Standards. North American market is expected to have a newly installed solar power capacity of 1.7 GW by 2010 which will then grow to 9 GW by 2020 United States subsidy funds are expected to create 30 GW of renewable capacity by Assuming a 50% capacity factor, this represents 3% of the total projected electricity generation in the USA for However, most sources of renewable energy are not meeting even a 50% CF rating: PV = 12-14% CF CSP = 20-25% CF Wind = 20-35% CF - Policy Makers and Technology reality need to be brought into balance. 12

14 Polysilicon PV is extremely expensive and the primary raw material is in short supply. EMERGENCE OF POLYSILICON PLAYERS North America produces a significant amount of polysilicon with top producers such as: Hemlock, REC, MEMC, AE polysilicon, Hoku, Dow Corning, Global PV Specialists,Solsil, ARISE and 6N. 90 % of the solar grade polysilicon feedstock in North America is bought from the semiconductor industry Despite the tight demand for polysilicon only a few companies are entering or are planning on entering the NA market to assist with the shortage of polysilicon supply - NA s status as a net importer is primarily due to the disadvantaged cost structure faced by domestic producers. - By 2015, we expect this import to production gap to increase by 86%. Emerging Polysilicon Players Production Capacity USA Hoku 1,500 MT Dow Corning 1,000 MT Global PV Specialists 1,000 MT Canada ARISE plans 400 MT by

15 Polysilicon Manufacture is an expensive proposition for the United States UNADJUSTED COST OF NEW PRODUCTION BY REGION $/KG (2008 BASIS) Country Raw Material Utilities Labor Maintenance Allocated Fixed Cost Total Cash Cost Kingdom of Saudi Arabia Asia COP Basis: KT Siemens Polysilicon plant, 750 employees - Optimized recycle of STC with only 12% going to waste; no by product credits - Fully back integrated to MGS conversion (MGS and HCL are primary feedstock) North America Source: Nexant 2008 Building a New Polysilicon Plant is Better Suited for Regions like ASIA and Saudi Arabia The United States in Addition to Disadvantaged Labor Costs have Higher than Average Allocated Fixed Costs. - US property taxes and insurance are among the highest in the world Other Regions have significant advantages that make them attractive for new investment. - Asia still boasts extremely low labor costs - Middle East nations have the lowest utility rates AND plenty of sun and sand. The costs do not end here, Polysilicon PV Value Chain includes wafer cutting, cell production, module creation, and system installation each with USA rates for labor, utilities, and fix costs. 14

16 Polysilicon manufacturing cost significantly impacts the cost of PV production IMPACT OF RISING POLYSILICON COST VALUE CHAIN 55-65% of wafer cost Polysilicon Wafers Cells Modules 20% of cell costs 10% of module costs Polysilicon accounts for 55-65% of total wafer costs and 20% and 10% of cell and module costs respectively Surge in polysilicon prices has had a ripple effect across the value chain, negatively impacting the operating profits of wafer, cell and module manufacturers Source: Nexant 2008 MODULE COST SYSTEM COST Cell 20% Other 17% Silicon 50% Installation 9% BOS 9% Modules 55% Module Finishing 30% Inverter 10% Source: Nexant 2008 Source: Nexant

17 Thin-Film has an economic advantage at the production level making it seem more suited for USA production $/W MODULE PRODUCTION COST BASED ON A 100MW SYSTEM(2007) Mono-Si Poly-Si A-Si CIS/CIGS CdTE Mono-Si Poly-Si A-Si CIS/CIGS CdTE $/W $2.32 $2.25 $1.52 $1.30 $1.15 Polysilicon Wafer Cell Module Source: Nexant 2008 INCREASING ADOPTION OF THIN-FILM TECHNOLOGY North America has the advantage of lower production cost, abundance of raw material for thin-film technologies, and a vast market By 2019, the US Government plans to have one million buildings with solar roofs trading a cumulative of 3000 MW. This American Initiative is expected to be over 50% thin film By 2010, the thin film production capacity is expected to exceed 1,771MW per year, making USA one of the major suppliers of thin-film silicon cells and modules in the global market. Most new entrants have been dedicated in thin film technology rather than polysilicon, e.g. First Solar 16

