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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
5th October 2012

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 earths land
mass (320,000 km) would be necessary to supply the worlds total
power consumption (20,260TWh in 2008)

The key raw material for the production of crystalline silicon cells
and modules, silicon (Si), is the earths second most prevalent
element, representing 28% of the earths 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 mankinds
ever growing need for energy

Available energy vs. global capacity

89,000 TW

370 TW
15 TW

Solar
Source: the MIT press, Stanford University, EIA

Wind

Global
Capacity

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 (Moores 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 150 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

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)

In 2008 solar LCOE(1) (Levelized Cost of Energy) for large-scale


installations was in the $450-570/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

Solar module price evolution divided by 20 over the last 30


years (in $/W)

(1) Cost of the energy-generating system including all costs over system lifetime

Energy Source

Generation costs
(new generation only, best-in class players)

Energy Source

Generation costs
(new generation only, best-in class players)

Solar PV

100/120/MWh (2012)

Biomass

100/150/MWh

CSP

140/250/MWh

Fuel (DG)

120/200/MWh

Onshore wind

55/90/MWh

Coal (imported)

70/90/MWh

Offshore wind

120/200/MWh

Nuclear (EPR)

70/90/MWh

Mini hydro

80/120/MWh

Gas (exc. Shale)

70/90/MWh

Volume momentum turns solar into the mainstream

New additional solar capacity (2004-2011, 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
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)
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 2012

29,157

30,000

25,000

20,000

16,533
15,000

10,000

7,357
6,254
5,000
2,487
1,085

1,419

1,470

2004

2005

2006

Europe

Asia

2007

Americas

2008

China

2009

MEA RoW

2010

2011

The rise and fall of the European feed-in tariffs

Market dynamics

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)
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 (2009-2012), Czech Republic (2010), France
(2010-2011), Italy (2011-2012) and the UK (2011-2012),
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)

European market split in 2011 (in MW and %)


Greece
426
(2%)

Spain
372
(2%)

United Kingdom
784
(4%)
Belgium
974
(4%)

Czech Republic
321
(1%)

Rest of Europe
623
(3%)

Italy
9,284
(42%)

France
1,671
(8%)

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)

The European energy transition paradigm

1
2011 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
2

The
European
energy
transition
paradigm

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
3
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
4
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

5
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,

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

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

High

PV attractiveness for country

Low

Country investment attractiveness

Source: EPIA

As a result the solar installations should boom in


those markets with the highest
(i) power needs,

(v) political stability

(ii) growth

(vi) bankability

(iii) power prices

(vii) political ambition in


solar/renewables

(iv) irradiation

High

The policy challenges of mass-scale solar power


generation

Core issue: how to bring mass-scale deployment of


solar power while fostering the countrys 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

The key drivers in the business of competitive solar


power

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

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

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

Solairedirect, a global pioneer of competitive solar


power

France
- PPAs at 0.11 /kWh
- 2015 annual construction
target > 500 MW

United States

China

- PPAs at 0.11 /kWh, fixed


price
- 2015 annual construction
target: 125 MW

-dedicated to upstream

Thailand
- 2015 annual construction
target > 100 MW

India
- Awarded PPAs:
0.11 /kWh)
- 2015 annual
construction target:
120 MW

Chile
- PPAs at 0.11 kWh Indexed
on market price
- 2015 annual construction
target: 100 MW

South Africa
- Awarded PPAs: at 0.13 /kWh
- 2015 annual construction target:
100 MW
- Module assembly line (40 MW)

Solar represents a compelling option due to its ease of installation in countries with electricity shortages

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 7 490 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