Solar Energy Sector Study Solar Energy Sector Study TechBA ArizonaDecember 2009 Confidential Document Table of Contents Section 1 Executive Summary Section 2 California and Arizona Solar Market 1 Energy Market Context ............................................................................................. 2‐1 2 Energy Market Framework ........................................................................................ 2‐1 3 Electricity ‐ Global Solar Market Size ........................................................................ 2‐4 4 Drivers for California/Arizona Solar Electric Market .................................................. 2‐5 5 California/Arizona – Best Solar Market to 2020 ....................................................... 2‐6 . 6 California/Arizona ‐ Solar Electric Market Demand Through .................................... 2‐7 7 Supply Side to the Solar Electric Market .................................................................. 2‐10 8 New Distributed Generation Electricity Markets .................................................... 2‐13 9 Solar Hot Water Market .......................................................................................... 2‐13 10 Summary of Solar Market Potential in Arizona and California ............................. 2‐14 11 Business Models .................................................................................................... 2‐13 12 Trends in Solar incentives ...................................................................................... 2‐17 Section 3 Solar Sector Market Opportunities 1 Introduction .............................................................................................................. 3‐1 . 2 Profiles of Mexican SMEs .......................................................................................... 3‐1 3 Supply Chain Demand for California and Arizona Solar Markets .............................. 3‐6 4 Climate Change Pressures on the Supply Chain Creates Opportunities ................. 3‐10 5 Export Sales of Solar Electricity to U.S . ................................................................... 3‐11 6 Global Thermal Energy Market ............................................................................... 3‐17 7 Industrial Process Heat ............................................................................................ 3‐18 8 Solar Cooling ............................................................................................................ 3‐20 9 Thermodynamic Converters for Solar Thermal ....................................................... 3‐22 10 PV‐Thermal for "Green Building" Markets ............................................................ 3‐24 11 "Low‐Carbon" Industrial Parks with Renewable Electric/Thermal Micro‐Grids .... 3‐25 12 Need for System Integrators and Multi‐Disciplined Engineering .......................... 3‐26 13 Export of Proprietary Solar Products .................................................................... 3‐27 14 Off‐Grid Solar Products ......................................................................................... 3‐28 Section 4 Overview of México's Solar Sector 1 México's Solar Markets ............................................................................................. 4‐1 2 Government Policies ................................................................................................. 4‐5 3 Government Support Programs for Solar ................................................................ 4‐9 . 4 Market Trends ......................................................................................................... 4‐11 5 Key Organizations, Research Institutions and R&D Focus ...................................... 4‐13 6 Foreign Direct Investments in Solar Industry .......................................................... 4‐15 Section 5 Financial Enables 1 Introduction .............................................................................................................. 5‐1 . 2 Approaches to Financing the Solar Sector ................................................................ 5‐1 3 Traditional Governmental Support Programs ........................................................... 5‐2 4 Solar Manufacturing Financial Support Programs .................................................... 5‐4 5 Solar Generation Financing Support Programs ......................................................... 5‐5 6 Private Investment/Tax Equity Financing .................................................................. 5‐6 . 7 International Development Financing .................................................................... 5‐10 8 Carbon Finance ........................................................................................................ 5‐12 9 Foreign Direct Investment ....................................................................................... 5‐14 Section 6 Solar Sector Policy Recommendations 1 Supply Chain Development ....................................................................................... 6‐1 2 Alternative Energies and Sustainable Technologies .................................................. 6‐2 3 Leverage Recent Climate Change Agreements .......................................................... 6‐3 4 Leverage New R&D Relationships ............................................................................. 6‐5 5 Solar Thermal Demonstration Projects ..................................................................... 