GTM Research Senior Analyst Cory Honeyman on the State and Future of the U.S. Solar Market. Presentation from Solar Power International, September 2015

1. The State and Future of the U.S. Solar Market
September 2015
Cory Honeyman
Senior Analyst, Solar Markets
honeyman@gtmresearch.com

2. www.gtmresearch.com -2-
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1
• U.S. Solar’s Emergence Over The Past Few Years
2
• 3 Reasons Behind 18 GW Over 18 Months
3
• From the Ashes of 2017…Emerges a Distributed Solar Boom
4
• How U.S. Solar Strikes Back between 2018-2020
3
U.S. Solar: Peering Over The Horizon

4. www.gtmresearch.com
80%+ of cumulative solar came online in last 3.5 years Solar gaining steam in broader electricity market too
4
U.S. Solar’s Growing and Going Mainstream…
4%
9% 9%
27%
32%
40%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2010 2011 2012 2013 2014 1H 2015
ShareofNewCapacity(%)
Solar's Share of New Electricity Generating
Capacity Brought Online in the U.S.

5. www.gtmresearch.com
Source: U.S. Utility PV Market Tracker
5
Utility PV’s Emergence: Realization of RPS Driven Demand
101
269
784
1,803
2,855
3,922
9%
32%
41%
53%
60%
63%
0%
10%
20%
30%
40%
50%
60%
70%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Cumulative Pre-
2010
2010 2011 2012 2013 2014
ShareofAnnualU.S.PVMarket(%)
UtilityPVInstallations(MWdc)
Utility PV Installations (MWdc) Share U.S. PV Market (%)

6. www.gtmresearch.com
Source: GTM Research/SEIA, Q2 2015 U.S. Solar Market Insight
6
Distributed PV: Growth & Growing Pains Amidst Incentive Volatility
0
50
100
150
200
250
300
350
400
450
500
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
DistributedPVInstallations
(MWdc)
Residential PV Non-Residential PV
Residential PV market displaces non-residential PV as
primary driver of distributed solar

7. www.gtmresearch.com
Sluggish Investment In The Sub 1 MW Market Challenging Economics Due to Rate Design
7
Underlying Barriers to Non-Residential Solar Growth
Source: GTM Research/SEIA, Q2 2015 U.S. Solar Market Insight Source: Genability

8. www.gtmresearch.com
Source: GTM Research/SEIA, Q2 2015 U.S. Solar Market Insight
8
Looking Ahead: 18 GW over 18 Months…But Why?
1,168 854
1,926
3,373
4,782
6,227
2,722
5,017
12,673
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
U.S.PVInstallations(MWdc)
Residential PV Non-Residential PV Utility PV
Pull-in of demand amidst pending federal ITC stepdown

9. www.gtmresearch.com
• Between 2010 and 1H 2015, steep cost reductions have expanded the
universe of state markets where solar is unchained by state incentive
funding or RPS driven procurement
1
2
3
9
Between 2H 2015-2016: 3 Reasons Behind 18 GW of Growth

10. www.gtmresearch.com
Source: GTM Research/SEIA, Q2 2015 U.S. Solar Market Insight
10
Cost Reductions: Primary Lever of Market Growth
$6.64
$5.86
$4.25
$4.77
$3.50
$2.31
$3.54
$2.26
$1.65
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
Residential PV Commercial PV Utility PV
AverageInstalledCost($/Wdc)
2010 2012 1H 2015

11. www.gtmresearch.com
Utility PV Pipeline (GWdc):
RPS vs. Non-RPS Driven Procurement
7.9
47%8.7
53%
Outside/Above and Beyond RPS Obligations
Driven by RPS Obligations
16.6
GWdc
Non-RPS Driven Pipeline:
Breakdown by Procurement Mechanism
Utility
RFPs
43%
PURPA
31%
UOG
7%
Offsite
C&I
12%
Wholesale Hedge
Contracts
5%
Bilateral
Negotiation
s…
7.9
GWdc
11
Most notably this trend is happening in utility scale PV…
Source: GTM Research, U.S. Utility PV Market Tracker

12. www.gtmresearch.com
Source: GTM Research/SEIA, Q2 2015 U.S. Solar Market Insight
6%
22%
42% 49%
94%
78%
58% 51%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2012 2013 2014 1H 2015
ShareofNationalResidentialPV
installations(%)
Without State Incentive With State Incentive
12
Resilient Residential PV Economics vs. Incentive Depletion

