The Importance of Accurate Lifetime Assessment to PV Investors

The Importance of Accurate Lifetime Assessment to PV Investors Jon Previtali Wells Fargo Environmental Finance Solar Power International September 2015

Wells Fargo s Investment in Solar $1,600 350 $1,400 300 $Million $1,200 $1,000 $800 $600 250 200 150 MW Utility 51% Commercial 27% Municipal 8% $400 100 Schools 14% $200 50 $0 2007 2008 2009 2010 2011 2012 2013 2014 $ Invested MW Installed 0 $1.5+ billion, 300+ projects

2020 2030 2040 Wells Fargo founded March 18, 1852 US EIA Annual Energy Outlook, 2015

US Gross Annual Capacity Additions Gigawatts 45 40 35 30 25 20 15 10 5 - Fleible capacity Other Solar thermal Small-scale PV Utility-scale PV Offshore wind Onshore wind Biomass Geothermal Hydro Nuclear Oil Gas Coal Source: Bloomberg New Energy Finance

Planned Comanche Solar Power Plant in Pueblo, CO (157 MWdc).

Elected officials and SunEdison breaking ground at Comanche (August 2015).

The Importance of Accurate Lifetime Assessment to PV Investors

Revenue source #1: Solar Investment Ta Credit (ITC) Immediate, but can be recaptured by the IRS within 5 years. Taes Saved/(Paid) Ta Credits Ta Partner Cash Ta Partner Investment Balance Revenue source #2: Accelerated Ta Depreciation (MACRS) Revenue source #3: EBITDA Power sales revenue minus operations costs (epenses). Typical pro forma for a solar partnership flip.

Merchant power sales & residual value EBITDA Revenue Power purchase agreement (PPA) sales Operations costs Typical pro forma for a solar partnership flip.

Ta Equity Investors like Wells Fargo, Google, MetLife Ta Partner Cash Sponsor Cash Project Developers and YieldCos like spower, TerraForm (SunEdison), 8point3 Energy (First Solar/SunPower) Typical pro forma for a solar partnership flip. Target partnership flip year: 7

Top areas of pro forma questions 1. Energy production estimate a) Met data b) PAN file c) System (and module) power degradation rate 2. Operating costs 3. Epected useful life a) Module latent defects b) Materials issues like pier corrosion, cable degradation 4. Curtailment (in CA particularly) 5. Residual Value a) Merchant power sales post PPA b) Resale value of equipment c) Decommissioning costs

Due diligence & funding timeline Project Commitment Initial (~20%) after Mechanical Phase I Independent Engineering review Project timeline Phase II Independent Engineering review & Construction Monitoring Asset Management Monthly Operations Reports from Primary Asset Manager Preproduction factory audit Module Production Production line issue remediation Pre-production lab tests Production factory audits Production lab tests Degradation Rate Tests (continued if modules fail IEC test) Final after Substantial Or Final after Degradation Rate Tests (if modules fail IEC test) IEC 61215 & etended (PVQAT) tests Custom procedure done with NREL Sample size: 90% acceptance rate at 90% confidence level

Take Away Messages For ta equity investors, income in out years is important, but not as much as the ITC in the first year. It will be more important post-itc reduction, particularly if we move back to sale-leasebacks where banks own 100% of the project for PPA terms (20 years). For long-term investors, income in out years is key. YieldCos promise share holders annuities over 35+ years. Epected Useful Life (EUL) and residual value are important, particularly for appraisals required to validate the ITC with the IRS or if the project must be decommissioned after the PPA.

Appendi: Module Lab Test Specifications and IE Review SOW

Ideal Module Lab Testing Schedule (no delays) Weeks 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Days at Lab 7 14 21 28 35 42 49 56 63 70 77 84 91 Manufacturing start Air Shipment Sample prep, outdoor preconditioning Tests Wet Leakage Current/HiPot Flash Test EL Visual Inspection LID PAN file validation 200 TC DH 500 10 HF (IEC) 20 UV 45 (IEC) 300 1000 (IEC) 1500 DML (IEC) PID (IEC) Bypass Diode Test (IEC) Degradation Rate Tests 75 C/20%RH 500 1000 1500 2000 85 C/20%RH 500 1000 1500 2000 95 C/20%RH 500 1000 1500 2000 Reports Initial Check Interim 1 Interim 2 Interim 3 Interim 4 Interim 5 IEC Etended Special 1 (if needed) Special 2 (if needed)

Degradation Rate Tests Degradation Rate Tests 75 C/20%RH 85 C/20%RH 95 C/20%RH Specific fault ID d in IEC test Used in new energy production estimate that feeds project pro forma and purchase price. Degradation Rate Test Results Arrhenius equation coefficients Arrhenius equation model custom fit for fault Additional degradation due to fault. Baseline degradation assumption. New degradation assumption plus error. Typical Met Year (TMY) data for project location Built work by Kent Whitfield and NREL s Mike Kempe, Sarah Kurtz, Dirk Jordan, and John Wohgemuth. NREL study ( Photovoltaic Degradation Rates An Analytical Review, Jordan, Kurtz).

