BUILDING ON THE EXPERIENCE OF

EUROPEAN MARKETS

Marie Latour, National Policy Advisor 22 September 2011

… to successfully develop PV markets in the long term

2

Content

• PV Market Status in 2010 and prospects for 2011• Market Outlook until 2015• Policy recommendations to sustainably develop a

market• PV on the road to competitiveness

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6

Evolution of the Global PV Market 2000 - 2010

+59%

+145%

+17%

+132%

7

The PV market in 2010

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The PV market in 2010 – Europe and the rest of the World

Europe: 81 %

Rest of the World: 19 %

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EU: PV installations Compared to other technologies

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Market in 2010 in Europe (EU27 + CH, NO…)

Germany: 7.4 GW

Italy: 2.3 GW

Czech Rep: 1.5 GW

France: 0.7 GW

Belgium: 424 MW

Spain: 369 MW

Greece: 150 MWSlovakia: 145 MW

Austria: 50 MW

UK: 45 MW

Portugal: 16 MW

Bulgaria: 11 MW

Rest of Europe: 98 MW

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Market segmentation

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Global Cumulated installed capacity until 2010

39.6 GW

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Cumulative installed capacity 2010

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The global top 10 in 2009 and 2010 (MW installed)

2009 2010

1 Germany 3.806 Germany 7.400

2 Italy 723 Italy 2.300

3 Japan 483 Czech Rep 1.490

4 USA 477 Japan 990

5 Czech Rep 398 USA 900

6 Belgium 285 France 719

7 China 160-228 Belgium 424

8 France 185 Spain 369

9 South Korea 167 Australia 320

10 Australia 79 China 300-520

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2011 SO FAR… (in MW)

2010 2011 est.

1 Germany 7.400 4000

2 Italy 2.300 8000

3 Czech Rep 1.490 10

4 Japan 990 1100

5 USA 900 1800

6 France 719 1400

7 Belgium 424 300

8 Spain 369 400

9 Australia 320 ?

10 China 300-520 1500

EU: 15-17 GWWorld: 22-25 GW

India (600-800)Thailand (100?)Israel (100?)Canada…

UK (300-400)Greece (300)Solvakia (350)Austria (100)…

25 GW produces 35 TWh (world)35 TWh relates to five 1000 MW Nuclear reactors.

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Short term Market developments

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Two short term scenarios

• A Moderate scenario (“Business-as-usual” market )• no major reinforcement of existing support mechanisms, • reasonable continuation of current FiTs aligned with PV systems

prices.• Policy-Driven scenario:

• continuation or introduction of support mechanisms, namely FiTs, • strong political will to consider PV as a major power source in the

coming years.• removal of non-necessary administrative barriers and the

streamlining of grid connection procedures.

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EU forecasts until 2015

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World forecasts until 2015

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Unlocking new markets, stabilizing others

In Europe: • Need to consolidate/further expand existing markets

• Germany, Italy, France, Belgium, Spain, Greece, Portugal, UK, Bulgaria

• Need to unlock/develop medium size markets • Hungary, Romania, Turkey, Poland?

• We Keep faith: Grid parity is within reach (2013-2020)

PHOTOVOLTAIC OBSERVATORYPolicy Recommendations

ENSURING A LONG TERM DEVELOPMENT

OF NATIONAL MARKETS

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Photovoltaic ObservatoryPolicy Recommendations

Aim:

• Identify best practices among existing support policies in Europe

• Promote market transparency and PV deployment in the energy sector across Europe

• Advise national decision makers on the successful implementation of their support policies

• Ensure the accelerated development of the market and the industry in a sustainable way

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Policy recommendations: 3 pillars

1. Implementing sustainable support mechanisms

2. Streamlining administrative procedures

3. Guaranteeing efficient grid connection processes

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Pilar 1: Implementing sustainable support mechanisms

1. Use Feed-in Tariffs or similar mechanisms

2. Ensure transparent electricity costs for consumers

3. Encourage the development of a sustainable market

4. Guarantee a gradual market development with the corridor concept

5. Develop a national roadmap to PV competitiveness

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Implementing sustainable support mechanisms1. Use Feed-in Tariffs or similar mechanisms

