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Solar Opportunity - Business Model Options PowerPoint PPT Presentation

Infrastructure & Government Solar Opportunity - Business Model Options Santosh Kamath Director, KPMG Advisory Services Private Limited Agenda Solar Photovoltaic Technology Solar Thermal Technology – Concentrating Solar Power (CSP)

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Infrastructure & Government

Solar Opportunity - Business Model Options

Santosh Kamath

Director, KPMG Advisory Services Private Limited


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Agenda

  • Solar Photovoltaic Technology

  • Solar Thermal Technology – Concentrating Solar Power (CSP)


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Solar Photovoltaic (PV) - Business Model Options & Critical Success Factors

  • Product Design

  • Marketing & Distribution

Appliance Manufacturer

Stand-alone

Manufacturer

EPC Player

Developer

Grid

Crystalline Silicon PV

Thin-Film PV

  • Engineering capability

  • Tie-ups with suppliers

  • Managing contracts including PPAs

  • Land Bank

  • Financing

  • Low cost manufacturing

  • Manufacturing Innovations

  • Technology innovation


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There is currently oversupply in the value chain but supply dynamics could change based on demand visibility

Zone of uncertainty

Wafer and cell production could expand to meet the demand

Wafer, ,Cell and Module capacities have lower gestation periods and can quickly ramp up production once there is more visibility on demand

“Expect 2 Years With No Profits”

Morgan Stanley Analyst

Polysilicon shortage has led to a large addition of capacity

OVERSUPPLY

Source: Needham, Company reports, EPIA, KPMG analysis


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Global Competitive Behavior – Past Trends (1/2 )

UPSTREAM

DOWNSTREAM

Systems Integration/ Developer

Poly silicon

Wafer

Cell

Module

Key Strategic Initiatives

Expansion into poly-silicon space

PV Crystalox ,LDK Solar

Strategic tie-ups with silicon manufacturers

Yingli acquires Cyber Power Group Ltd., a solar-grade poly-silicon production company

Trina Sola, Yingli

Acquire other system integration companies in different geographies

Sun power

Strategic tie-ups with upstream manufacturers

Conergy, Solon, Centro solar

Expansion into wafer segment

Canadian Solar

…A vertically integrated presence to capture profits across value chain


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Global Competitive Behavior – Recent Trends (2/2 )

UPSTREAM

DOWNSTREAM

Systems Integration/ Developer

Poly silicon

Wafer

Cell

Module

Key Strategic Initiatives

REC Solar, SolarWorld

Downstream move – Equity Stake in solar farm developer

Stake through subsidiaries in thin-film technology firms

JV Partnership with LDK to develop PV systems in Europe and China

Q cells

Solarfun, Suntech, Evergreen solar, JA Solar

JV to develop solar farms

Suntech – Acquires MSK and EI Solutions System Integrators

Thin-film Module

First Solar*, Ascent Solar ,Energy Conversion Devices

First solar acquires solar power project pipeline n USA

*Strategic land rights of approximately 136,000 acres (approximately 210 square miles) with the potential to deploy up to 19 gigawatts

…An increased focus on market access


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CSFs for Business Model – Crystalline PV Manufacturing

Poly silicon

Wafer

Cell

Module

Capital & Energy

Labour

Technology

  • Ability to secure low cost and good quality inputs ( Poly-silicon, Wafer, Cell)

  • Ability to get market access – Increase capacity utilization

…. Advancement in wafer and cell technologies are considered to be the key drivers in the overall cost reduction possibilities for crystalline PV


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CSFs for Business Model – Thin Film Manufacturing

Players

Concern

CSF

CIGS – Copper Indium Gallium Selenide

CdTe – Cadmium Telluride

A-Si – Amorphous Silicon


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Build-up of scaleAcross the value chain, the median capacity of the industry has been going up, which is most significant in the case of Wafers and Cells

Crystalline

Thin film

The bars correspond to actual/planned capacity additions by year

Expected economies of scale in thin film is likely to see capacity scale-ups


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Players in Thin-film - CIGS technology is supported by new start-ups with strong venture capital funding…

CdTe

CIGS

A-Si

Solar Thin-film – Industry Profile

Production > 25MW

First Solar

Mitsubishi

Uni-solar

Kaneka

Production > 5MW

Sanyo

Honda

Sharp

Schott

Wurth Solar

Solyndra

ersol

Development Status

Sontor

Pilot Production

Nanosolar

Terrasolar

NexPower

Miasole

Free Energy

CSG

Heliovolt

Solon

Kenmos

Plant Construction / Ramp up

Calyxo

Signet

Malibu

Avancis

Scheuten

R&D

Johanna

PV Flex

CIS Solartechnik

2006 or earlier

2007

2008

2009

2010

Year of Market Entry (Expected)

Source – KPMG Analysis, EuPD Research 2008


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Industry clustersCapacity expansions along the value chain are clustered around certain key geographies

Cell

Wafer

USA, Japan and Germany are hot-beds of thin film technology, while China and Taiwan are growing manufacturing bases for crystalline wafer and cell

USA’s capabilities in research make it a significant thin film player

China is gearing up to be a major cell and wafer player

a-Si

Cd-Te


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CSFs for Business Model – Project Developer

Solar Farm

Roof Top

  • Ability to sign a PPA with govt /utility

  • Ability to secure low cost and high quality equipments

  • Developing land banks and managing grid interconnections

  • Ability to get access to customers

  • Marketing and customer relationships

  • Manage customer service and performance. Supply chain to manage multiple/retail customers

CSF

PPA with utility

PPA with customers

  • Key challenges -

  • Risk of default from customers

  • Dealing with utility / electricity metering & measurement, grid connections etc.