6‐6 Section 7 Company Screening Process and Company Profiles Appendix 1 Solar Technology Value Chain Appendix 2 Solar Policies and Incentives Overview Appendix 3 Solar Sector Market Opportunities (Presentation) Grid‐parity for Distributed PV in 2015‐2018 – PV is expected to achieve parity with natural gas peaker plants in 2015 at $.15/kWh with conventional power plants.175/kWh.1 GW of in‐state renewable energy capacity to meet state self‐imposed mandates for Renewable Energy Portfolio requirements by 2020. and rising electricity rates. aggressive renewable energy requirements for utilities. PV grid‐parity will likely be greatly influenced by geography and will come sooner to California and Arizona than to other U.S.S. As the costs for PV decline. These states have exceptional solar resources. The well respected Silicon Valley venture capital firm of Khosla Ventures makes the following projections: Peak‐parity for Solar Thermal Electric in 2009 – utility‐scale solar thermal electric plants are considered to be at parity with the electricity costs of California’s natural gas‐fired peaker power plants at a peak price of $. social and environmental returns. the costs of grid power will be increasing each year. As solar becomes increasingly part of Mexico’s export trade and climate change initiatives. Grid‐parity for Solar Thermal Electric in 2011‐2012 – By 2011. Grid‐parity is the point in time at which electricity generated from renewable energy is either equal in cost or less expensive than grid power. California and Arizona Solar Markets California has the 8th largest economy in the world and Arizona is the 2nd fastest growing state in the U.Section 1 Executive Summary Context Significant opportunities exist for Mexican companies to participate in all segments of the various solar value chains and solar markets including the emerging Mexican market along with the enormous export markets of the southwest U. Solar will play a larger role in the renewable energy mix in these 2 states in the future than anywhere in the world. utility‐scale solar thermal electric plants is expected to reach parity at $. Utilities in California and Arizona are projected to require some 22. states because of superior solar resources.S.22/kWh in 2018 Declining incentives are directly related to “grid parity”. companies performing in this space will be increasingly valued for their “triple‐bottom lines” of financial. 1‐1 . the Americas and the world. lower installed PV costs. Nowhere else will there likely be a greater investment and concentration of all forms of solar energy collectively contributing to electricity production. and unprecedented growth in peak load demand. It is also expected that solar in California and Arizona will be the first markets in the world to achieve “grid‐parity” where the price of solar is at or below the price of grid electricity. Utility‐scale solar thermal electric and PV will account for more than 50% of this new renewable capacity which represents a market over $90 billion. greenhouse gas reductions and economic development. This market will require an extraordinary near‐term expansion of a global a supply chain. Grid‐parity will be achieved from predictable volume‐based cost reductions and the next‐level “big” market for solar is expected to take off after unsubsidized solar is cheaper than grid electricity.25/kWh and parity with conventional power plants at $.. México is well positioned to benefit from the continued growth of a domestic solar market and to be a leader to the export of solar goods and services.S. The market potential for utility‐scale solar thermal electricity. Most of the world’s energy is used to generate heat which consumes more than 2 times the energy that is used for electricity and 50% more than is used for transportation. The export of renewable electricity to California has already begun with recent sales of geothermal and wind by Federal de Electricidad (CFE) and by IPPs to California utilities. heating. Additional opportunities will come from companies working to provide materials with lower “embodied” energy. These options include third‐party distributor/supply agreements. markets. desalinated water and “distributed‐scale” thermal power blocks for electricity and heat. solar hot water systems and solar street lights. solar hot water and PV is well known.S. Perhaps the largest near‐term solar opportunity for Mexican companies is to initiate the development and construction of utility‐scale solar power plants in México for the export sale of electricity to the United States. new and emerging Mexican companies which understand and anticipate these trends by implementing carbon‐reducing policies and practices which go far beyond previous “Greening the Supply Chain” initiatives. These opportunities apply to system integrators. Perhaps the largest market potential is positioning Mexican companies as strategic players in the supply chain for the enormous capacity additions for utility‐scale solar power plants near the border in southern California and Arizona where there are enormous opportunities to supply mirrors. reflectors. direct‐sale Power Purchase Agreements with U. Specifically there is a new and emerging market for the export of renewable electricity from northern México to California by Mexican Independent Power Producers (IPPs). Key products of direct solar thermal which present great opportunities for México are industrial process heat and process hot water. Thermal energy represents 54% of the global final energy demand with electricity accounting for just 17%. The use of direct solar thermal energy for process and for conversion applications is the least known and least developed sector of the solar industry.Solar Market Opportunities There are numerous and diverse niches in the various sectors and segments of the global solar market which present a wide‐range of opportunities for Mexican companies to participate in the growth of exports to the U. cooling. joint‐ventures and wholly‐ owned subsidiaries as system integrators. There is a fast growing domestic solar market in México along with Latin and South American. For California to meet its Renewable Portfolio Standards of 33% by 2020. 