Stephen O'Rourke | PV Status and Pathways

Solar Photovolatic Industry Institute for Analysis of Solar Energy – 24 April 2009 Deutsche Bank Securities Stephen O‘Rourke (212) 250-8670 All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research is available to customers of DBSI in the United States at no cost. Customers can access IR at http:// gm.db.com/IndependentResearch or by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1 Solar Impulse HB-SIA prototype airplane © Solar Impulse/EPFL Claudio Leonardi

Stephen O‘Rourke (212) 250-8670
New technology could accelerate solar PV cost reduction
Solar PV industry – long-term outlook Broad cost convergence over the next 6 plus years c-Si CIGS  -Si (2x) CdTe US - Average price of electricity in 2009 est: 9.5 cents/kWh Electricity from solar PV is becoming cheaper… … and grid costs are rising Grid cost convergence Periodic over-supply is inevitable Potential for explosive growth in demand upon convergence New technology wildcard
“ Grid parity” is a conditional number; no single number is adequate
No technical breakthroughs are required to achieve solar PV cost reduction curve(s)
Oversupply is inevitable and will be acute over the near term (credit driven)
Supply Demand Source: Deutsche Bank estimates 6% 5% 4%

Stephen O‘Rourke (212) 250-8670 Economics by technology (what companies can do…)

Stephen O‘Rourke (212) 250-8670 Solar PV value chain for c-Si and thin film technologies
Three points in the value chain warrant the most careful consideration
1. Manufacturing $/Wp at the module level 2. System level (price) $/Wp 3. LCOE ($/kWh)
Improving CE
Declining Si pricing
Declining ASPs
Compressing margins
Scale effects
Variance error OK
Company cost structures at key points in the value chain have enormous implications on LCoE and business models Assessing the Value Chain
Significant “low tech” potential
A select few are actively opening mkt segments
Scale effects emerging
Maturing segment
Variance error is high
Limited credit
Increasing cost of capital
ASP support mechanisms
Variance error good
Growing database
Technology dev’t
Maturing segment
Increasing cost of capital
ASP support mechanisms
Source: Deutsche Bank Thin film approaches c-Si approaches PV Cells PV Modules Wafers PV Cells Polysilicon PV Modules SiH 4 /TCS Manufacturing Equipment Ancillary Equip Distribution Installation Distribution Installation Energy Energy

Stephen O‘Rourke (212) 250-8670 Cost comparisons along the value chain Source: Deutsche Bank estimates c-Si (ave) c-Si (high CE) c-Si (hi/lo) a-Si (mm) CIGS CdTe Module $/Wp by technology System $/Wp by technology (1MWp system) LCOE ($/kWh) (1MWp system, 5kW/m 2 /d)
CdTe is a disruptive technology and will maintain a large module $/Wp advantage over c-Si at the module level. CIGS has the potential to challenge over the long term.
c-Si’s apparently large learning curve is more a result of substantial polysilicon cost reduction.
Fully installed system price ($/Wp) for fixed tilt systems.
There is substantial sensitivity to numerous variables (e.g. BOS costs (ex. inverter), margin structures, business models). The greatest variance error in any analysis resides here.
At the LCoE CdTe has a distinct advantage over c-Si; CIGS has the potential to challenge over the long term.
Margin structures are critical to assess the true competitiveness of technologies (and companies).

Stephen O‘Rourke (212) 250-8670 There are leaders, but no definitive winner at the LCOE level Comparative advantages – LCOE (with respect to c-Si) c-Si (hi/lo) c-Si (ave) c-Si (high CE) a-Si (mm) CIGS CdTe c-Si (hi/low) Source: Deutsche Bank estimates Module $/Wp wrt c-Si System $/Wp wrt c-Si (1MWp system) LCOE ($/kWh) wrt c-Si (1MWp sys, 5kW/m 2 /d)
CdTe has and should maintain a >40% module $/Wp advantage over ave CE c-Si at the module level.
The near-term % increase in $/Wp by thin film competitors is due to a substantial polysilicon cost reduction.
CdTe module $/Wp advantage declines to ~8% to ~12% over ave CE c-Si at the system level.
High CE c-Si and a-Si (UM) lag, and low cost/ higher than ave CE c-Si can offer better system level costs.
CdTe is the LCoE leader for a fixed tilt installation (~10% to 12% lower than ave CE c-Si), and should remain so with substantial margin latitude.
CIGS has great potential
High CE c-Si will struggle with a fixed plate configuration.