Overview of EU Support schemes in EU

FITs fix price Green Certificates fix volume:

Exclude non yet cost competitive technologies

AND 2010

3,784

1,025

17,183

1.953

3,494

66803

130

103145

1

1

18

206

0

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Implementing sustainable support mechanisms 3. Encourage the development of a sustainable market

Evaluation Logic

Insufficient support

Sustainable Support

Unsustainable support

Private Investor <6% 6-10% >10%

Business Investor <8% 8-12% >12%

Evaluation of IRR sustainability levels (example)

► Internal Rate of Return (IRR) of PV investment

FiT structure and level Other incentives: Tax rebates, investment

subsidies PV system prices Solar Irradiation

► IRR of PV investment should represent a reasonable incentive compared with IRR of investments with similar risk level

► Higher IRR may lead to unsustainable growth, lower to market stand still

► No unique solution; balanced combination of policy / financial instruments country risk must be considered

► by assessing profitability (IRR) on a regular basis and adapting support levels accordingly

2006 2007 2008 2009 20100

500

1000

1500

2000

2500

3000

Unsustainable Sustainable Insufficient

PV market development under different support strategies

Ma

rke

t G

Wp

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Spanish Case

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Czech Case

10!

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Slovak case

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 est.0

1000

2000

3000

4000

5000

6000

7000

8000

42 78 118 139

670951 843

1271

1809

3806

7408

4500

In MW

Growth corridor 2.5 to 3.5 GWp/year

German case

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Implementing sustainable support mechanisms4. Guarantee a gradual market development with the corridor concept

Support structure :

► Basic support : Feed-in Tariffs weighted on the

market development → « corridor »

Rationale and advantages:

► Market > upper limit, degression rate

► Market < lower limit, degression rate

► Transparent control and predictable market

► Ensures sustainable growth of market Period 1 Period 2 Period 3 Period 40

200

400

600

800

1000

1200

1400

1600

1800

Upper limit reached → degression increase

Lower limit reached → degression decrease

“Corridor” market cap rationale

Ma

rke

t G

Wp

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Implementing sustainable support mechanisms5. Develop a national roadmap to PV competitiveness

• Support scheme are temporary• Until when are they needed • How should they be shaped until grid parity is

reached?• FiTs, FiPs, self-consumption, net metering ?

• What will happen after reaching grid parity• What kind of support will be needed

No definitive answer now, but one thing is clear, grid parity is within reach and we must get prepared!

National roadmaps

September 2011

Competing in the Energy Sector

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PV competitiveness

• PV’s generation cost is decreasing faster than many expect

• A competitive solution before 2020

• Policy recommendations

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WHAT IS A PV SYSTEM?

6-14% 10-20%

21-26%

45-60%

PV modules PV inverterBalance of

systemInstallation

2010 situation (industry averages)

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PV SYSTEM PRICE EVOLUTION

• The price of PV modules and systems has been going down for more than 30 years.

• This will continue thanks to further technological improvements and economies of scale.

• A 36-51% decrease could be achieved on average by 2020.

Market anomalies will disappear as the market matures

> 50%

Evolution of the PV system price in Europe

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HOW MUCH DOES IT COST TO PRODUCE 1KWH FROM PV ?

• Generation cost of PV electricity LCOE: Levelised Cost of Electricity• Used widely to compare electricity from different energy sources

- 50 %

• 5 countries: France, Germany, Italy, Spain, UK

• 4 market segments: - residential rooftop (3 kW), - commercial rooftop (100

kW), - industrial rooftop (500

kW), - utility-scale ground-

mounted (2.5 MW)

• Crystalline Silicon and Thin Film technologies

PV’s generation cost could go down by 50% during this decade

European PV LCOE range projection 2010-2020

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OUTLINE

• PV’s generation cost is decreasing faster than many expect

• A competitive solution before 2020

• Policy recommendations

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Dynamic Grid Parity for electricity consumers:

The moment at which, in a particular marketsegment in a specific country, the present value of the long-term revenues from a PV installation is equal to the long-termcost of installing, financing, operating and maintaining the PV system.