13. www.gtmresearch.com
• Between 2010 and 1H 2015, steep cost reductions have expanded the
universe of state markets where solar is unchained by state incentive
funding or RPS driven procurement
1
• Growth is happening in spite of or due to the way utilities value distributed
solar PV resources2
3
13
3 Reasons behind 18 GW of Growth

14. www.gtmresearch.com
NEM and Rate Reform Debates in Context
• In 39 states, utilities and/or legislators have now considered
rate reforms and net energy metering (NEM) revisions that
would roll back the value of solar for residential PV customers
• Yet less than 5% of those proposals have been approved
as originally proposed or approved in some version altogether
• Amidst the wave of NEM and rate design reforms, national
residential solar companies are scaling up into new state
markets that remain economically attractive
• In December 2015, California’s ruling on NEM 2.0 will be the
most critical decision of residential PV’s growth trajectory in
recent history
Number of Residential PV State Markets by Quarterly
Installation Volumes
14
Residential Rate Reform Risk Spurs Geographic Diversification
26
22
12
5
6
9
3 3
4
1
4
10
68
171
473
0
50
100
150
200
250
300
350
400
450
500
0
5
10
15
20
25
30
Q2 2011 Q2 2013 Q2 2015
NationalResidentialPVInstallations
(MWdc)
NumberofStates
Less than 1 MW
1 MW to 5 MW
5 MW to 10 MW
10 MW+
National Residential PV Installations (MWdc)

15. www.gtmresearch.com
Residential PV State Markets by Payback Period: 2015 1H 2015 Residential PV Installations by State
15
But Residential PV Demand Diversification Remains Slow Moving…
12
18
13
8
0
2
4
6
8
10
12
14
16
18
20
15+ Years 10-15 Years 7-10 Years Less than 7
Years
AllStatesPlusWashington,DC
50%
9%
6%
6%
5%
76%
24%
California New York
Arizona Massachusetts
New Jersey Top 5 States

16. www.gtmresearch.com
Why is the commercial solar market struggling?
Average Commercial Solar Export Rates in CA:
Default Tariff vs. Option R in SCE and PG&E
16
Rate Design Matters for Commercial Solar Too…
$0.09
$0.14 $0.14
$0.18
$0.00
$0.02
$0.04
$0.06
$0.08
$0.10
$0.12
$0.14
$0.16
$0.18
$0.20
SCE
TOU-GS-3
SCE
Option R
PG&E
A-10
PG&E
A-6
SolarExportRate($/kWh)
SCE's Option R:
50%+ increase in value of
PG&E's A-6:
25%+ increase
in
value of solar
• Medium and large commercial customer economics
remain tough to pencil:
• For these customers, solar is compensated anywhere between
15%-60%+ less than residential and small commercial customers,
due to demand charges that lower the volumetric portions of
customers’ bills, which solar can directly offset
3 reasons to remain optimistic about non-residential PV
• Solar-Friendly Rate Structures to Fuel Mid-Scale C&I:
• Low/zero demand and high energy charges
• Small Commercial PV Economics Already Pencil:
• PACE financing solutions and efforts to streamline risk
review process for non-investment grade customers
• And the third reason lies in the emergence of community
solar…

17. www.gtmresearch.com
• Between 2010 and 1H 2015, steep cost reductions have expanded the
universe of state markets where solar is unchained by state incentive
funding or RPS driven procurement
1
• Growth is happening in spite of or due to the way utilities value distributed
solar PV resources2
• Solar’s total addressable market is expanding through new product offerings
that blur market segment distinctions, but spur blue sky growth strategies
for distributed and centralized PV
3
17
3 Reasons behind 18 GW of Growth

18. www.gtmresearch.com
• Community Solar: Expected to add nearly 400 MW between 2015 and 2016, both
in markets with statewide legislation and pilot utility programs1
• Offsite C&I: The pipeline of offsite centralized PV projects procured by corporate
and government entities currently totals ~1 GW2
• Solar Loans: Emergence of solar loans will fuel a growing share of residential
solar’s growth, as third party leases/PPAs dip from a 72% to 57% market share
between 2014 and 2016
3
18
3 Emerging Segments: ~2 GW Opportunity Through 2016

