Solar3.0 Roadmap From Policy To Profitability

Solar3.0 - A Path from Policy to Profitability

A National Platform for Process Innovation to Scale DG solar PV

Intersolar N.America
San Francisco, CA

Making Solar Happen

About SolarTech
Our Initiatives Our Board Our Partners
Scalable Entire Value Collaborative
Chain Consortium
Local best practices
Systems
National Approach
impact
Performance`

Installation Workforce

Permitting
Financing

Interconnect

2

Proprietary & Confidential www.solartech.org Intersolar 2012
Making Solar Happen

Overview
• Current U.S. market landscape
• Solar 1.0  Solar 2.0  Solar3.0
• The Solar3.0 Platform
• Tipping Points
• A (proposed) path from Policy to Profitability
• Q&A

3
Making Solar Happen

U.S. Solar Market Growth Through 2015
• 2012 – We face multiple challenges with fragmented solution paths

PV Installations Forecast
7000

6000
Market Uncertainty
•1603 & Solyndra hangovers
5000
•Excess Capacity
•Trade dispute
Megawatts (MWdc)

4000
•Election year POLITICS
3000
•Confused Consumers
•Fractured marketplace
2000

1000

0
2005 2006 2007 2008 2009 2010 2011 2012e 2013e 2014e 2015e
SEIA/GTM Research: Q3 2011 Solar Market Insight
Year Q1

Solar3.0 Program Goal  Inject stability & Market Direction
•Efficient local markets through standards, best practices
•Provide lower prices and more predictable transactions to consumers
4
Making Solar Happen

Average Installed System Costs Continue to
Decline (many reasons)

SEIA/GTM Research: Q3 2011 Solar Market Insight

Greentech Media Report (Q111 vs Q112)
•Drops across all sectors = $4.44/w average across markets
•Res - $5.89, Commercial $4.53, Utility $2.90 / W

5
Making Solar Happen

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

- Wikipedia

Making Solar Happen

What is “Main St. USA” waiting for?
• Residential PV break-even • Residential PV break-even
installed price in 2008 assuming installed price in 2015 assuming
full retail net metering, state full retail net metering and 30%
incentives and 30% ITC. ITC.

Source: Denholm, Margolis, Ong, Roberts “Break-Even Cost for Residential Photovoltaics in the United States:
Key Drivers and Sensitivities” NREL 12/2009

7
Making Solar Happen

The people who are crazy enough to think they can
change the world are the ones who do.
- Apple’s “Think Different” commercial, 1997

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

Making Solar Happen

2012 Landscape: “The TOTAL PRODUCT does NOT yet Exist”

• Fragmented Market
– Solar is SOLD (not Bought)
– Solar industry access is
confusing
– Customer Acquisition costs
$2500+
• Lead generation sites yield
1-2%
• Direct conversion rates are
10-15%
– Inefficiencies across the
enterprise
– Few economies of scope &
scale

Proprietary & Confidential www.solartech.org Intersolar 2012 9
Making Solar Happen

“Solar3.0” - A pathway to industry scale

Solar 1.0 Phase 3.0
Policy Innovation Business
(Create Markets) Innovation
Fed Policy (Scale Markets)
RES/RPS
Processes
REC’s
Productivity
SB1, CSI,AB32
Scale
“Total Cost of
Ownership”
Solar 2.0
Technical Innovation
(Capture Markets)

Products
Technology
Innovation
Commercialization
Making Solar Happen

Solar 1.0
Policy
Innovation
http://www.dsireusa.org/
Fed Policy
RES/RPS
REC’s
SB1,
CSI,AB32

Making Solar Happen

•Comparative benchmarking of clean-energy activities
•Analysis of technology, policy, and financing trends / state
Solar 2.0 •Data on which clean-tech sectors are expanding by market
Technology •Insight on each state's relative strengths and weaknesses

Products
Technology
Innovation http://cleanedge.com/research/state-index
Commercialization

Making Solar Happen

A National Platform for Process Innovation in Solar PV
http://solar30.org/ Program Overview
1000+ Communities
Phase 1 90+ Utilities, 500+ PV Installation
Needs Analyses Companies
1600 electrical and code officials trained
Phase 2 30,000 industry stakeholders
Developmen 8 state target, organic adoption beyond
t Phase 3
Implementati
on

Phase 4
Market Impact

Non-Hdwr BOS 2012 2013 2014
costs as % of
<30% <20% <10%
Installed Costs

$2.85M Funding to Reduce Non-Hardware
BOS Soft Costs by 50% by 2014

Making Solar Happen

“Solar3.0” - A pathway to industry scale
Phase 3.0
Business
Processes
Innovation
Productivity (Scale Markets)
Scale
“Total Cost of Ownership”