1‐2 . Significant opportunities exist for Mexican companies in all aspects of the emerging commercial/industrial solar thermal market. engineering services and manufacturers of the solar thermal generation systems along with the thermal conversion equipment and systems used to transform heat into productive “work”. Nevada and New México. and especially in the southwest states of Arizona. There may even greater opportunities to use low‐ and moderate‐temperature solar thermal heat in direct applications to displace fossil‐fuel electricity generation and to replace the direct combustion of fossil‐fuels for heat. the California Public Utility Commission expects that 17% of its renewable electricity will come from out‐of‐state which equates to 4. structural supports and engineering services. California. solar receivers.S. There are numerous business models and market entry strategies for Mexican companies expanding into U. Global climate change initiatives will create increasing pressures to reduce the carbon footprint of all aspects of the solar supply chain and to reduce the embodied energy content of materials used in solar components and parts.000 GWhs of electricity. These opportunities range from the export sale of utility‐scale solar thermal electricity from northern México to the global distribution of solar products such as photovoltaic panels. utilities and large commercial customers and large self‐generation/carbon projects using solar. These climate change initiatives will also create new opportunities in the solar supply chain for existing.1 GW of renewable capacity additions which will provide more than 12. Often solar is a key component to programs focused upon providing affordable housing and promoting rural development. México’s average solar resources for PV are more than 60% higher than the best solar in Germany which has 5.5 to 3 years and for photovoltaics 5‐9 years depending upon regional solar resources. These are low‐ cost. Key entities promoting solar in Mexico are the Instituto de Investigaciones Eléctricas (IIE). Currently.7 GW which is 67% of the world’s PV installed capacity. Universidad 1‐3 . Residential electricity rates in México are subsidized by the government and were described by a recent World Bank report as among the largest electricity subsidies in world. In 2009. México’s extraordinary solar resources have largely gone untapped with just 135 MW of installed solar capacity in 2008. México is one of the first developing countries to commit to a specific reduction of emissions through the use of clean and efficient energies. The “energy return factor” (ERF) for PV installed in most of México is very favorable and produces 17 times the electricity that is required to manufacture the PV system. The main objective of the Law is to regulate the use of renewable energy resources and clean technology and to establish a national strategy and financing instruments to allow México to scale‐up electricity generation based on renewable resources. PV prices are now approaching the GTZ Report’s “optimistic pricing” scenario (2009‐2014) already in 2009. Mexico’s solar resources have largely gone untapped but the potential is huge with a photovoltaic and solar thermal market potential estimated to be as large as 45 GW which is approximately 75% of México’s 2008 electricity generation capacity. Spain and Germany are the global PV leaders with a total of 8. In the past 2 years México has seen dramatic reductions in the installed costs for PV ranging from 30% to 60% with the variation depending under system integrator and whether the module uses silicon or thin‐film cells. In near future. equipment selection and installer pricing. the general payback periods for solar hot water systems are 1. are most often the sponsors of large‐scale solar development. The Federal government’s new “Renewable Energy Development and Financing for Energy Transition Law” (LAERFTE) became effective in November 2008 and mandated SENER to produce a National Strategy for Energy Transition and Sustainable Energy Use and a Special Program for Renewable Energy. Centro de Investigación en Energía. there are no solar thermal electricity plants in México. energy consumption.4 GW of installed PV. often in conjunction with international development entities. This figure is 1. Photovoltaics module prices are dropping faster than all predictions and are driving unprecedented PV growth in México during 2009. Over 66% of electricity subsidies go to residential consumers and the volume of subsidies to residential customers increased by 46% between 2002 and 2006 in real terms. Government programs. In 2006 residential electricity subsidies accounted USD 9 Billion which represented more than 33% of total electricity sector revenues and equated to 1% of the gross domestic product.Several Mexican SMEs have developed and are now manufacturing proprietary solar products for the domestic market and are starting to export to Europe and to Latin and South America. Photovoltaic electricity is “unsubsidized” in México and competes against “subsidized” residential electricity rates. solar is expected to play a major role in the country’s ambitious climate change initiatives during the Kyoto Post‐2012 period. high‐quality products which are strong candidates for export to the California and Arizona markets. As a global leader in climate change.5 times higher than the ERF for Germany and is equal to most of Spain. México’s Solar Sector Mexico’s solar resources are among the best in the world and far superior to Germany and Spain which are the recognized world leaders in installed photovoltaic systems. Some 80% of PV installations in México are for off‐grid/rural electrification and 78% of all solar hot water installations are for swimming pool heating. loans. Export Trade Development – existing initiatives which use direct loans and credit enhancements to assist foreign customers buying solar products. Recommendations include: Enhance competitiveness of the SME “Gazelles" in the new carbon market 1‐4 . the Germany sustainable development organization. To a great extent the solar sector plays a part of a larger. Many steps can be taken to further