Stephen O‘Rourke (212) 250-8670 The LCoE Gap (c-Si) $0.00 $0.10 $0.15 $0.20 $0.35 $0.40 Levelized Cost of Electricity (LCoE) – US$/kWhr Installed cost/Wp – US$/Wp $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $1.50 $2.00 $2.50 $3.00 $0.05 Solar PV LCoE (1MWp x-Si system) (Santa Maria, CA – 1.573kWhr/Wp fixed mount, 6% interest rate) ~$5.50/Wp (Ave today) No incentives w/ 30% grant/ITC w/ accelerated depreciation Industrial(2008): 7.02¢/kWhr 2008 average retail price: 9.81¢/kWhr State Incentive plan ~$1.00/Wp installed Residential (2008): 11.35¢/kWhr $0.25 $0.30 Source: PG&E, EIA, SunPower 2008 analysts day presentation, and Deutsche Bank estimates Santa Maria, CA Comb Cycle Nat Gas LCoE of $0.073 to $0.121/kWhr Gas Peaking Power LCoE of $0.221 to $0.352/kWhr Wind Generation LCoE of $0.044 to $0.091/kWhr

Stephen O‘Rourke (212) 250-8670 The LCoE gap (c-Si) $0.00 $0.10 $0.15 $0.20 $0.25 $0.30 $0.35 $0.40 Levelized Cost of Electricity (LCoE) – US$/kWhr Installed cost/Wp – US$/Wp $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $1.50 $2.00 $2.50 $3.00 $0.05 Solar PV LCoE (1MWp x-Si system) (Newark, NJ – 1.183kWhr/Wp fixed mount, 6% interest rate) No incentives w/ 30% grant/ITC w/ accel depreciation 2008 average retail price: 9.81¢/kWhr Residential (2008): 11.35¢/kWhr Industrial(2008): 7.02¢/kWhr w/ 30% grant/ITC w/ accel depreciation No incentives Newark, NJ Source: EIA, SunPower 2008 analysts day presentation, and Deutsche Bank estimates Solar PV generated electricity is much more expensive in NJ. However, NJ’s SREC program allows the sale of related carbon credits at ~$0.40 to $0.71/kWhr, offering an attractive market. Comb Cycle Nat Gas LCoE of $0.073 to $0.121/kWhr Gas Peaking Power LCoE of $0.221 to $0.352/kWhr Wind Generation LCoE of $0.044 to $0.091/kWhr

Comparing production solutions (fixed tilt) $0.06 $0.10 $0.12 $0.14 $0.16 $0.18 $0.20 $0.22 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 Levelized Cost of Electricity (LCoE) – US$/kWhr Installed cost/Wp – US$/Wp $0.08 $4.75/Wp Installed Output over a day LCoE = Total costs of system Total kWhr generated = $ kWhr Area under curve = kWhr Stephen O‘Rourke (212) 250-8670
Installed cost/Wp plus financing costs
Maintenance/upkeep costs
Land/roof lease costs
ITC tax benefit included in this analysis
Total system costs include:
Location of the system installation
Solar irradiance at the location
System config. (tilted, fixed, tracking, etc.)
Technology attributes
Total kWhr generated incorporates: $4.00/Wp installed CdTe (direct bandgap) yields higher output Fixed mount Comparing 1MWp scale systems (6% interest rate)
c-Si installed price $5.50 (>$3/Wp module)
CdTe installed price $4.50 (~$2/Wp module)
c-Si installed price $4.75 (<$2.50/Wp module)
CdTe installed price $4.00 (<$1.80/Wp module)
Recent system prices Future comparison system prices Source: Deutsche Bank estimates Wp noon Wp Time (hrs, one day) Fixed mount CdTe $4.50/Wp Installed Fixed mount ave efficiency c-Si $5.50/Wp Installed