18 Market Dynamics & Trends North America Major Thin-Film Players Manufacturers In North America Company Status Module Efficiency (Adjusting for AC Conversion) Products Uni Solar 180 MW by end of 08 and 300MW by 2010 ~ 7.8% a-si on flexible steel Energy Photovoltaics 10 MW installed 6% to 8.5 % a-si on glass Power Film small production; ramp plans unknown 6% to 8.5% a-si on flexible glass First Solar 1 GW production by end % glass modules Prime Star early stage start up ~ 7.5 % glass modules Canrom commercial production to begin soon 8% to 10 % none MiaSole 25 MW production line in place ~10 % flexible CIGS modules ISET Not yet in production ~8% to 11% characterizing ink selenization CIGS on glass Nano Solar Not yet in production ~8% to 11% characterizing ink selenization CIGS on plastic Heliovolt Plans to expand in 2008 ~8% to 11% Characterization CIGS on glass Shell Solar 3 MW CIS Ascent Solar 1.5MW line in place, 25 MW line for 2010 ~8% to 11% CIGS on plastic Solo Power 20 MW capacity in 2008 CIGS on plastic Global Solar 18 MW capacity for 2008 ~ 8% to 11% CIGS on plastic Source: Nexant

19 Despite the economic disadvantages the United States continues to dominate the polysilicon PV market INCREASING CAPACITY OF WAFER MANUFACTURERS As the USA was the original pioneer for commercializing the solar industry due to NASA s solar needs in outer space, North America s solar wafer manufacturing continues to remain strong ranking third in production behind Japan and Germany Several companies in North America are planning to set up wafer manufacturing plants, increasing the potential customer base for domestic and global polysilicon manufacturers (e.g. Evergreen Solar, Sunpower, United Solar OVONICS, Canadian Solar and Photowatt Technologies) Current domestic demand is 4743 MT of polysilicon to supply 474 MW of new PV production requiring no net import or export - By 2015, the gap is expected to grow by 86 % EXPECTED FUTURE PRODUCTION CAPACITIES OF MAJOR WAFER MANUFACTURERS Company Evergreen Solar Sunpower United Solar OVONICS Canadian Solar Photowatt Technologies Country USA USA USA Canada Canada Production capacity Expansion Plans Plan to increase capacity from 60 MW in 2007 to 125 MW in String Ribbon technology, currently accounts for 100 MW, and reduces silicon consumption by approximately 50%. With a capacity of 100 MW in 2007, the company plans to increase capacity to 255 MW by 2008 and 450+ MW by 2009 Increased capacity to 120 MW in 2007/2008 from 28 MW production in Plan to increase capacity from 100 MW in 2007 to 250 MW in 2008 Plans to increase capacity to 390 MW by end of 2011; Vertically integrated; produces ingots to make plates, cells, multi-crystalline modules Source: Nexant

20 As a result United States Photovoltaics have near 60,000 people working in the industry $230,000,000,000 USD in solar investments 50 States with some version of grants, loans, and other incentives Utility players beginning to ramp-up involvement with PV (e.g. Pacific Gas & Electric 800 MW PV purchase) 19

21 Photovoltaics in the United States Where to Now? 20

22 Commercially feasible PV is on its way help from the government Federal Government Programs and Campaigns - HR 1424 The Emergency Economic Stabilization Act of Solar America Initiative - Energy Efficient Commercial Buildings Tax Deduction - Modified Accelerated Cost-Recovery System (MACRS) + Bonus Depreciation - Residential Energy Conservation Subsidy Exclusion) - Business Energy Tax Credit - Energy Efficient Appliance Tax Credit for Manufacturers - Energy-Efficient New Homes Tax Credit for Home Builders - Renewable Electricity Production Tax Credit (PTC) - Tribal Energy Program Grant - USDA Rural Energy for America Program (REAP) - Grants - Clean Renewable Energy Bonds (CREBs) - Energy Efficient Mortgages - U.S. Department of Energy - Loan Guarantee Program - USDA Rural Energy for America Program (REAP) - Loan Guarantees - Residential Energy Conservation Subsidy Exclusion - Residential Energy Efficiency Tax Credit - Residential Renewable Energy Tax Credit - Renewable Energy Production Incentive (REPI) The recent passing of House Rule 1424 should generate a sustained investment in United States Photovoltaics. United States - RPS, Renewable Portfolio Standard: These states set a minimum renewable criteria to electrical utilities 26 states have mandatory RPS 2 states, Missouri and Virginia, have voluntary RPS commitments - Most incentive programs in the United States are RPS instead of feed-intariffs which are predominant in Europe - Policies are endorsed by states instead of the entire nation - The primary incentive are for environmental concerns to reduce GHG, and not due to the amount of sunlight - Other incentives include job creation, energy security, and cleaner air Example: Texas plans to reduce 3.3 million tons / year of CO2 emissions by requiring 2,000 MW of extra renewable generation by Only three states have implemented Feed in Tariff programs Michigan Hawaii Washington 21