  • Permits and clearances

  • O&M of equipment at customer premises


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CSFs for Business Model – Standalone Applications

VALUE CHAIN

Equipment Supply

System Solution Design

Distribution & Installation

Maintenance & Service

  • Source Equipments - Tie-ups with Manufacturers

    • Secure supply of good quality and low cost modules

    • Procure balance of system components – battery, inverter, cables, electrical components from vendors

  • System assembly and installation

  • Adhere to standards & specifications

  • Install and connect the system through meters and other equipments

  • Provide quick and high quality service at customer end

    • Local infrastructure in-place to respond to breakdowns or any other problems

  • Design and develop solar solutions

  • Customize solutions

    • Configuration - Stand-alone systems; grid connection etc

    • Appropriate Size and Orientation

Description

  • Cost competitiveness

  • Product design

  • Assure high reliability and performance

  • Good quality service

CSF


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To Summarise for PV

  • Business Model Options Include:

  • Wafer & Cell Manufacturing: Scale, Government incentives and ability to innovate in manufacturing processes and access to cell technology are key drivers. Strategic tie-ups for supply contracts are also key differentiators.

  • Modules: Likely to be low margin game. Could be a potential entry point for a new entrant. Can also be part of integrated play with cells and wafers.

  • Polysilicon: Ability to source cheap energy and negotiate Government incentives will be key drivers

  • Thin-Film: Access to technology will be the key factor

  • Standalone Systems: Product design and marketing will be key capability requirements. Potential could be large.


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Agenda

  • Solar Photovoltaic Technology

  • Solar Thermal Technology – Concentrating Solar Power (CSP)


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Solar thermal technologies - Brief Snapshot


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Solar Thermal Technologies – Value Chain

Operations

EPC

Project Development

Key Industry Themes

Engineering

Manufacturing

Land

Permits

Financing

R&D

Technology

Construction

Epuron

Schott Solar , Rioglass, Flabeg

  • Market Access –

    • PPA’s with utilities

  • Strategic Alliances

    • Amongst Technology, EPC, Financing players.

Solargenix Energy LLC

Ausra, Solel, Skyfuel

  • Diversification strategy in solar (Renewable portfolio, Solar Portfolio)

Iberdrola, ENEL, Energias de Portugal, FPL

  • Vertical integration- Presence across the entire value chain

Solar Millennium AG, Abengoa S.A, BrightSource Energy, Acciona Energia


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CSP - Business model options

Technology Supplier/ Manufacturer

Turn key EPC Provider

Developer

Niche or Integrated Presence

  • Market Access – PPA with utility

  • Efficient power plant operations

  • Land Selection – Build land bank

  • Technology R&D Innovation – Drive costs towards grid parity

  • Low cost manufacturing

  • Core Component Access – License or partnerships for – components like :- Heliostats, Absorber tubes, Curved mirrors and receivers etc

  • EPC – Project Management and Construction Capability


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Santosh Kamath

Director

KPMG Advisory Services Private Limited

+91 99670 16369

[email protected]

18

Thank You


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  • APPENDIX


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Solar power offers immense potential as a clean alternative to meet the growing grid and off-grid energy requirements of the country

  • Grid Power -

    • India’s energy shortage is about 10%*

    • Peak deficit about 17%*

    • Government announced the “National Solar Mission” - which envisages capacity addition goal of 1000 MW of solar power per year

  • Potential in Remote Villages -

    • 33% of India’s population has no access to grid electricity

    • Replace kerosene lighting consumption per household – 50 to 70 liters per year

    • Solar Lamps could be used for lighting load

  • Commercial Applications -

    • Replace diesel generators in stand-alone systems like telecom towers, oil & gas platforms, railway communications etc

…Solar power can be used to meet energy requirements for centralized as well as decentralized applications as solar systems can be built for capacities varying from Wp to MWp

*CERC


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Government has taken several investor friendly initiatives to promote solar power development in India

Incentives for solar power generation in India

  • Along with incentives for power generation, there are favorable incentives for setting up manufacturing facility in India.

    • Semiconductor policy - Government will bear 20 % of Capex during the first 10 years, if a unit is located within Special Economic Zones (SEZs) and 25% for industries not located in an SEZ. Capital subsidy can be in the form of investment grant and interest subsidy


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A portfolio of technologies at different levels of maturity and outlook are available for consideration..

Established – Efficiency Improvements

Solar Power

Nascent - Innovation Stage

Solar Thermal Technologies (CSP)

Amorphous Silicon

CdTe – (Proprietary Technology)

Parabolic Trough

Power Tower

Dish Sterling

CIGS

Module

System Assembly / Integration

Poly-Silicon

Wafer

Cell

Key challenge :- Outlook on grid parity for different solar technologies


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Detailed Approach – Real Options Evaluation Framework

Option 1: Start as an EPC Player, License Technology as soon as industry growth is visible

ILLUSTRATION

Year 4

Year 0

Year 1

Year 2

Year 3

Year 5

Slow growth pattern of the Industry

EPC Player, Tech agnostic

EP = -10

Modest Returns

EP = +20

P = 50%

Rapid Growth commences in

Year 4

EP = -100

Specific Technology

EP = +500

Right Bet

P = 70%

P = 30%

EP = +500

EP = -200

P = 30%

Wrong Bet (Switching Costs)

Rapid

Growth

EP = +700

EP = -200

Multiple Technologies

P = 70%

All Win

EP = +600

P = 30%

Some Win

Option 2: Take Technology Position Now (Acquire, JV, In-house)

P = 70%

EP = -50

EP = +700

One Technology

Rapid

Growth

EP = +1000

Multiple Technology

P = 30%

EP = -100

Expected payoffs and probability of the event shall be estimated by studying past trends in similar technology oriented industries.


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