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SOLAR MARKET UPDATE

MINNESOTA LEGISLATURE TESTIMONY

ETHAN ZINDLER, HEAD OF POLICY ANALYSIS 2 APRIL 2013, ST. PAUL, MN

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MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

BLOOMBERG NEW ENERGY FINANCE: 200 STAFF IN 13 OFFICES WORLDWIDE

London San Francisco

Europe (88)
Zurich New Delhi

Asia Pacific (24)


Beijing

North America (39)

New York Washington

Tokyo Hong Kong

Africa (29)

South America (5)

Singapore

Sao Paulo Cape Town Sydney

Objective: Be the definitive source of insight, data and news on the transformation of the energy sector.

/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

Clean energy investment overview

Global solar trends

US solar trends

/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

GLOBAL TOTAL NEW INVESTMENT IN CLEAN ENERGY


200412 ($BN)
20% $302bn -11%

$269bn
34%

$251bn

-2% 16%
45% $164bn $191bn $187bn

43%
48% $80bn $54bn

$114bn

2004

2005

2006

2007

2008

2009

2010

2011

2012

Note: Includes corporate and government R&D, and small distributed capacity. Adjusted for re-invested equity. Does not include proceeds from acquisition transactions

Source: Bloomberg New Energy Finance

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NEW INVESTMENT IN CLEAN ENERGY BY TRADE BLOCK


200412 ($BN)
3% 14% 17% 20% 22% 25% 7% 5% 6% 7% 6% 6% 6% 9%

27%

26%

27% 35%

84% 77% 74% 73% 68% 66%

ROW BASIC OECD


68%
67% 57%

2004

2005

2006

2007

2008

2009

2010

2011

2012

Note: Excludes corporate and government R&D

Source: Bloomberg New Energy Finance

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NEW INVESTMENT IN CLEAN ENERGY BY SECTOR IN 2012 AND % CHANGE ON 2011 ($BN)
Solar Wind Biomass & Waste Small hydro Energy smart technologies Biofuels Geothermal Marine Other 9.03 7.35 3.24 2.81 1.58 0.19 0.06 76.56

137.68

-9%
-13% -28% 18% -33%

-50%
-41% 52% 84%

Note: Excludes corporate and government R&D

Source: Bloomberg New Energy Finance

/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

Clean energy investment overview

Global solar market trends

US solar market trends

/ / / / MINNESOTA STATE LEGISLATURE, 2 APRIL 2013

DYNAMICS OF THE GLOBAL SOLAR SECTOR

Massive supply-demand imbalance with far more capacity available than


currently being demanded.

Plummeting equipment prices due to technology advancements and the


supply-demand imbalance.

Major demand coming from the EU in recent years with strong growth in
Japan (post-Fukushima) and China.

Commoditization of solar equipment with China now playing a dominant role


in manufacturing.

Consolidation, bankruptcies, and value destruction well underway. Trade skirmishes!

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DEMAND VS. HISTORICAL AND PROJECTED MODULE PRODUCTION (GW)


60
Current cell manufacturing capacity Historical Future

50
40 30 20 10 2006 2007 2008 2009 Supply - crystalline silicon Supply - thin film non-silicon Demand - optimistic
Note: Supply scenarios based on continued 2012 utilisation rates.

2010

2011 2012 2013 2014 Supply - thin-film silicon Demand - conservative

2015

Source: Bloomberg New Energy Finance

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PV INSTALLATION BY YEAR, HISTORICAL AND CENTRAL FORECAST, 2007-2015 (MW)


Historical Forecast
52.1GW 45.6GW 36.7GW 28.7GW 30.2GW 18.2GW 6.6GW 7.7GW 2.8GW 2007 2008 2009 2010 2011 Western Europe Eastern Europe China India 2012 2013 Japan Rest of World 2014 USA 2015

Note: Few countries have yet finalised their 2012 data, hence the spread here. Table with all major countries in Appendix. The conservative forecast is the sum of the first quartiles of the spread between conservative and optimistic for each country.