build the capacity of México’s emerging solar sector to compete in a dynamic global and national marketplace while also meeting goals to reduce greenhouse gas emissions. and tax incentives to solar companies locating and/or expanding in certain regions or locations. Foreign Direct Investment and Strategic Alliances/Partnerships – usually consists of equity and debt financing to build manufacturing capacity in low‐cost countries with local strategic partners in order to guarantee a supply of solar products for fast growing markets. some countries are targeting the renewable energy sector for export trade initiatives. Kyoto Protocols and Post‐2012 Funds – consists of international players buying “certified emission reduction” credits from renewable energy projects which assists in financing projects and assists countries meet their carbon reduction commitments under the Kyoto. debt and leveraged investments with tax‐offsets and pass‐through net operating losses. Renewable Energy Generation Incentives and Portfolio Requirements – the “market drivers” for the explosive growth of solar in the US is due to a mix of voluntary incentives and mandatory requirements for generating solar energy in California and Arizona which makes large and small solar projects “bankable” which leverages equity and debt investments in solar manufacturing and in the solar supply chain. La Asociación Nacional de Energía Solar (ANES). Carbon Funds. goods and components produced domestically. and GTZ. Private Investment/Tax Equity Financing – comprised largely of institutional and tax equity investors. Policy Recommendations Several policy recommendations are presented for consideration as tools to accelerate the development of a solar industry in México. International “Donor Trust Funds” – established to buy the environmental attributes of solar energy projects in long‐term contracts which are used to secure conventional financing. Financing Enablers The general types of support programs. solar incentives and financial tools used by “enablers” to leverage investment in the various value chains of the solar industry which include: Economic Development – traditionally consists of targeting individual companies with conventional grants.Nacional Autónama de México (CIE‐UNAM). fast‐changing global “carbon market” in which the dominate drivers will be greenhouse gas (GHG) reductions and reduced “carbon footprints”. Targeted Financing for Solar Manufacturers – consists of national and state tax credits targeted to assist the financing of solar manufacturers along with utilities receiving “Renewable Energy Credits” for payments to solar manufacturers for sales leading to in‐state solar generation. private syndicated investments and private bond placements offering equity. some efforts are marketed at promoting new “solar cluster development” along with “green jobs”. S. and Mexican SMEs in the solar sector Form new linkages for SMEs with the European solar industry Export renewable electricity to U. Export proprietary solar products and integrated systems Leverage new R&D Relationships Increase awareness of solar thermal capabilities with high‐profile demonstrations * * * 1‐5 . Focus on financing SMEs which can lead in the implementation of all aspects of climate change initiatives Leverage recent climate change agreements to accelerate formation of strategic partnerships between U.S. Nowhere else will there likely be a greater investment and concentration of all forms of solar energy collectively contributing to electricity production. Solar will play a larger role in the renewable energy mix in these 2 states in the future than anywhere in the world. All costs in this section are in US Dollars. An advantage of solar is that production is highly correlated to the load profile of utilities in the southwest US and northern México 2‐1 . This section describes the California and Arizona solar market through 2020 in order to provide an overview of the size.Section 2 California and Arizona Solar Markets 1 Energy Market Context California has the 8th largest economy in the world and Arizona is the 2nd fastest growing state in the U. and unprecedented growth in peak load demand. diversity and scale of the market demand along with a review of current developments in market supply. 2 2. It is also expected that solar in California and Arizona will be the first markets in the world to achieve “grid‐parity” where the price of solar is at or below the price of grid electricity.1.1 Energy Market Framework Electricity Markets 2. Utilities in California and Arizona are projected to require some 24 GW of renewable energy capacity to meet state self‐imposed mandates for Renewable Energy Portfolio requirements by 2020.S. greenhouse gas reductions and economic development. aggressive renewable energy requirements for utilities. These states have exceptional solar resources. Utility‐scale solar thermal electric and PV will account for more than 50% of this new renewable capacity which represents a market over $90 billion.1 Utility‐Scale Electricity Utility markets are characterized by companies generating electricity in central plants and acquiring additional electricity which is delivered through a transmission network to distribution centers which step‐down the electricity which is then delivered through local distribution loops to end‐users. This market will require an extraordinary near‐term expansion of a global supply chain. Electric utilities obtain electricity in several ways: Generation from their own power plants Acquisition of electricity through competitive long‐term supply contracts (Power Purchase Agreements ‐ PPAs) from third‐parties such as Independent Power Producers (IPPs) Purchases on the spot market Utilities classify electricity by product values which correlate to how and when electricity is generated: Baseload power plants operate nearly continuously Intermediate‐load power plants operate to supply daily periods of increased power demand