3.0 Tipping Points – High Priority Markets
2.9 Connect Private Capital & Human Capital
2.8 Mass Market products – “Plug-in-Play”
2.7 Micro-Grid proof points
2.6 Integrated Architectures: RE + NG + EE
Solar 1.0
Policy
2.5 Empowering Consumer Choice
Innovation 2.4 Broader Access to Lower Cost Capital
Fed Policy
RES/RPS 2.3 Relentless Soft Cost reduction
REC’s
SB1,
Solar 2.0
Technology
2.2 Unified Messaging, Aggregate Demand
CSI,AB32
2.1 Market driven solutions
Products
Technology
Innovation
Commercialization
Making Solar Happen

2.1 Shift to Market driven solutions
Phase 3.0
Business
Innovation
(Scale Markets)

Making Solar Happen

Phase 3.0
2.2 Unified Messaging, Aggregate
Business Demand
Innovation
(Scale Markets)

Solar Most Popular Energy by Far
“All of Above” But Major Partisan Divide on Other Energy

Solar +85.3% +93% +93% +73%

Natural Gas +62% +24% +56% +94.7%

Wind +62% +88% +77% +32%

+29% +67%
Nuclear +15% +28%

Oil +24% +58% +13% +84%

Biofuels +18% +31% +24% +4%

Clean Coal +15.7% +38% +1% +68%

Source: Lazard (2011)
Making Solar Happen

Phase 3.0
Business Demand
Innovation
(Scale Markets)
… Americans Are Thinking Another
There is majority support for a measure to increase renewable
Headlines Say One energy standards in every state.
Thing …
Why the Clean Tech
Boom Went Bust

Clean-Energy Aid
Racks Up Losses
*In instances where the data was split-sampled and aggregate data was not
available, the sample with the higher %yes was used.
Summer 2011
Economic Slowdown Challenges
Renewable Energy
Making Solar Happen

Phase 3.0
Business Demand
Innovation “Clean, renewable energy” is seen very positively – that
(Scale Markets)
phrase tends to resonate most strongly.

Phrase %80-100
Thermometer Ratings (Mean Rating)
90
Clean, renewable
energy 52%
80 75 74 72
70
70 68 Clean energy 52%
60
50 Renewable energy 47%
40
30 Sustainable energy 43%
20
10
Green energy 44%

Clean, Clean Renewable Sustain. Green
renewable energy energy energy energy
energy
Making Solar Happen

Phase 3.0
2.3 Relentless Soft Cost reduction
Business •With rapid decline in hardware costs, reducing
Innovation soft-cost is becoming increasingly important
(Scale Markets)

$24

$22
Average Module Price (2010 $/Wp)

$20

$18
$16

$14

$12
$10
$8
$6

$4
$2
$0
What’s left?
1980 1985 1990 1995 2000 2005 2010

2005 2010 Note
ASP $4.04/W $2.40/W in 2010 Avg installed system price decreased ($1.70/W)
Relative module price decline = 96% of the total decline PV system price
Making Solar Happen

Phase 3.0
Business There is more to a system than
Innovation hardware
(Scale Markets)

5) Monitor
performance
4) Install,

3) Permit, Inspect
Interconnect
$$$
-

2) Finance PV
system

• In the U.S., the process of selecting an installer
1) Choose
installer
through operating a PV system can add significant
time and cost to project completion.
• Inefficient supply chains, O&M, and delays can
also increase cost.
 Need for standardization and automation

Making Solar Happen

Phase 3.0
Business Non Hardware Balance of System Costs:
Innovation Baseline and Solar 3.0 Goals by 2014
(Scale Markets)

$1.60
$1.52

$1.40
Installation
Installed Costs

$1.20 Labor
(2011$/Wdc)

$1.00
$0.80
$0.80
Customer
$0.60 Acquisition

$0.40 System Design
All Other
$0.20
“Soft”
Costs
$-

Baseline Solar 3.0 Goal

Source: Ardani et al. Quantifying Non-hardware Balance of System Costs for Photovoltaic Installations in the United states
Using a Combined Annual Expenditure-Labor Hour productivity Approach. National Renewable Energy Laboratory. 2012.