Comparing production solutions (1-axis tracking) $0.06 $0.10 $0.12 $0.14 $0.16 $0.18 $0.20 $0.22 Levelized Cost of Electricity (LCoE) – US$/kWhr Installed cost/Wp – US$/Wp $0.08 LCoE = Total costs of system Total kWhr generated = $ kWhr Stephen O‘Rourke (212) 250-8670 1-axis tracking system costs include: Output over a day Area under curve = kWhr $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00
Higher installed cost/Wp (tracker cost)
Higher maintenance costs
More land used
Comparing 1MWp systems (6% interest rate) 1-axis tracking Fixed mount High efficiency (Hi CE) modules better leverage cost on 1-axis trackers, leading to lower LCoE relative to standard efficiency modules. Total kWhr generated incorporates:
Higher energy output offsets
Higher efficiency better exploits energy/cost benefit
Hi CE c-Si installed price $6.00 (>$3.25/Wp module)
Trackers from potentially <$0.40/Wp (fully integrated mfg) to >$1.00/Wp
Hi CE c-Si installed price $5.00 (<$2.75/Wp module)
Recent system prices Future comparison system prices Source: Deutsche Bank estimates Hi CE, 1-axis track $6.00/Wp Installed w/ 1x track Wp noon Wp Time (hrs, one day) Hi CE, 1-axis $5.00/Wp Installed

Comparing production solutions (optimized c-Si mfg) $0.02 $0.10 $0.12 $0.14 $0.16 $0.18 $0.20 $0.22 Levelized Cost of Electricity (LCoE) – US$/kWhr Installed cost/Wp – US$/Wp $0.06 Stephen O‘Rourke (212) 250-8670 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $1.50 $2.00 $2.50 $3.00 $0.08 $0.04 Comparing 1MWp scale systems (6% interest rate) Case V (low c-Si cost) Total installed price of $3.46/Wp Source: Deutsche Bank estimates Wind Generation LCoE estimated at $0.044 to $0.091/kWhr Comb Cycle Nat Gas LCoE estimated at $0.073 to $0.121/kWhr Gas Peaking power LCoE estimated at $0.221 to $0.352/kWhr China low cost example Declining c-Si cost progression $3.46 $3.88 $4.25 $4.73 $5.19 Installed $/Wp P-Si costs from $120/kg (case I) to $40/kg (Case V), using 7g/Wp P-Si wafering Cell, Module Module GM 17% B/S cost Inverter cost Install GM 12% Labor & Misc.

Stephen O‘Rourke (212) 250-8670 Quantifying competitive advantages Key competitive metric: operating structure For a given LCoE , a CdTe system can support a GM of ~30% versus ~17% for c-Si. High CE c-Si on 1x tracking can compete with CdTe, with a GM of at least several points lower. Points to potential market segmentation As competition becomes more margin based, “EMS-like” GMs could make it difficult for technology centric companies (i.e. business models could be reset).
Installation type
Area constrained
Residential
Fixed mount
(not area constrained)
Large scale
Most applicable technologies
high CE
Ave CE c-Si
Ave CE c-Si / CdTe
CdTe / high CE c-Si 1x tracker
A more aggressive, staged transition to IPP business models.
Source: Deutsche Bank estimates

Stephen O‘Rourke (212) 250-8670 Supply and Demand (what an industry does…)

Stephen O‘Rourke (212) 250-8670 Demand - (ROI) based demand growth by Region
Toward a regional demand model
We built a demand model with regional ROI’s as primary demand growth determining metrics.
The quantification of exogenous effects must be estimated when known.
Incentives will continue to be key demand drivers over the next several years.
Source: Deutsche Bank Provided there is capital… Source: Deutsche Bank estimates Source: Deutsche Bank estimates Large markets Next growth markets Hopeful growth markets Nearterm laggards

Stephen O‘Rourke (212) 250-8670 Supply vs Demand Solar PV supply & demand forecast Forecast 40% Source: Deutsche Bank Source: Deutsche Bank estimates Solar PV industry CAGR (5% increments from 30% to 60%) Supply Base case Supply Upside Supply Downside Demand Upside Demand Downside 30% 35% 55% Module output (CAGR) 45% 8.8 5.6 Sales downside case 12.5 7.2 Sales upside case 10.9 6.2 5.5 Sales base case 2010 2009 2008 Total module supply (GWp) * “Sales” is adjusted for FGI, etc. at year-end c-Si module supply (GWp) 8.2 4.7 4.7 Sales 9.7 5.5 5.2 Production 2010 2009 2008 2.7 1.6 0.8 Sales 3.1 1.8 0.9 Production 2010 2009 2008 Thin film module supply (GWp) Source: Deutsche Bank Module demand (MWp installed) Demand Base Case

Stephen O‘Rourke (212) 250-8670 Dynamics of an industry shake-out – actuals vs projections
Anticipated over-supply dynamic emerged two+ quarters ahead of prior expectations due to:
The emergence of acute credit restrictions
Spain’s 500MWp annual cap for 2009 and beyond enacted in late 2008
Un-checked capacity build-out over past two years
Effects are matriculating up and down the value chain with varying degrees of severity.
We had forecasted periodic resets in Module ASP in response to shifts in supply and demand – the present credit crisis pulled in the first reset substantially.
Margins are narrowing as oversupply drives price competition.
Source: Deutsche Bank
Comparing our May ‘08 forecast to actual module pricing trends
General margin structures will decline for much of the upstream portion of the value chain.
Hypothetical ASP reset May 08 f’cast Forecast Module ASP could reset iteratively as production hits market; periodicity is difficult to predict. Module cost (May-08 f'cast) Module price (ASP) Reality May-08 f'cast

Stephen O‘Rourke (212) 250-8670 Translating industry dynamics to LCOE
Notes (EIA data, 2006):
EIA data latest available (released Oct-07)
Residential $0.104/kWhr, commercial $0.092/kWhr, and industrial $0.012/kWhr
Convergence projection Pulled in by about a year
Actual solar PV LCoE trended differently from our original projections due to:
An appreciating Euro, and strong Spanish subsidies and growth drove installed system prices higher.
The emergence of acute credit restrictions led to module over-supply and rapid ASP declines.
While the near-term trajectory toward grid convergence has accelerated, the longer term trajectory has pulled in by roughly a year to a year and a half.
c-Si module systems Source: Deutsche Bank estimates $0.089/kWhr (ave retail electricity prices - US) 4% CAGR 5% CAGR 6% CAGR 7% CAGR DB LCOE projection (c-Si) (May-08) Euro driven inflation case An appreciating Euro and Spanish subsidies led to rising installed prices for solar PV systems ASP/margin reset Over-supply and weakening Euro Extreme ASP/margin reset Forecast

Stephen O‘Rourke (212) 250-8670 Business models and markets (measuring strategic acumen…)

Stephen O‘Rourke (212) 250-8670 Considering business models over the long term
Selling energy on a commercial scale
Manufacturing and selling silicon when the shortage returns
Why continue to make cells/modules, an inevitable commodity?
If a company has a technology advantage that enables the lowest LCOE with which to compete for energy contracts
Source: Deutsche Bank The most profitable places – the ends of the value chain Industry shake out

Stephen O‘Rourke (212) 250-8670 Solar PV – a means of translation (measuring an industry’s health and maturity)

Stephen O‘Rourke (212) 250-8670 Solar PV industry outlook – a translation Source: DB estimates
Initial financing boom is over
Public – silicon technology based financing  market capitalization and liquidity become adequate for many investors
Private – transition from silicon to thin films and next generation materials (technology windows opening/closing)
Initial production ramp: Emergence of many companies Rationalization: Corporate Finance Stock performance Initial growth phase Build-out of an industry Maturity Shake-out Shake-out and consolidation Some casualties of shake-out expected Normalized anticipated corporate finance activity Normalized anticipated stock performance Foundations for a new industry: Commercial scale production ramp by a rationalized supplier base – corporate finance activity to support A maturing industry: Classic cyclical growth phase – industry leaders become self financing, followed by corporate financing activity
Oversupply is driving a shakeout: corporate finance activity has declined and will likely shift to M&A
Some companies will not survive; longer-term industry leaders will emerge
Average grid parity reached  huge production ramp ensues  corporate finance to fund expansion
Industry reaches cyclical growth phase  self-financing will drive larger portion of subsequent expansion
Source: Deutsche Bank Grid partiy reached

Stephen O‘Rourke (212) 250-8670 Thank you

Special Disclosures Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s) about the subject issuer and the securities of the issuer. In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. Steve O'Rourke None

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Stephen O'Rourke | PV Status and Pathways

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