Peak‐load plants operate for limited hours as needed to meet peak power needs “Non‐firm” /Intermittent power is generated only when renewable resources are available such solar and wind. energy‐generated is used on‐site Commercial/Industrial – Includes government. Thermal energy is usually segmented by temperature ranges and defined as low‐. natural gas and biomass) and the conversion of geothermal and solar radiation through heat exchange systems. a group of facilities or a micro‐grid. medium‐ or high‐temperature markets. the point of consumption. DG is generally referred to generation occurring on the customer side of the electrical meter. hospitals. Thermal energy can be generated though combustion processes (coal.2. DG can be grid‐connected or off‐grid. Distributed generation can support a single‐family residence. often called “remote” power.1. ect. DG is also used by utilities to site distributed generation at or near a load center which can off‐set expense for expanding a central power plant and for additional transmission capacity. schools. etc. a commercial/industrial facility.2 Distributed Generation ‐ Electricity Distributed Generation (DG) is sometimes called “distributed power” or “distribution energy” and refers to the production of electricity at. “village” power. More particularly the DG market is segmented as follows: Residential – Includes single‐family residences and multi‐family housing. energy generated is used within a local loop or for a specific home or building 2. Thermal Energy Market Segments by Temperature and Applications High‐Temperature Industrial Process Heat > 250°C > 480°F 400°C‐1000°C 750°F‐1800°F Utility‐Scale Solar Thermal Electric Medium‐Temperature Heat 80°C‐250°C 176°F to 480°F Industrial Process Heat Industrial Process Hot Water Thermal‐Based Cooling Electricity Generation Desalination Low‐Temperature Heat < 80°C < 176°F Industrial Process Heat Domestic Hot Water Space Heating Thermal‐Based Cooling Desalination 2‐2 ... DG is connected to the grid at distribution voltages. micro‐grids. or close to.2 Distributed Thermal Energy Markets The direct use of thermal energy is inherently Distributed Generation with the place of heat generation at or near the thermal point‐of‐use. energy‐generated is used on‐site Utility DG – Generation facilities usually with capacities under 20 MW which are grid‐connected in the distribution loop Off‐Grid – Generation that is isolated from the distribution grid. The high ambient temperatures of the southwest U. Concentrating solar thermal systems generally have solar‐to‐thermal conversion efficiencies of 50‐70% with technologies consisting of parabolic trough.3 The Value Proposition of Solar Conversion The value proposition for solar energy in the various segments of the energy market is directly correlated to the manner and efficiency by which the solar technology converts sunlight into useful energy. refrigeration Space Heating – boiler pre‐heating. belt‐drives. district heating. dehumidification. drying. commercial laundries. New PV‐Thermal technologies convert photons directly into electricity and collects thermal energy off of the PV cells for useful purposes. Solar‐to‐Thermal‐to‐Electricity. sterilizing. heat treatment. industrial facilities.1 Low‐ and Medium‐Temperature Applications Process Heat – washing. etc. water purification.2. The primary products from the direct conversion of solar energy are DC electricity and thermal energy. Stirling engines powered by external heat to create mechanical energy to drive a generator. commercial buildings Conversion Processes – o Electricity from heat‐driven thermodynamic turbines and converters o Kinetic energy for mechanical applications (water pumping. grinding. PV panels become thermal absorbers during mid‐day and 85‐90% of this thermal energy received is dissipated and lost as waste heat. can further reduce the performance of PV. Photovoltaics (PV) use Global Horizontal Radiation (GHI) which includes direct and diffuse radiation and which means that PV performs on a cloudy day. kinetic water pumping 2. boiling.) Water – industrial process hot water. pasteurizing. Solar‐to‐Thermal ‐to‐Electricity and Thermal Energy. There is an annual drop‐off in performance of PV . Combined Heat and Power (CHP) solar concurrently generates electricity and thermal energy. swimming pool heating. multi‐stage flash desalination (MSF). adsorption cooling. space heating or process heat. Thermodynamic conversion is accomplished by using the thermal energy power blocks such as: conventional steam Rankine cycles to drive a turbine.5 to 1% due to degradation which is factored into PV output. PV modules use semiconductor materials to convert approximately 10‐15% of solar energy directly into DC electricity which is converted to AC power or used directly for off‐grid DC applications. dehydration Cooling – absorption cooling. The exhaust heat from an ORC turbine can be used to generate hot water.2. 2‐3 . residential homes. domestic hot water. desiccant cooling. All solar thermal systems use Direct Normal Irradiance (DNI) which is direct beam sunlight which means that solar thermal does not perform on a cloudy day. Solar thermal systems use reflectors and mirrors to concentrate direct beam irradiation which is collected and used in a thermodynamic conversion process to generate electricity. multiple effect desalination (MED). parabolic dish. Net solar‐to‐electricity efficiencies range from 9‐25%. and linear Fresnel. and Organic Rankine Cycle (ORC) and Kalina Cycle turbines which use low‐temperature heat to generate electricity. These solar CHP systems offer net solar‐to‐energy conversion rations of more than 60%. Solar energy can be understood in 4 conversion processes each of which presents its own unique value proposition in the solar and energy markets: Solar‐to‐Electricity.S. power tower. 