Making Solar Happen
21

Phase 3.0
Business Q3 – Q4 Plan
• 100 communities selected • Solar 3.0 Tool Kit Update 2
Innovation • Monthly webinars • Inspector/Installer workshops
(Scale Markets) • Leadership event • Affiliate-led workshops
• Solar 3.0 scorecard 1

Industry Partners
Solar30.org States PV Developers
Portal
PV Installers

Local/State
Cities
Fire Marshals
Building
Inspectors

Code Officials

Utilities
Making Solar Happen

2.4 Broader Access to Lower Cost Capital
Phase 3.0
Business
Innovation
(Scale Markets)

Mature
industry

Balanced understanding of uncertainty in the performance,
reliability, and safety of components/systems optimized for
The appropriate risk and cost.

Problem < Newer
industry
(ie. Solar)

Uncertainties (real or perceived) can lead to an
unnecessarily high assessment of risk and cost.

Making Solar Happen

Phase 3.0
Business
Innovation
(Scale
Markets)
Current State Future State
• Discrete risks in traditional lending • A standardized approach to risk:
verticals are known (e.g., Auto, Real-Estate) • Construction, Solar resource
• Solar finance involves a unique models, Technology, O&M
combination of risks in a single vertical
Policy Risk
• Opportunity
Customer Risk • Broader participation of
Development Risk
lenders in Solar
• Facilitate the emergence of a
Construction Risk
secondary market for Solar
Resource Risk debt
Technology Risk
• Solar Securitizations, Solar Bonds
Operating Risk

• No standardized way to analyze solar PV Solar as an
project risks, consistent methods, Asset Class
standardized risk asessment
• Most lenders struggle to efficiently
underwrite loans in this field 24
Source: Team Analysis Making Solar Happen

Why Solar as an Asset Class?
Objectives Capital Market Drivers
• Coordinated strategies to increase •~30-35% CAGR to 200GW+ by 2020(GTM)
confidence, decrease risk, and improve •Low cost debt fuels expansion
flow of capital
Today: ~$70bn/ year
• Ways to accelerate commercialization
(<50% is debt financed)
of new technologies through validation
of system performance and reliability. •2020: ~$375bn/ year
• Close gaps in model guidelines re. (~70-80% debt financed)
quantification of risk, capital formation, NEED - $1 trillion in cumulative debt
and bankability. issuance to fuel industry growth by 2020

1:1 (Business-To-Business paradigm 2007-2012)
Development Construction Wharehouse Capital Markets

• Sites • Pre / Post • Insurance • Portfolio
• Contract • Performance • Final due • Ratings
• Partnerships • Commission diligence • Cash Flow
• Structure • Risk / De-risk
• Economics
25
Making Solar Happen

Why does securitization matter 2012-2020?
1:Many (Scale)
Total US Banks vs US Banks actively lending to Solar
• Over 6,500 banks or U.S. lending projects
institutions ~6,500
• <5% are actively lending to Solar <5%

projects
• A “participation gap” exists

Standards +
• Methods, standards, resources, tools, Methods = Scale
guidelines, skills or the capabilities to
<300*
efficiently diligence and underwrite
these loans does NOT exist AT SCALE Total no. of Banks actively
Banks in the lending to Solar
US projects
•Closing the “participation gap” means:
•Lower cost of capital Source: S. Ghaemmaghami & Prof. King “The Solar Risk
•Improved terms Project @ IQSS/ Harvard University “

•Lower prices for consumers
•Subsidy free markets (cheaper,
better, faster)
26
Making Solar Happen

Who has $1,000,000,000,000?

$2.0
Cumulative Loans and Deposits for US • Solar could represent
Community Banks*, 2005-Present ($T) an attractive new
$1.8
vertical for many
Deposits Community Banks
$1.6

$1.4 • Excess cash,
Loans strong(er) balance
$1.2 sheets, shortage of
quality, local, non-
$1.0
traditional lending
verticals (e.g., Real
Estate)
$0.8
2005 2006 2007 2008 2009 2010 2011

* Commercial Banks with assets $200m-$10bn Source: Federal Reserve Weekly H8 Report Loans
excludes assets reclassified under FASB Statement 166; Team Analysis

Making Solar Happen

A Holistic Approach is needed - Key Elements
Performance Symposium – Intersolar NA 7/9/2012
• Program Framework - Chart a course towards ITC expiration

• Ratings - Understand how project/portfolio analysis is conducted,
Rating Agency’s risks stacks are evaluated, quantified, and mitigated at various points
in time
• Risk Stack - Facilitate the underwriting process w/consistent ways to
backstop risk (policy, customer, performance, technology,
construction, O&M , data analytics, and methods independent of
market sectors.
• Local/Regional Capital - Improve the process to access broader,
Local $ lower cost capital pools through standardization

• DATA - Access to system data, analytics, and methods to better
quantify risk stacks: engineering performance, data collection,
Operations & Maintenance, Technology, Financials

• Origination - Propose risk reduction solutions to reduce perceived
and real project risk across the project delivery chain

• Backstop - Leverage models, analytics, data gathering efforts from
National Labs to backstop ratings & risk` 28
Making Solar Happen

Phase 3.0
Business
Innovation
(Scale Markets)

GTM Forecasts 21 GW of PV Module Capacity to Retire by
2015

Create Demand
Pull < 2014!!!

