2012 U.S. solar market soft-cost reduction roadmap

2012 Solar Leadership Summit

Doug Payne

Co-founder / Executive Director

March 7th, 8th 2012

Industry tipping points – Where do we go from here?

Summit at-a-glanceDay 1

WHAT solutions WILL move the U.S. residential / commercial markets faster?

Federal Energy Regulatory Commission

Steps to a sustainable solar future

Conversations at the intersection of Energy, Politics, States, and Consumers

Day 2When, where, and how to drive adoption <2015?

Inside the #’s - Top U.S. markets poised for parity

Finance

Performance

Permitting

Interconnect

I, II, IIIInstallation

I, II, III

Workforce

• How do we execute and drive adoption?

• Top priority issues, tools and markets?

• What standards or best practices are ready to scale?

• How will they reduce soft costs?

• Which local markets are the best tipping points?

• What’s missing?

Politics, States, and Consumers

Finance

Performance

Permitting

Interconnect

I, II, IIIInstallation

I, II, III

Workforce

Day 1 report out – “Town Hall Forum”

Scaling Capital to Scale an industry

Full Summit Report “Executive Situation Desk”

• How do we deploy best practices faster to support a subsidy-free / grid-parity distributed PV marketplace?

U.S. Solar Market Growth Through 2015

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5000

6000

7000

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PV Installations Forecast

Market Uncertainty•1603 & Solyndra halos

•Trade dispute•Election year POLITICS

•Confused Consumers•Fractured marketplace

• 2012 – We face multiple challenges with fragmented solution paths

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2005 2006 2007 2008 2009 2010 2011 2012e 2013e 2014e 2015e

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Year Q1SEIA/GTM Research: Q3 2011 Solar Market Insight

•Fractured marketplace

Solar3.0 / Summit Goal �� Inject stability & Market Direction•Efficient local markets through standards, best practices

•Provide lower prices and more predictable transactions to consumers

SolarTech Copyright 2012 - All rights reserved

Average Installed System Costs Continue to Decline

SEIA/GTM Research: Q3 2011 Solar Market Insight

2012 Summit / Solar3.0 Tipping Points


Tipping point - The event of a previously rare phenomenon becoming rapidly and dramatically more commonrapidly and dramatically more common

- Wikipedia

What is “Main St. USA” waiting for?• Residential PV break-even

installed price in 2008 assuming full retail net metering, state incentives and 30% ITC.

• Residential PV break-even installed price in 2015 assuming full retail net metering and 30% ITC.

Source: Denholm, Margolis, Ong, Roberts “Break-Even Cost for Residential Photovoltaics in the United States:

Key Drivers and Sensitivities” NREL 12/2009


The people who are crazy enough to think they can change the world are the ones who do.

- Apple’s “Think Different” commercial, 1997

How will “Go Solar”?

- SolarTech’s “4th Solar Leadership Summit”, 2012

Addressable U.S. Rooftop Market for Residential Customers(1)

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100,000

150,000

200,000

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MW Addressable for

Residential Rooftop

# of States with

Addressable Demand

The good old “S-curve”<

142

$27M to achieve

scale

(1) The residential market sizing by ThinkEquity assumes that solar facilities are purchased by individual homeowners. We have modified the analysis to reflect additional federal subsidies worth $0.50/W from which commercial owners such as SunRun benefit.Source: ThinkEquity “Think Greentech” Feb 2010

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Total System Price / Watt

2011 2008200920102012

scale


Program Overview 1000+ Communities90+ Utilities, 500+ PV Installation Companies1600 electrical and code officials trained30,000 industry stakeholders8 state target, organic adoption beyond

Phase 1Needs Analyses

t

Phase 2Developmen

t

on

Phase 3Implementati

on

“Solar3.0” - A National Platform for Process Innovation

Solar 3.0 Partners:

Non-Hdwr BOS costs as % of Installed Costs

2012

<30%

2013

<20%

2014

<10%

Phase 4Market Impact

Phase 4Market Impact


A Market Based approach to accelerate grid parity

for 46,016,325 people

Solar 3.0

2012 Target States

Full Summit Report “Executive Situation Desk”

•Top priority issues, tools and markets?

•How do we deploy best practices faster to support a subsidy-free / grid-parity distributed PV marketplace?

•What standards or best practices are ready to scale?

•How will they reduce soft costs?

•Which local markets are the best tipping points?

•What’s missing?

Finance

Performance

Permitting

Interconnect

Installation I, II, III

Workforce

Wade Crowfoot - Deputy Director, Governor’s Office of Planning & Research

Scott Clavenna - CEO, Greentech Media

Nat Kreamer – CEO, Clean Power Finance

Danny Kennedy – President & Founder, Sungevity

Ned Harvey - COO, Rocky Mountain Institute

Jurgen Krehnke – President & GM, SMA North America

Summit Report / Recommendations

Solution Paths

• Working well – Just scale it– Existing tax equity sources are trained

– Debt financing on utility scale markets is fairly efficient

– Lending in residential space doing well

• Market gaps – Participation gap: Less than 5% of

banks lending to solar plants

– Tax equity: Limited resource (2 own 80%) & lack of transparency

Finance

Execution & Adoption

• Highest priority markets• C&I market

• Residential market

• Keys to adoption• Standardize: Standardize criteria and

rating methodology for assessing credit risk in Solar assets

• Simplify & Amplify: Simplify message to educate all parties; Take time to become credible advocate with regulators and educate utility commissioners

80%) & lack of transparency

– C&I market: In no-mans land and hence scalability an issue

• Top priorities– Close participation gap in banks;