23 The Emergency Economic Stabilization Act of 2008 (H.R. 1424) Long-term Extension of Business Solar Investment Tax Credit -Extends the 30 percent investment tax credit for solar energy through Allows alternative minimum tax (AMT) filers and public utilities to claim the business solar investment tax credits. -Companies and utilities that put solar energy property in service in the U.S. will receive a credit against their income tax liability (includingamt) in the amount of 30 percent of the cost of their installation costs, including solar energy equipment and labor. Long-term Extension and Modification of the Residential Solar Investment Tax Credit. -Extends the credit for residential solar property for 8 years through Removes the cap on the credit (currently $2,000), effective for solar electric property placed in service after December 31, Individual taxpayers can use the credit to offset AMT liability, and to carry unused credits forward to the next succeeding taxable year. -Individuals who install residential solar electricity in the U.S. will receive a credit against their income tax liability (including AMT) in the amount of 30 percent of the installed cost, including equipment and labor. 22

24 The Emergency Economic Stabilization Act of 2008 (H.R. 1424) New Clean Renewable Energy Bonds ( CREBs ) -Authorizes $800 million of new clean renewable energy bonds to finance facilities that generate electricity from renewable resources, including: solar. -$800 million authorization will be allocated as follows: - 1/3 will be used for qualifying projects of State/local/tribal governments - 1/3 for qualifying projects of public power providers - 1/3 for qualifying projects of electric cooperatives. -The bill also extends the termination date for existing CREBs by one year. -CREBs will be able to be issued through December 31, 2009 $600 mm USD set aside to encourage utilities to build Solar capacity. 23

25 HR 1424 will encourage investment along the entire value chain. Extension of Energy-Efficient Buildings Deduction : Current law allows taxpayers to deduct the cost of energy-efficient property installed in commercial buildings. - $1.80 per square foot of building floor area for (i) interior lighting systems, (ii) heating, cooling, ventilation, and hot water systems, or (iii) the building envelope. - Expenditures must be certified as being installed as part of a plan designed to reduce the total annual energy and power costs with respect to the interior lighting systems, heating, cooling, ventilation, and hot water systems of the building by 50 percent or more in comparison certain established standards. - Deductions allowed through December 31,2013 Qualified Energy Conservation Bonds: The bill creates a new category of tax credit bonds, "Qualified Energy Conservation Bonds" (QECBs) to finance State and local government initiatives designed to reduce greenhouse emissions. - QECBs can be issued to finance capital expenditures incurred for: reducing energy consumption by at least 20 percent; implementing green community programs; rural development involving the production of electricity from renewable resources. - The bonds can also be used to finance research facilities and provide research grants for, among other things, technologies to reduce peak use of electricity. - There is a national limitation of $800 million, allocated to States, municipalities and tribal governments. 24

26 HR 1424 will encourage investment along the entire value chain. Research and Development Tax Credit: - Extends the research and development tax credit equal to 20 percent of the amount by which a taxpayer s qualified research expenditures for a taxable year exceed its base amount for that year. - The previous provision expired December 31, The new legislation will extend current law through the end of It Increases the alternative simplified credit from 12 percent to 14 percent for the 2009 tax year and repeals the alternative incremental research credit for the 2009 tax year. - The proposal is effective for amounts paid or incurred after December 31, Thus, research expenditures incurred by the solar energy industry would qualify for the credit. 25

27 Combining these incentives with industry ingenuity will provide a robust environment for photovolatics what else is needed? DISCUSSION POINTS Redistribution of revenue and costs More deregulation? Who owns the grid anyway? Is Net-Metering sufficient enough to redistribute $ from decentralized solar production? REPs? Energy Economy Renaissance or Revolution? Effective Policy Knowledge and Awareness Distribution 26

28 Thank you for your attention and time Sidhartha Sen Principal, Global Chemicals Nexant, Inc. 909 Fannin St., 1275 Houston, TX, Office: Cell: Fax: