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“LCOE and Grid Parity revealed : What is the impact on the PV supply chain?”. Concepts and implications for materials and equipment company executives competing in the global PV market. Joseph Berwind, Principal Linx-AEI Consulting. Linx-AEI Consulting.

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lcoe and grid parity revealed what is the impact on the pv supply chain

“LCOE and Grid Parity revealed : What is the impact on the PV supply chain?”

Concepts and implications for materials and equipment company executives competing in the global PV market.

Joseph Berwind, Principal

Linx-AEI Consulting

slide2

Linx-AEI Consulting

At the intersection of electronic materials and photovoltaic power generation

  • Accomplishments:
  • Fabrication TCO simulation
  • Manufacturing database
  • IP Analysis
  • Module company valuation
  • PV project analysis
  • PV Materials (4rd. Ed.)
  • Technology competitive analysis
  • LCOE and grid-parity tracking
  • Services:
  • Proprietary reports
  • Multi-client reports
  • Retainer services
  • Advisory and due-diligence
  • Technology research
  • Business development and strategy
  • Market entry services
  • Private company valuation
slide3

Grid Parity,

"The PV Demand Relationship”

  • Equity
  • Debt

Power Sales / $kWhr

System IRR %

slide4

Residential

LCOE,

“What is it and why does it matter to me?”

  • LCOE Basics
  • LCOE implies “LevellizedCost of Electricity.” This is simply the lifetime cost incurred producing solar electricity divided by lifetime electricity generated by the system discounted back to today using the present value of money.
  • LCOE is independent of subsidies. This is because the subsidies are the income generated by the system whereas LCOE implies the cost of generating electricity.
  • LOCE is mainly dependent on solar radiation and module prices.
slide5

LCOE,

”It matters at every step in the supply chain”

  • Consistent, High Purity Silicon Wafers
  • Improved paste formulations, most importantly for front side grids
  • Si recovery in sawing slurries
    • Potential key resource saving. Technical breakthrough required
  • Diamond wire
    • Cheaper wafering, less surface damage
  • Improved texturization etches
    • Higher cell efficiency
  • Cleaning technology
    • Improved line yield, better cell efficiency
  • Patterned emitters and MWE
    • Reduced cell shadowing, improved ease of moduling
  • Non-contact metal deposition or plating
    • Reduced breakage, reduced materials cost
  • Chamber cleaning gas
    • Environmental concerns, reduced GWP
  • Backsheet alternative
    • UV protection sheet supply
  • Improved factory automation and higher yields
    • Material and process improvements will struggle to deliver cost reduction needed
slide6

LCOE,

“Materials & Processes Enable Markets”

Cost per Wp

LCOE

Source: Linx-AEI Consulting

Source: Linx-AEI Consulting

success

Evaluating or selling new materials and or new processes using TCO analysis that stops at cost per watt is incomplete without simulating LCOE effects.

5¢ kWhr

3¢ kWhr

slide7

LCOE,

”The least analyzed, yet the most important”

Source: Linx-AEI Consulting

6

slide8

Residential

Grid Parity,

“What is it and why does it matter to me?”

“The single most frustrating question inside the board-room related to a firm’s investment decision in PV for the C-level executives to answer:

“When is grid-parity?”

Tuvalu, formerly known as the Ellice Islands, is a Polynesian island nation located in the Pacific Ocean, midway between Hawaii and Australia.

Grid Price kWhr

LCOE kWhr

slide9

Grid Parity & LCOE,

“Is this chart all we ever need?”

slide10

Grid Parity,

“Until Then, Subsidies, subsidies, subsidies”

c

Subsidies are given based on different parameters in different geographies. Factors such as system size, installation type are considered in deciding the quantum of subsidy. Local subsidies, therefore, impact returns differently leading to different demand dynamics.

slide11

Grid Parity,

“Until Then, LCOE, LCOE, LCOE”

Net Benefit

Source: Linx-AEI Consulting

slide12

Grid Parity,

“Until Then, Subsidies, subsidies, subsidies”

38% to 42% subsidy cut slows robust demand

42% to 46% subsidy cut would tank the market

MIRR. Always on the move!

20 Year Govt. Bond. Always on the move!

5.38%: Strong Demand

4.93%: Medium Demand

4.48%: Weak Demand

+1%

If subsidies are cut <=38%, demand remains "strong"

Source: Linx-AEI Consulting

- 52%

“Quantifiable knowledge of the market based on LCOE calculus.”

2009 view the new market reality
2009 ViewThe New Market Reality

New

Capacity

High Quality Modules

All available raw materials converted to modules for installation.

Factory Capacity not used at 100%

Easy access to capital allows high risk capacity to be constructed

Financial Crisis

Tight restrictions on project loans

Finance worthy module capacity broadly in balance with demand

New capacity financed if capital is available, if risks are low, or if new technology meets expectations

2009 view pv polysilicon capacity vs demand
2009 ViewPV Polysilicon Capacity vs. Demand

Source: Linx-AEI Consulting

Silicon Supply passed into balanced supply in 2008, and is likely to go into oversupply in 2009

2009 view critical lesson learned investors look ahead
2009 ViewCritical Lesson Learned: Investors Look Ahead

“Credit Crisis followed by global recession is exacerbating an existing situation. Oversupply throughout the supply chain is expected to last some years.” – Joe Berwind January 2009

German 20-Yr Yields

December 4.10%

January 3.90%

February 3.78%

March 3.72%

April 3.58%

May 3.24%

June 3.10%

July 3.25%

August 2.60%

September 2.83%

October 3.02%

November 3.16%

December 3.46%

Source: Linx-AEI Consulting

German 20 year yields were under 4% for most of 3Q ‘09

Module prices had fallen from over $3/Wp to $2.25/Wp

4Q’09 FiT = € 0.4301 for rooftop systems

3Q’10 FiT = € 0.3405 for rooftop systems

investors look ahead cont lesson applied to the current situation
Investors Look Ahead, cont.Lesson applied to the current situation

Source: Linx-AEI Consulting

German 20-Yr.

YieldsForwards

3.4473 3 months

3.5823 1 year

3.7502 2 years

3.9007 3 years

What lies ahead?

thank you
Thank You!

Linx-AEI Consulting

25 DeForest Avenue

Suite 207

Summit, NJ 07901

joe@aeiresearch.net

Tel. +1 (917) 514-5246