Create Green bank

– Expand scope of tax equity participation

– Policy to stimulate C&I market (Example: REIT, Commercial PACE)

• Impact on soft cost reduction– Cost of capital: 200-400 bps premium

on solar assets (700 bps for tax equity)

educate utility commissioners

• Train: Train banks and rating agencies in the space and increase participation from broader market

• What are the risks?• Policy risk: ITC expiring in 2016;Low

incentive for new banks to get into tax equity market;

• Net-metering: 5% cap issue

• Scalability risk: Volume needs to grow to attract more banks


Solution Paths

• Working well – Just scale it– O&M risk manageable, but overlooked

• Market gaps – Transparency: Lack of transparent

data in market

– Standardization: Need standardized methods for assessing data to reduce solar resource risk; Takes long time to develop standards

– Bankability: High degree of subjectivity in defining “bankable” product

Performance


• Highest priority markets• C&I market

• California, Texas and New Jersey

• Keys to adoption• Performance data: Trusted 3rd party

needs to help create standards to build transparent performance data from power plants; Learn from other markets like Germany and/or require monitoring

• Standardization: Standardization of Independent Engineer evaluations; in defining “bankable” product

• Top priorities– Open access to performance data

– Need to create “best practices” for assessing performance of plants

– Involve Independent Engineers to help standardize definition on bankability

• Impact on soft cost reduction– $/W impact: Variation in energy yield

leads to increase in system cost (10% over-prediction � 10% increase in cost)

Independent Engineer evaluations; Standardization of communication and monitoring methods

• Securitization: Transparency needed to eliminate technology risk and enable securitization of the market

• What are the risks?• Policy risk: ITC uncertainty makes

financing long term projects more difficult

• Perceived risk : Perceived risk higher than the actual risk of projects. We may be leaving money on the table


Solution Paths

• Working well – Just scale it– A NEC and I Codes

– B Training

– C German methods

• Market gaps – “Building code requirements” is

known, must go faster

– ‘Lack of ASTM Standard’ is known, little is being done

Installation I,II, III


• Highest priority markets• Solar America cities

• Common priority markets:

• Residential

• Unique priority markets: Commercial rooftop

• Keys to adoption• A Public awareness

• B Use ASTM for systems standardknown, little is being done

– ‘Systems Approach” is over the horizon

• Top priorities– A Education & public awareness

– B Plug-n-Play systems

– C Certification (components & installers)

• Impact on soft cost reduction– $0.50 / W, cost of capital (%)

• B Use ASTM for systems standard

• C Industry collaboration & leadership

• What are the risks?• A Roof failures

• B Bad PR

• C Bad/restricted policy


Solution Paths

• Working well – Just scale it– Industry Driven Workforce

Collaboratives

– State & Federal Certified Programs (eg. Apprenticeships)

– Energy Faculty Forum

• Market gaps – Need for training in Finance and

Workforce


• Highest priority markets• Follow sales and economic

demographic/PV demand statistics

• Residential market is leading now

• Keys to adoption• Regional Industry-Driven

Partnerships

Sales for Energy Professionals

– Miniature/Stackable Credentials

– Interdisciplinary Training

• Top priorities– Integrate EE and PV/RE into

Training Curricula

– Standardize Learning Objectives and Curricula

– Integrate Work Experience- OJT -Apprenticeships

• What are the risks?• Profitability of “Best Practices” (can

best practices sustain themselves?)

• Impact on soft cost reduction• Quantify Value of Training to

Employers


Solution Paths

• Working well – Just scale it– Standardization in pockets

– Certification—drive adoption

– Streamlining—SolarABCS, etc.

• Market gaps – Known (See Solar3.0 / SunShot)

• Top priorities– Training for Permitting Officials


• Highest priority markets• West

• CA, AZ, MA, NJ

• Identify key cities across U.S.

• Keys to adoption• Survey AHJs to gauge training

requirements

Permitting

– Training for Permitting Officials

– Permit Training for Installers

– Development of a Toolbox

– Third Party options as “battery backup”

• Impact on soft cost reduction– $.50 - $1.00 / W, cost of capital

(10-25%)

requirements

• Survey Industry to identify key factors to expanding in AHJs

• Utilize DOE leverage to demonstrate viability of options and drive adoption

• Utilize technology to expedite and streamline permitting

• What are the risks?• Pushback from jurisdictions

• Success


Solution Paths

• Working well – Just scale it

– IREC Freeing the grid

– IREC interconnection and net metering best practices guideline

– Online application SDGE and FLP

• Market gaps

– Tariff vs. Process

– Utilities who have benefited using existing solutions vs. those who have not

Interconnect


• Highest priority markets

• Solar 3.0 top 100 cities

• Regional (SMUD, LADWP, PG&E, SCE)

• Keys to adoption

• Communication - not just to utilities but to PUCs, munis’ and elected officials and/or sustainability rep

• Buy-In

• Education - importance of doing it correctly, benefits of doing it correctly

• Accountability & Transparency• Top priorities

– Online application with Software validation & transparency

– Educating applicants, identify people who need help

– Marketing campaign to PUCs and Munis demonstrating existing solutions via webinars

• Impact on soft cost reduction

– Cycle time for on-line application submittals is <5 days, txn costs?

• Accountability & Transparency

• What are the risks?

• Success

• Fallout from focus group (volunteers). Must have incentive

• Time is the enemy – need an achievable time line to achieve success

Documents

2012 U.S. solar market soft-cost reduction roadmap