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Key Considerations in 2017
• 55% national level decline in PV installations between 2016 and
2017
• Which market segment is most sensitive to the stepdown of the
federal ITC?
• Utility PV: With a growing share of utility PV being procured based on
cost competitiveness, rather than RPS driven demand, the market segment
is seeing a majority of 2017 installations packed into 2016
• Which market segment is least sensitive to the stepdown of the
federal ITC?
• Residential PV: More than 50% of average national residential PV
installed costs ($3.50/Wdc) come from soft costs
• What about non-residential PV?
• 40%-50% of average installed costs are comprised of soft costs, offering
ample opportunity to counter the stepdown of the federal ITC
• But continued questions surrounding how to standardize customer
acquisition and lower transactional costs, plus more challenging rate
designs, put the market segment at higher risk of economics recovering
compared to residential PV
Post 2016 U.S. PV Market Outlook
19
2017 Outlook: Distinct Downturns For Each Market Segment
0
2,000
4,000
6,000
8,000
10,000
12,000
2010 2012 2014 2016E 2018E 2020E
InstalledCapacity(MWdc)
Residential PV Non-Residential PV Utility PV

20. www.gtmresearch.com
Key Considerations in 2018-2020
• Residential PV: Emerges as leading driver of U.S. solar
market
• Steepest cost reduction opportunities keep residential PV
economics afloat in core state markets
• Incremental geographic diversification spurred by expansion of
solar loan product offerings and tolerable rate reform battles that
hinder but do not erase residential solar’s savings potentials
• Non-Residential PV: Sub 1 MW market takes a greater role
in fueling demand
• By 2020: Sub 1 MW segment will account for 51% of non-
residential solar, as efforts to standardize PPA financing solutions
for smaller, non-investment grade entities come to fruition
• Community Solar: 1.2 GW market size between 2018 and 2020
Post 2016 U.S. PV Market Outlook
20
2018 and Beyond: The Road to Market Recovery
0
2,000
4,000
6,000
8,000
10,000
12,000
2010 2012 2014 2016E 2018E 2020E
InstalledCapacity(MWdc)
Residential PV Non-Residential PV Utility PV

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Key Considerations in 2018-2020
Utility PV: How does the market recover?
• By 2019: Utility PV PPA prices are expected to return to late
2015/early 2016 levels
• CCAs, munis, co-ops, and corporates interested in offsite
centralized PV are expected to play a larger role in
procurement, focused on hedging against natural gas price
uncertainty
• When does the Clean Power Plan become a material
driver of procurement?
• Given that utility scale PV projects can only be used to meet near
term compliance obligations, and sluggish timelines for rolling out
state implementation plans, the CPP is expected to fuel deployment
in the post 2020 timeframe
Post 2016 U.S. PV Market Outlook
21
2018 and Beyond: The Road to Market Recovery
0
2,000
4,000
6,000
8,000
10,000
12,000
2010 2012 2014 2016E 2018E 2020E
InstalledCapacity(MWdc)
Residential PV Non-Residential PV Utility PV

22. www.gtmresearch.com
• State supported
demand and
incentivized
economics
Pre 2015:
Legacy Market
Dynamics
• Growth unchained
by state incentive
funding and RPS
procurement
2015-2016:
Era of Cost Parity
• Growth reverts to
core states with
the loss of the
federal ITC
2017:
Geographic
Contraction
• Residential PV
displaces utility
scale as anchor
market segment
2018-2020:
U.S. Solar Strikes
Back
22
4 Phases of U.S. Solar: Looking Ahead to 2020
U.S. Solar’s Transition to a Post Subsidy Demand Landscape
18 GW
20 GW
6 GW
27 GW

23. www.gtmresearch.com
Total gigawatts of solar PV expected to come online between 2H 2015 and
2016
18
Share of 16.6 GW utility PV pipeline that has been procured primarily based
on its competitiveness with natural gas
47%
Number of years it will take for solar to return to being a 10 GW+ annual
market after the federal IT drops at the end of 2016
4
Number of days until the federal ITC drops from 30% to 10%
(0% for direct owned residential PV)
471
23
4 Numbers to Remember About Future of U.S. Solar

24. www.gtmresearch.com
Thank You!
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Cory Honeyman
Senior Analyst, Solar Markets
Greentech Media
Questions? Visit www.gtmresearch.com
Or contact honeyman@gtmresearch.com