Independent Engineering Review Typical Scope of Work Project Type Commitment pre or early DG <1 DG>1 Utility Scale MWdc MWdc >10 MWdc Review Equipment and Warranties Review PV modules or Turbines Inverters Racking, Tracker, Parking Structure or Tower Data Acquisition System SCADA System Communication Infrastructure Permits and Assessments Review (technical only) Environmental Site Assessment (ESA) Environmental permit ALTA Survey Easements Utility Scale Interconnection agreement Conditional Use permit including decommissioning requirement if any Building permits (confirm completion) DG Interconnection agreement (confirm completion) Periodic through Initial Mechanical Final Substantial or Final 1/7

DG <1 MWdc Project Type DG>1 MWdc Utility Scale >10 MWdc Review Commitment pre or early Periodic through Initial Mechanical Final Substantial or Final Contracts Review (technical only, but including review and gap analysis of various guarantees, tests, operating requirements) PPA EPC EPC schedule O&M Asset Management Monitoring Service Provider Spare Parts List Decommissioning Site Lease Others if needed Contractors Review EPC and main subs O&M and main subs Asset Management including infrastructure (ticketing, billing system, etc.) Monitoring Service Provider Others if needed 2/7

Project Type Commitment pre or early DG <1 DG>1 Utility Scale MWdc MWdc >10 MWdc Review Design Review Geotech report Civil including earthwork and drainage Electrical Structural including wind loading (for both ground and roof), structural roof integrity and post pull-out test results for ground (if needed) Mechanical Architectural (for on-site buildings only) Site Review Site plan including access System impact, facility or interconnection study Hazardous waste on-site Off-site contamination Endangered species Roof condition Land condition including flood plane Operational Budget Review (including reserve accounts, confirm rates are "market") O&M Asset Management, reconciled with Managing Partner responsibilities Monitoring Service Provider Decommissioning Others if needed 3/7 Periodic through Initial Mechanical Final Substantial or Final

Project Type Commitment pre or early Periodic through Initial Mechanical DG <1 DG>1 Utility Scale MWdc MWdc >10 MWdc Review Financial Model Review (pro forma) review Revenue including TOD if applicable Other sources of revenue such as PBI, SRECs. Epenses Review of Curtailment Study (may be performed by third-party) Energy Production Estimate Solar Resource Assessment PAN file creation or confirmation of validation (module) OND file creation or conformation and validation (inverter) Loss estimation (shading, soiling, snow, etc.) Load study for non-eport systems and loss estimation Simulation including Inter-Annual Variability and P50, P75, P90, P99 for 1 and 10 years Site Inspections and Punch List Review Small DG Photographic (desktop)/remote Inspection Utility Scale Monthly Physical/On-Site Inspection Physical/On-Site Inspection at Mechanical Photographic (desktop)/remote Inspection at Final 4/7 Final Substantial or Final

Project Type Commitment pre or early Periodic through Initial Mechanical DG <1 DG>1 Utility Scale MWdc MWdc >10 MWdc Review Mechanical Review Confirmation all major equipment has been installed per plan Commissioning tests outlined in EPC, at least including: String polarity (if not already covered in short circuit current testing) Open circuit voltage and short circuit current testing or the equivalent such as a full coverage IV curve tracer kit or modulelevel thermal audit (if interconnected) Grounding continuity Megger testing Final Substantial or Final 5/7

Project Type DG <1 DG>1 Utility Scale MWdc MWdc >10 MWdc Review Substantial or Final Review Confirmation all construction is complete per plan Performance Test (at least 5 days for DG, 15 days for utility scale at sufficient solar irradiance), e.g. Energy Yield Tests or Performance Ratio Tests Functional Test (continuous, autonomous operation, at least 5 days for DG, 15 days for US at sufficient solar irradiance) Confirmation of remote SCADA system functionality at operator's facility via screen sharing with operator. Confirmation of VPN connection to SCADA system at back-up operator's facility via email from Wells Fargo s back-up operator, commonly EDF. Confirmation of Wells Fargo's parallel monitoring feed functionality via email from Wells Fargo s parallel monitoring service, Industrial Evolution. Confirmation that required Continuity of Operations Program (COP) documentation has been uploaded to Wells Fargo share drive. Commitment pre or early Periodic through Initial Mechanical Final Substantial or Final 6/7

DG <1 MWdc Project Type DG>1 MWdc Utility Scale >10 MWdc Review Review Supplemental Reports (and reference in Commitment pre or early Periodic through Initial Mechanical Final Substantial or Final IE reports) Construction monitoring reports Module lab testing reports Module factory audit reports Curtailment study Insurance review Local ta review Others if needed Reporting IE Reports Supplemental IE Reports IE certificates Project Scorecard (Open Item/Punch List) Meetings and Dialogue Kick-off Periodic meetings (semi-monthly or weekly if needed) Discussion and feedback 7/7

Thank You jonathan.m.previtali@wellsfargo.com (415) 947-1980