Making Solar Happen

Phase 3.0
2.6 Integrated Architectures:
Business
Innovation
Renewables + Natural Gas + EE
(Scale Markets)

Architecture Challenges Ahead
•Grid integration challenges
•Capacity factors / contribution
•Interconnection
•Dispatchability
•Impact on power markets, economics
•Central vs. DG renewable delivery

21st Century Clean Local Energy Architecture
•IT enabled and automated
•Integrated supply/demand models
•Smart grid applications
•Enterprise delivery systems
•Open architectures moving energy information
across consumers, industry, cities, and utilities.

http://www.nrel.gov/docs/fy12osti/53732.pdf
Making Solar Happen

Phase 3.0
Business
Innovation
(Scale Markets)

Can military bases improve energy
generation and transmission via a new
system: Energy Surety Migrogrids™?

Vision: An energy surety system that
uses more small, renewable, and Trickle down energy
distributed generation and storage innovation effect
nearer the load (microgrid), with less
reliance on generation from big power
plants using a microgrid approach.

“Solar Energy is now a
clean enabling technology.
It’s simply all about clean
electrons now.”

Making Solar Happen

2.8 Mass Market products
Phase 3.0 “Plug-in-Play”
Business
Innovation
(Scale Markets)

•April 24,2012
•$5M for “plug-and-play” PV systems that can be purchased, installed and operational <1day
•partnerships with universities, industry, utilities, and other stakeholders.
•Part of a 5 yr program for an additional $20M ‘ask’ of Congress over the next four years
Making Solar Happen

2.9 Connect Private Capital with Human Capital
Phase 3.0
Cumulative Funding Needs
Business State Capacity Based on Market
Innovation (MW) Share ($M)
California 1,513.4 $25.5M
(Scale Markets)
Where’s the $$$? New Jersey 601.7 $10.1M
Arizona 383.2 $6.5M
Colorado 198.6 $3.3M
New Mexico 160.9 $2.7M
Pennsylvania 141.9 $2.4M
Nevada 141.0 $2.4M
New York 114.4 $1.9M
North
97.2 $1.6M
Carolina
Florida 87.1 $1.5M
Rest of
510.60 $8.6M
Nation
Total 3,950 $66.5M

How can we
create a better
match between
private capital and

Who will train all these new workers? human capital?

Making Solar Happen

Phase 3.0
2.9 Connect Private Capital with Human Capital
Business
Innovation Sustainable Business Models (suggested)
(Scale Markets)
Next steps – Industry vetting
Key Element and Relative Weighting %
Total
Technical Industry Ease of Long-Term Weighted
Replicable Score
Model Simplicity Participation Funding Viability
(7.5%)
(7.5%) (35%) (30%) (20%)

Public/Private
Partnership 5 10 2 4 6 5.7

Revolving Fund 3 5 7 10 8 6.7
Crowd sourcing 2 5 4 9 7 5.4

Public/Private Public/Private Revolving Revolving Revolving Revolving
Highest Score
Partnership Partnership Fund Fund Fund Fund

A joint collaboration of:

Making Solar Happen

3.0 Tipping Point: High Priority Markets
Phase 3.0
Business
Innovation
(Scale Markets)

Making Solar Happen

“Solar3.0” - A Market Based approach to accelerate grid parity
for 46,016,325 people

Phase 3.0
Business
Innovation
(Scale Markets)

Solar 3.0 = Better Tools | Efficient Markets | Lower Costs
Processes
Productivity 3.0 Tipping Points – High Priority Markets
Scale
“Total Cost of 2.9 Connect Private Capital & Human Capital
Ownership” 2.8 Mass Market products – “Plug-in-Play”
2.6 Integrated Architectures: RE + NG + EE
2.2 Unified Messaging, Aggregate Demand
2.1 Market driven solutions
Making Solar Happen

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

What does the U.S. solar industry look like at scale?
- Intersolar N.A, San Francisco CA 7/2012

Making Solar Happen

Solar3.0 Roadmap From Policy To Profitability

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