Source: Grid operators, incentive programme administrators, industry associations, Bloomberg New Energy Finance

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INSTALLED PV PER CAPITA, END OF 2012, CONSERVATIVE SCENARIO (W/PERSON)


450 400 350 300 Italy 250 Czech Republic 200 150 100 50 India 0 0 10,000 Bulgaria France Japan Denmark Portugal UK USA South Korea Canada Romania Netherlands 20,000 30,000 40,000 50,000 GDP per capita Belgium Germany

Greece

Spain

Australia

Israel

China

Note: GDP per capita adjusted for purchasing power, in 2011 $

Source: World Bank, Bloomberg New Energy Finance

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ANNUAL COSTS OF TARIFFS AS SHARE OF GDP VS PV ELECTRICITY PRODUCTION AS SHARE OF CONSUMPTION, END OF 2011
Annual costs as share of GDP 0.45% 0.40% 0.35% 0.30% 0.25% 0.20% Spain

Czech Republic Germany

Italy

0.15% 0.10%
0.05%

Greece
Ontario France

0.00% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Share of PV electricity production of overall electricity consumption Bubble size representing 5GW cumulative PV capacity at end of 2011
Source: Bloomberg New Energy Finance, Eurostat, Canadian Statistics

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CRYSTALLINE SILICON MODULE SPOT PRICE, 200812


($/W)
4.50 4.00

Four years

-75%

3.50
3.00

2.50
2.00 1.50 1.00 0.50

0.00 2008

2009

2010

2011

2012

Note: Prior to 11 July 2011 the index collated module prices without differentiating between mono and multi crystalline

Source: Bloomberg New Energy Finance Solar Spot Price Index

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SPOT PRICE OF C-SI MODULES, 2 JANUARY 2012 4 MARCH 2013 ($/W)


1.2 1.0 0.8 0.6 0.4 0.2 0.0

09 Apr

23 Apr

13 Aug

27 Aug

10 Sep

07 May

21 May

24 Sep

26 Mar

12 Mar

08 Oct

22 Oct

05 Nov

19 Nov

03 Dec

17 Dec

31 Dec

13 Feb

27 Feb

11 Feb

2012

2013

Multicrystalline silicon module (c-Si)

Monocrystalline silicon module (c-Si)

Note: Dates represent first day of the week for which the price has been averaged, ie 8 August represents quote for the week 8-14 August. Data available here.

Source: Bloomberg New Energy Finance Module Spot Index

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25 Feb

04 Jun

18 Jun

02 Jan

16 Jan

30 Jan

14 Jan

28 Jan

02 Jul

16 Jul

30 Jul

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CHINESE MULTICRYSTALLINE SILICON MODULE PRICE BUILD-UP, MARCH 2013


S

0.094 Module 0.050 0.25 0.003 -0.03 -0.07

Spot price $0.68/W

Cell
Ingot & Wafer

0.13

$0.40/W

0.010 0.03
0.14 0.005

-0.08 0.06

$0.91/piece

Polysilicon

0.09

-0.04

$16.6/kg SG&A per W Best-in-class margin per W

0.03 Processing cost per W Depreciation per W

Note: Assumes 5.6g of silicon per watt of wafer. Processing cost based on SEC filings of quoted companies, publically available reports, various discussions and analyst estimates. SG&A represents sales, general, administration and R&D.

Source: Bloomberg New Energy Finance

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FORECAST COSTS FOR GROUND MOUNTED PV PROJECTS, 2010-2020 (2012 $/W)


3.24 0.18 0.41 0.50

2.65 0.18 0.41


0.50 0.21 1.35 1.59 0.15 0.32 0.27 0.12 0.73 1.55 0.15 0.31 0.26 0.11 0.72 1.52 0.14 0.30 0.25 0.10 0.72 1.47 0.14 0.29 0.25 0.10 0.70 1.40 0.13 0.28 1.34 0.13 0.28 0.23 0.09 0.61 1.28 0.13 0.27 0.23 0.08

0.30
1.85

0.24 0.09
0.65

1.23 0.12 0.26 0.22 0.08

1.19 0.12 0.26 0.22 0.08

0.57

0.54

0.52

2010

2011 2012 Module

2013 2014 2015 2016 2017 2018 Inverter Balance of plant EPC

2019 2020 Other

Note: Based on experience curves for each component. Methodology here http://bnef.com/Insight/1954 though charts updated January 2013

Source: Bloomberg New Energy Finance

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FORECAST COSTS FOR RESIDENTIAL PV PROJECTS, 2010-2020 (2012 $/W)


4.64 0.52 0.64 0.67 0.41 2.41 0.28 1.76 4.16

0.81
0.63 0.68 2.95 0.52 0.60 0.65 0.26 0.91 2.75 0.43 0.58 0.63 0.24 0.87

2.59 0.36

0.56
0.61

2.44 0.31 0.54 0.59 0.21 0.79

2.28 0.26 0.53 0.57 0.20 0.72

2.15 0.22 0.52 0.56 0.19 0.66

2.04 0.20 0.51


0.55 0.18 0.61

1.95 0.18 0.49 0.54 0.17 0.57

1.88 0.16 0.49 0.53 0.17 0.54

0.23 0.84

2010

2011 2012 Module

2013 2014 Inverter

2015 2016 BOP

2017 2018 EPC

2019 2020 Other

Note: Based on experience curves for each component. Methodology here http://bnef.com/Insight/1954 though charts updated January 2013

Source: Bloomberg New Energy Finance

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SMALL PV SYSTEM COST IN JAPAN, GERMANY AND CALIFORNIA, $/W


9.0 8.0 7.0

6.0
5.0 4.0 3.0 2.0

1.0
0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 Average sub-10kW German system cost Japanese residential system cost average Average California residential system cost Chinese multicrystalline silicon module price

Source: BSW-Solar, California Solar Initiative filings, JPEA, Bloomberg New Energy Finance

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GLOBAL CRYSTALLINE SILICON CELL MANUFACTURING CAPACITY (MW/YEAR)


61.1GW

53.2GW
8,294
1,476 7,147

9,344 1,666 7,747 42,303

29GW
6,953 856 4,205 16,944

36,253

14.8GW

10.1GW
2.4GW
1,292 438 36

5.3GW
2,095 36 952 2,193

3,290 116 1,632 5,036

4,936 466 2,057 7,300

2006

2007

2008

2009

2010

2011

2012

China

Taiwan

Korea

Rest of world
Source: Bloomberg New Energy Finance

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PV MODULE PRODUCTION BY COUNTRY, 2010-12 (%, GW)

18.1 2.7% 12.0% 1.3% 1.4% 2.1%

29.7 2.4% 1.0% 0.6% 0.7% 1.3%

30.1 2.6% 6.3% 7.4%

1.2% 0.3% 0.1%

9.4% 9.1%

12.7%

10.9%

Taiwan

11.2%
12.9%

Spain
India United Kingdom South Korea Norway Germany 71.1% Japan

64.3% 54.7%

USA
China

2010
Note: Geography calculated by company headquarters, not manufacturing capacity location

2011

2012
Source: Company reports, Bloomberg New Energy Finance estimates and enquiries

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c-Si CELL PRODUCTION BY COUNTRY, 2010-12 (%, GW)

20.7 2.4% 4.3% 9.5% 10.8% 0.3% 0.4%

23.0 3.0% 3.2% 8.6% 7.5% 0.4% 1.7%

27.4 2.7% 4.0% 7.6% 2.6% 15.3% India South Korea Norway USA Japan Germany 67.8%

17.9% 18.1%

54.3%

57.8%

Taiwan China

2010
Note: Geography calculated by company headquarters, not manufacturing capacity location

2011

2012
Source: Company reports, Bloomberg New Energy Finance estimates and enquiries

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POLYSILICON PRODUCTION BY COUNTRY, 2010-12 (%, TONNES)


154000 7.4% 11.0% 18.6% 19.5% 20.2% 15.4% Taiwan UK Japan 0.5% 1.3% 1.3% 215000 1.9% 1.4% 8.9% 0.3% 0.6% 205000 2.0% 4.9% 9.2%

18.5%
28.3% 32.0% 25.0%

Other Norway South Korea Germany China

USA

29.9%
20.9% 21.0%

2010
Note: Geography calculated by company headquarters, not manufacturing capacity location

2011

2012
Source: Company reports, Bloomberg New Energy Finance estimates and enquiries

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INVERTER PRODUCTION BY GEOGRAPHY, 2010-12 (%, GW AC)