8 3. water purification and desalination.S.2 Off‐Grid is 14% of U. California accounted for 67% of installed capacity with 526 MW and Arizona was ranked 5 in state capacity at 25 MW installed. PV Capacity Grid‐connected PV accounts for 86% of all installed capacity. cooling. refrigeration.2% of the global market. residential and industrial hot water. 1 2‐4 . drying. industrial heat and hot water. The cumulative installed capacity for grid‐conned PV in the U.000 PV installations in 2008. California has been the global leader in utility‐scale solar thermal electric.679 5.16% Solar Thermal Electric MW 5% 679 0 217 428 388 1 0 Total MW 13. Solar‐to‐Thermal –to‐Thermal‐Based Applications and Processes. etc. it is clear that California and Arizona will dominate the global market place as “the” location for utility‐scale solar thermal electric projects and for the sale of solar electricity.S. and a new generation of “distributed”/micro parabolic troughs.217 914 26 22 PV MW 95% 13. was 789 MW at the end of 2008. For more than 20‐years.19% 0.400 3.1 Electricity ‐ Global Solar Market Size Current Market Share by Country Germany and Spain have dominated the global solar markets for years and held 55% of the market in 2008 driven by PV installations with California and Arizona accounting for 7.600 62% 86% Off‐Grid 11.400 38% 14% Total 30.000 3. There were more than 30. dehumidification.3 California and Arizona have 70% of the PV market share in U.000 5.400 3. Solar thermal collector technologies consist of flat plate collectors.S. 3 3. evacuated tube collectors. US PV Grid Installations 2008 Installations Capacity Grid‐Connected 18. Grid‐connections accounted for 62% of these sites and 86% of the installed capacity.300 789 526 25 21.517 1. Global Installed Capacity PV + Solar Thermal Electric 2008 World Germany Spain US California Arizona México Market Share ‐‐‐ 39% 26% 9% 7% 0. Direct beam radiation is collected and converted to thermal energy which is directly used in thermal‐based processes with working temperatures of ≤ 82°C to 400°C (170°F to 750°F). In the near future. Thermal applications include space heating. California 2. US ‐ Grid‐Connected PV Ranked by Cumulative Installed Capacity through 2008 Market Share 67% 9% 5% 4% 3% 3% 2% 1% 1% 1% 1. Nevada.S. President who has reversed long‐term policy and now puts renewable energy at the lead in economic recovery and global warming policies New Federal incentives for solar such as the 30% Investment Tax Credit. New York 7. accelerated depreciation.S.S. Arizona 6. Hawaii 8. Connecticut 9. loan guarantees A growing recognition that emission reduction of greenhouse gases (GHG) through a “carbon tax” is inevitable and that the U. the world’s electricity load growth demand is far behind supply and that 65% of power plants needed around the world in 2030 are yet to be built.1 Drivers for California/Arizona Solar Electric Market Convergence of Market Drivers There has been extraordinary demand for utility‐scale and distributed solar in the southwest U. Nevada 5. New México and Texas General acceptance that there will some form of National RPS A new U.S. Arizona.2 Explosive load growth in the southwest U. Colorado 4. over the past 2 years due to the convergence of numerous market drivers: Procurement by utilities for utility‐scale solar projects driven by State‐mandated Renewable Portfolio Standards (RPS) in California. New Jersey 3. – 2‐5 . German and Israeli solar developers with extensive project portfolios in Spain’s highly favorable but small solar thermal market Significant Foreign Direct Investment is being made in North America for PV manufacturing to supply the U. markets Independent of GHG and RPS mandates. will become a major global player in “carbon markets” Market entry in utility‐scale solar by Spanish. Oregon 10. Massachusetts MWDC 526 70 36 34 25 22 14 9 8 8 4 4.S. o California’s electricity load was 52 GW in 2005.000 MW per year for the next 15 years. solar industry. the U. 5.S. refineries and big industrial complexes that produce most of the nation’s greenhouse gas pollution. The “cap” would set the upper limit of GHG that could be emitted into the atmosphere while the “trade” would allow for companies to invest in pollution‐reducing technologies or buy and sell credits to reach the cap. Congress to establish a federal RPS that would require electric utilities to produce 25% of their electricity from wind. CA 5.6 In comparison.1 GHI Resources The Global Horizontal Insolation (GHI) available for photovoltaics in California and Arizona is more than 47% higher than the GHI available in Germany.5 GW of PV in southern California and Arizona would produce about the same amount of electricity as 5 GW of PV in Germany.7 999 2‐6 .S. Arizona. Once adopted.3 o Peak loads in the California.816 Madrid.5 1. “cap‐and‐trade” will provide another market to drive the U. For Los Angeles the GHI is 5. EPA will be assuming authority for the greenhouse gas emissions of 14. The net effect of such regulation is expected to increase the cost of fossil fuel generation for environmental compliance with greenhouse gas emissions and thereby make the use solar thermal energy for power generation and industrial process heat more financially viable.1 Superior Solar Resources in California/Arizona The quantity and quality of the solar resources in California and Arizona are among the best in the world and are 30% to 47% higher than solar resources in Germany and Spain which continue to be the recognized leaders in the solar global market. solar and other renewable energy sources by 2025.660 Berlin.2 Pending Federal Government Actions – New Drivers EPA to Regulate Power Plant Greenhouse Gases – In September 2009.000 coal‐burning power plants. Environmental Protection Agency (EPA) adopted new rules to regulate greenhouse gases from power plants and large industrial facilities. Spain 4. Southern Nevada and New México are forecasted to grow by nearly 2.0 kWh/m² a day compared to Berlin at 2. 