Cheaper than…

Generation Value Competitiveness for utilities:

The moment at which, in a specific country, adding PV to the generation portfolio becomes as equally attractive from an investor’s point of view as a traditional and normally fossil-fuel based technology.

Cheaper than…

COMPETITIVENESS: TWO PERSPECTIVES

PV installed on rooftops

Large installations (rooftops or ground mounted)

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WHAT IS DYNAMIC GRID PARITY?

Usual consumer

Tre

nd

Prosumer

Additional revenue

Reduced bill

Electricity consumer point of view

Tren

d

Tr

end

T

ren

d

Electricity bill

Cost of PV electricity

Sales of excess

electricity

>Electricity bill

Self-consumption assumptions:

30-75%

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DYNAMIC GRID PARITY: THE 3 ROOFTOP SEGMENTS

FR DE IT ESP UK

Residential 3 kW 2016 2017 2015 2017 2019

Commercial 100 kW 2018 2017 2013 2014 2017

Industrial 500 kW 2019 2019 2014 2017 2019

Based on the average irradiance per country.

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38%

0%

0%

0%

42%

20152016

46%

0%

26%

6%

58%

201720182019

100%

100%

46%

89%

100%

2020

DIFFUSION OF DYNAMIC GRID PARITY

ACROSS THE POPULATION

Real irradiance levels can change time when competitiveness is reached.

85%

100%

0%

82%

100%

85%

0%

48%

100%

51%

100%

Residential segment

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GENERATION VALUE COMPETITIVENESS

FR DE IT ESP UK

Industrial 500 kW 2015 2017 2015 2015 2019

Ground-Mounted 2.5 MW 2015 2017 2014 2015 2019

Based on the average irradiance per country.

PV vs Gas CCGT

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SENSITIVITY ANALYSIS:

DELAYING OR ACCELERATING?

Wh

at c

ou

ld d

ela

y

• Higher LCOE:• Market anomalies (eg.

admin. costs)

• Specific applications:• e.g. BIPV on existing

buildings is more expensive

• Investors requesting a “green premium” above real investor’s risk

Wh

at c

ou

ld a

cce

lera

te

• An unexpected surge in fossil fuel prices

• Any scheme rewarding higher electricity injected to the grid (self-consumption or net-metering)

• Specific applications: e.g. BIPV on new or renovated roofs

Competitiveness can happen even quicker!

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OUTLINE

• PV’s generation cost is decreasing faster than many expect

• A competitive solution before 2020

• Policy recommendations

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THE ROAD TO COMPETITIVENESS

• Sustainable market growth will contribute to price decrease • This market development must occur in all countries and all

market segments. • Support schemes (including FiTs) need to be adapted on a regular

basis to avoid market disturbance.

• Administrative barriers must be removed and procedures streamlined so that additional costs do not increase the total price of a PV system.

• Grid connections must be simple and easily authorised, and priority access to the grid for PV electricity should be ensured.

• Political commitment to continuous research and development must be assured, so that PV technology continues to develop.

• PV should be considered a low-risk investment; therefore reasonable profits should be taken in line with that risk level.

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REACHING COMPETITIVENESS AND BEYOND

For electricity consumers (rooftops):

• Allow final customers to sell the electricity produced on the market.

• Maximise savings on the electricity bill. Regulatory frameworks should therefore promote net-metering and self-consumption schemes.

For utilities:• Facilitate access to capital by lowering the perceived risk.

After competitiveness is reached:

• Some specific incentives might still be needed in order to ensure PV competitiveness in Northern regions of a country.

• Dedicated support mechanisms could be required on a temporary basis for more specific technologies, such as residential and commercial BIPV, or innovative current and upcoming technologies such as concentrated solar PV, organic PV or dyesensitised solar cells.

• Grid stability could be favoured through new incentives for decentralised storage, demand side management, or to provide additional network services contributing to grid stability.

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Switching to solar photovoltaic electricity is not just a desirable option for achieving

our energy and environmental goals. It is also a realistic and competitive one.

PV is already cheaper than many people think

PV can be competitive before 2020 across the EU

The PV industry is committed to lowering costs. Policymakers should act

accordingly.

CONCLUSIONS

www.epia.orgMarie Latour

National Policy Advisor

m.latour@epia.org