23.0 3.7% 25.6 4.3% 17.0% 17.6% 13.7% Rest of the world 21.5% China Other Europe USA Germany

10.0%

21.4%

47.2%

43.4%

2011

2012
Source: Company reports, Bloomberg New Energy Finance estimates and enquiries

Note: here DC-DC optimiser production has been converted into AC, which is estimated to be 85% of DC, Geography calculated by company headquarters, not manufacturing capacity location

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Q4 2012 LEVELIZED COST OF ENERGY FOR SELECT TECHNOLOGIES


CSP - tower & heliostat CSP - parabolic trough + storage Wind - offshore CSP - parabolic trough Fuel cells CSP - tower & heliostat w/storage PV - c-Si Biomass - anaerobic digestion PV - c-Si tracking Biomass - gasification PV - thin film Geothermal - binary plant Biomass - incineration Wind - onshore Landfill gas Municipal solid waste Geothermal - flash plant Large hydro Small hydro Nuclear Natural gas CCGT Coal fired Natural gas CCGT w/CHP
0 50 100 150 LCOE Range 200 250 300 350 400 450 500

Current Mid

Source: Bloomberg New Energy Finance, EIA

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Clean energy investment overview

Global solar market trends

US solar market trends

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TOTAL NEW US INVESTMENT IN CLEAN ENERGY, 2004-12 ($BN)


70 60 50 40 30 20 10 0 10.6 17.1 32.1 43.3 43.0 32.8 43.5
44.2

65.4

2005

2008

2011

2004

2006

2007

2009

2010

Note: Shows total clean investment in the US across all asset classes (asset finance, public markets, venture capital/private equity), as well as corporate and government R&D and small distributed capacity. Values include estimates for undisclosed deals and are adjusted to account for re-invested equity.

Source: Bloomberg New Energy Finance

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2012
26

US CUMULATIVE RENEWABLE CAPACITY (GW)


100 90 80 70 60 50 40 30 20 10

85.7

68.9
54.8

60.4 2.9 14.4 2.9 40.1

3.1 14.7

43.5 2.8 13.9 1.6 25.3

2.9 14.3 2.0 35.6

3.0 14.5 4.9

8.0

Geothermal
Biomass & waste

46.6

59.8

Solar Wind

2008 2009 2010 2011 2012


Source: Bloomberg New Energy Finance, EIA

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US ELECTRICITY GENERATION BY FUEL TYPE, 2007-12 (%)


100% 80% 60% 40%
20%

Other Renewables (including hydro) Natural gas


Nuclear Oil

0%
2007 2008 2010 2011 2012
2009

Coal

Note: Contribution from Other is minimal and consists of miscellaneous technologies including hydrogen and waste. Values for 2012 are projected, accounting for seasonality, based on latest monthly values from EIA (actual data available through October 2012).

Source: Bloomberg New Energy Finance, EIA

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PRIMARY ENERGY CONSUMPTION VS. GDP, 1990-2012


Quadrillion Btu GDP ($bn)

105

14

90 75
60

12 10
8

Other Hydro

Natural gas
Nuclear Petroleum Coal

45
30 15

6
4 2

0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

GDP

Note: Values for 2012 are projected, accounting for seasonality, based on latest monthly values from EIA (actual data available through September 2012). GDP is real and changed; 2012 value is based on economic forecasts from Bloomberg Terminal.

Source: Bloomberg New Energy Finance, Bureau of Economic Analysis, US EIA

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SHALE GAS EXTRACTION BREAK-EVEN PRICE, BY US PLAY ($/MMBTU)

1 April 2013 Henry Hub $4.03/MMBTU

Note: Assumes 15% equity IRR. UK assumes $8m Drilling & Completion cost; 2000-4250 mcfd dry production (per Marcellus and Eagle Ford); 20% royalty rate; usual tax treatment

Source: Bloomberg New Energy Finance; Various

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AVERAGE WIND PPA PRICE RELATIVE TO WHOLESALE REGIONAL PRICES, 2004SEPT 2012 ($/MWH)
100 90 80 70 60 50 40 30 20 10 0 2004 2005 2006 2007 2008 ERCOT West 2009 2010 2011 2012 PJM West MISO (Illinois Hub)

Southwest Power Pool

California

PPA price (signing date)

Note: Price indices are calculated by averaging the hourly price at ISO hubs throughout a 24-hour day. Quarterly rolling averages are used to eliminate outliers. Small sample size accounts for some variation in PPA prices in 2011 and 2012.