25% National Renewable Portfolio Standard Legislation – Numerous efforts are before the U.S. the 2020 load is projected to be 69 GW. GHI By Locations GHI kWh/m² Day Year Los Angeles.S. 2.0 1.4 4.7 kWh/m². 5 California/Arizona – Best Solar Market to 2020 No place in the world has both the best quantity of solar resources and the most aggressive Renewable Energy Portfolio Standards than California and Arizona. 5. Germany 2.5 In 2008 the installed capacity of PV Germany grew to 5 GW in 2008. Together there is a supply and demand dynamic which is unparalleled.1. Congress is considering legislation which will establish a mechanism that sets pollution reduction targets and then uses market incentives to find the most affordable paths to achieve the targets with limits being set on the amount of Greenhouse Gases (GHG) that companies could legally emit. “Cap‐and‐Trade”/”Carbon Tax” Legislation –The U. A National 25% RPS is considered an essential component to any greenhouse gas emission reductions. Southern Spain 5.67 2.21 1.11 However. Under the order. reports that a new 726 MW trough project site in Blythe.67 kWh/m² which is more than 30% higher than southern Spain.960 Almería. California. 5.800 Southern CA + AZ 7.7 DNI by Locations DNI kWh/m² Day Year Blythe. who built the 150 MW Andasol trough project in southern Spain. CA 7.5 Billion in 750 MW Utility Distributed Generation Market Leveraged by Feed‐in‐Tariffs – New legislation in October 2009 requires California utilities to expand utility purchases of electricity from solar facilities up to 3 MW in capacity at a guaranteed feed‐in‐tariff. 8 Every $1 in incentives leverages another $6 in private investment.9 Billion in 3 GW Distributed PV Market Leveraged by California Solar Initiative – Continuing program which provides cash incentives for residential and commercial/industrial projects. In 2020 California will have retail electricity sales 3 times greater than Arizona. The California’s Renewable Portfolio Standard was raised from 20% to 33% by 2020. because of higher RPS requirements and load growth. California will have a renewable energy demand 15 times higher than Arizona. $12 Billion invested in New “Renewable” Transmission – To deliver the new renewable electricity generation needed in 2020. and established an aggressive target for greenhouse gas reduction.1.2 California Governmental Actions to Accelerate Demand in the State’s Solar Market New 33% California RPS and 20% GHG Reduction Targets – On November 17. 2008 Governor Schwarzenegger signed Executive Order S‐14‐08 which created the highest Renewable Portfolio Standards in the U.5 kWh/m² per day which is about 30% higher than the best solar conditions in Europe.12 2‐7 . 7 new major transmission lines are needed at a cost of $12 billion. $12. Spain 5.1 California/Arizona ‐ Solar Electric Market Demand Through 2020 108 TWhs of Renewable Energy Needed in 2020 The 2020 Renewable Portfolio Standards (RPS) for California and Arizona will require 108 TWhs of renewable energy. California must also reduce greenhouse gas emissions by 25% by 2020 which is leading to the adoption state‐wide carbon cap‐and‐trade program.50 2. The estimate of new Utility DG market is based on average of $6. Target is 3 GW of new Distributed PV by 2017.S.9 $4.10 6 6. This incentive provides a fixed price for new renewable generation sold to utilities at an above market rate and will apply until a 750 MW capacity cap is reached.738 Andasol Project. The German solar developer Solar Millennium.2 DNI Resources The Direct Normal Insolation available for solar thermal energy in southern California and southern Arizona is well above 7.37 1. has a Direct Normal Irradiation of almost 7.000/kW installed costs.900 5. 8 108.298 10.2 GW of renewable energy capacity to meet RPS requirements by 2020. 2‐8 MW 279 478 1.7% 46.1% .497 40 3.529 63% Solar PV 340 14% Wind 401 17% Geothermal 85 3% Biomass 74 3% Total 2.799 Share 1.0% 6. The California Public Utility Commission (CPUC) expects that 19.3% 0.2 26 GW of Renewable Energy Capacity Needed in 2020 California and Arizona are projected to require some 26.235 7. Arizona will be more reliant upon solar to meet its renewable demand than any state.13 The expected renewable resource mix for Arizona is expected to be 65% California Renewable Resource Mix 2020 33% RPS Reference Case (In‐State and Imports) Renewable Resource Biogas Biomass Geothermal Hydro‐Small Solar PV Solar Thermal Wind Total 2020 Arizona Renewable Resource Mix In‐State MW Share Solar Thermal 1.6% 30.2% 2.7 GW of new in‐ state renewable generation will be needed in 2020. solar is expected to account for 77% of the state’s renewable energy installed capacity and to generate 65% of the renewable energy production.2% 13.972 23. For Arizona in 2020. The disproportion between installed capacity and energy production is explained by the lower capacity factor for solar compared to other renewable energy sources.2020 Comparative RPS Requirements for Renewable Generation California and Arizona California Arizona Total Total Retail Sales RPS Requirement TWh 33% 308 15% 97 ‐‐‐ 405 RPS Requirements TWh 102 6.429 100% In 2020 solar is expected to account for 51% of California’s in‐state renewable energy installed capacity and generate 38% of the renewable energy production.8 94% 6% 100% 6. 255 2‐9 .402 100% $60.496.3 Billion of Solar Energy Capacity Needed in 2020 The market size for solar energy installation by 2020 in California and Arizona is estimated at $60.3 billion with PV accounting for 52% of the market value and utility‐scale solar electric accounting for 48%. In Arizona there are active efforts to increase the RPS from 15% to 25% by 2025. the construction of solar power plants to meet the Arizona Corporation Commission’s RPS requirements is estimated to cost approximately $22 billion in cumulative capital expenditures by 2030.307.000 $6.135 Solar Share MW 9.869 $4.000 $2.529 8.720. In total.837.588 Solar Thermal 8.827 71% $35.869 11.921 $51.235 340 3.333.546 $8.1 $60.192.115.868 Technology Share> Utility‐Scale Solar Thermal MW 6.293 70% California Arizona Totals PV MW 3.255 California and Arizona PV 3. A renewable energy assessment14 commissioned by Arizona utilities reported: Solar is expected to account for 65% of Arizona’s RPS requirements Beginning in 2017.527.000 Totals 10.764 1. 