Source: Bloomberg New Energy Finance, FERC

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MIDWEST RPS SUPPLY-DEMAND (TWH)


45

40 35 30 25 20
15 10 5 0

Wind generation in region (commissioned or financed)

Non-binding programmes Binding programmes

2010

2012

2014

2016

2018

2020

Notes: Demand is split into regions in the Midwest with binding RPS programmes (Iowa, Minnesota, Missouri) and regions with non-binding programmes (North and South Dakota, Oklahoma). Supply is based purely on wind capacity in these states, comprised of capacity commissioned (or having secured financing) as of July 2012.

Source: Bloomberg New Energy Finance

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AVERAGE PURCHASING PRICE BY OFFTAKER, ALL PROJECTS 2011H1 2012 ($/MWH)


0 5 10 15 20 25 107 100 76 76 73 72 66 64 61 57 57 55 54 54 52 51 47 46 44 43 42 41 39 38 38 37 35 35 35 34 32 30 26 23

New England Power Southern California Edison Snohomish County PUD Pacific Gas & Electric NV Energy Arizona Public Service Appalachian Power Tennessee Valley Authority CA Dept of Water Resources Associated Electric Coop First Energy Solutions Corp PacifiCorp Omaha Public Power District Idaho Power Company Bonneville Power Admin San Diego Gas & Electric Exelon Nebraska Public Power District S.California Pub Power Authority Public Service Coof Colorado NorthWestern Energy Northern States Power American Electric Power Great River Energy Oklahoma Gas and Electric NEPOOL Basin Electric Power Coop Minnesota Power Public Service Co of Oklahoma PJM NYISO SPP Southwestern Pub Service Co MISO 0
Merchant rates

25
PPAs

50

75

100

125

Reporting projects

Note: Includes wind, biomass and geothermal PPAs. Does not include solar PPAs. Only includes offtakers purchasing energy from two or more projects

Source: Bloomberg New Energy Finance, FERC

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SOLAR PPA PRICES BY SIGNING DATE, H2 20082011 ($/MWH)


250
Eurus Energy Avenal Park, Sand Drag, & Sun City Plants First Solar Agua Caliente First Solar Topaz First Solar Silver State North Sempra Mesquite Solar I BP Long Island

200

Iberdrola San Luis Valley 11 solar PPAs executed via CA RAM

150

Sempra Copper Mountain

Fotowatio Apex AES Ilumina Cogentrix Alamosa

Fotowatio Spectrum NextEra Hatch


NRG Roadrunner

AZ CA CO NM NV NY PR
250MW 50 MW

100

Solar Reserve Crescent Dunes

Enel Stillwater

50
Estimated 2011 CA RFP shortlist (2016 delivery $7090)

0 Jul 08

Jan 09

Jul 09

Jan 10

Jul 10

Jan 11

Jul 11

Jan 12

Note: Does not include PPAs under 5MW. Banded PPA prices are pegged at the average price over the period of project operation. The California RFP resulted in 7.5TWh of shortlisted generation, of which about half was PV. California RFP price estimates are sourced from developers. Topaz PPA price estimate based on first-year total PPA revenues ($198.8m).

Source: Bloomberg New Energy Finance, FERC

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Energy Finance, Bloomberg Finance L.P., Bloomberg L.P. or any of their affiliates ("Bloomberg"). The opinions
presented are subject to change without notice. Bloomberg accepts no responsibility for any liability arising from use of this document or its contents. Nothing herein shall constitute or be construed as an offering of financial instruments, or as investment advice or recommendations by Bloomberg of an investment strategy or whether or not to "buy," "sell" or "hold" an investment.

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THANKS!
ETHAN ZINDLER, EZINDLER@BLOOMBERG.NET TWITTERS: @ETHANALL

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