2020 California and Arizona RPS Solar Demand.645.575 30% 6.298 $4.000 $29.806.529 $4.000 $22.720.806.429 22.000.380. Arizona will need to be adding 200 to 400 MW of new solar thermal installed capacity to be built each year through 2025 2020 Solar Demand from California and Arizona RPS Requirements Renewable Energy Capacity MW 19.000.588 Solar Thermal 1. Market Size by Technology California MW Costs/kW Capital Costs PV 3.706 2.533 $4.000 Arizona PV 340 $7.575 29% $25.235 $7. Utility‐scale concentrating solar thermal is expected to meet 70% of solar demand in 2020 in California and Arizona.025.000 Solar Thermal 7.527.999 1.667 Total 12.667 Totals 1.000. 153 2 $7.500 4. The estimated capital value of these projects in California and Arizona is some $40.825 177 5 $5. 2‐10 Parabolic Trough Power Tower Dish Stirling Compact Linear Fresnel Thin‐Film 1‐axis Tracking Silicon Totals Capital Costs Projects per kW Total MW 12 $4.1 10 GW in Projects with $40. there will certainly be projects which will drop out due to a variety of reasons such as permitting issues.2.6 billion. 7. The Arizona Corporation Commission has approved a 280 MW parabolic trough plant which is in pre‐ construction. There is a pipeline of another 80 utility‐scale projects proposing another 60 GW of additional capacity in the deserts of southern California and Arizona which are advancing through the process of acquiring rights‐of way from the U.000. These projects have announced contracts or Power Purchase Agreements and in various stages from development and permitting to having been approved and are in pre‐construction.762.000 $3.000 $3.000 .S.2 Billion Market The annual market for RPS‐related solar electricity sales to utilities by IPPs in California and Arizona is estimated at $3.000 $7.000 2.200.15 Announced Utility‐Scale Solar Projects in California and Arizona ‐ October 2009 CSP CSP CSP CSP PV PV 7. This figured is based upon annual PPA sales by near‐term additions of utility‐ scale solar projects using an average sale price of $140/MWh. Of this 70 GW of potential projects. inability to secure financing or water for “wet cooling” processes.413.080.2. the first application for a permit to construct and operate a large solar plant in California since 1989 was submitted just in July 2008 for a 50 MW trough project in Victorville.000 $40. more than 10 GW of near‐term utility‐scale solar electricity projects in California and Arizona are being developed. Since then.2 Annual Electricity Sales is a $3.536 14 $3.596.025.547 2 $2.453 Capital Investment $20.1 Supply Side to the Solar Electric Market Supply Side of Utility‐Scale Solar Thermal Electric Market On the supply side.7 7.000 440 36 10. 7.600 1 $2.000 $500.875.500.000 1.000. land and environmental compliance costs.2 billion. The market appears to have responded and there are 10 GW of near‐term grid‐scale solar projects with construction starts in 2010 to 2013 which appear capable of meeting the 2020 targets much sooner.000.000 $5. the California Energy Commission has listed 35 utility‐scale solar projects which are under permitting review or officially announced as being under a Power Purchase Agreement.6 Billion in Project Costs As of October 2009.000 1. and lack of access to timely transmission.641.2 Near‐Term Grid‐Scale Solar Supply California’s long‐term 33% RPS estimates that 10 GW of installed solar will be needed in 2020.350. government. 547 1.025.7 GW and estimated projects costs of $13.Announced Utility‐Scale Solar Projects in California and Arizona ‐ October 2009 Capital Costs per kW $4.000 $38.000.000 $3.208.701 Project Costs $6.000. California Energy Commission Utility‐Scale Solar Thermal Projects Under Permit Review ‐ October 2009 Parabolic Trough Power Tower Dish Stirling Compact Linear Fresnel Totals PPAs Announced for 3.080.200.655.000. These projects have not yet submitted permitting applications.000 Details of the status of this project inventory follow: 4.025.000.000.441.153 440 10.453 CSP CSP CSP CSP PV PV Parabolic Trough Power Tower Dish Stirling Compact Linear Fresnel Thin‐Film 1‐Axis Tracking Silicon Totals Projects 12 14 2 1 5 2 36 Capital Investment $18.214.000 $2.16 The estimated project costs are estimated to be $17 billion. California Energy Commission Announced or Under Power Purchase Agreement ‐ October 2009 Utility‐Scale Solar Thermal Projects Parabolic Trough Power Tower Dish Stirling Compact Linear Fresnel Totals 2‐11 Projects MW 2 1.200.000 .000 $2.000 $3.000.000 $5.147 0 0 0 0 15 3.000 Projects MW 9 2.000 $7.9 GW Utility‐Scale Solar Projects in Permit Review by California Energy Commission – Over the past 2 years.225.000 $500.200.200.025.703 1 400 2 1. developers of 13 utility‐scale solar thermal and PV projects representing 4.725.000 $0 $0 $12.200.000 $15.000 $3.4 billion have received or have announced PPAs in California.000 $500.600 177 1.000.880 Project Costs $10.7 GW of Utility‐Scale Solar Thermal Projects – Another 15 projects with a capacity of 3.000 $7.000 $1.000.536 2.000 ‐‐ Total MW 4.600 1 177 13 4. The AFC process takes at least a year of review leading to CEC approval and a certificate to construct and operate the project.554 13 2.711.762.000 $3.641.000 $6.9 GW of capacity have submitted “Applications For Certification” (AFC) to the California Energy Commission (CEC).811.825 $5.500. 500. Arizona.593 Project Costs $5.551 78% *Active means projects which have advanced by filing a "Plan of Development" filed with BLM The dominant technology for grid‐scale solar is trough which is the proposed system for approximately 50% of the pending BLM projects.080. Abengoa executed a PPA with Arizona Public Services in 2008 with announced projects cost of $1 billion and a 30‐year PPA contract value of $4 billion. Utility‐Scale Solar Projects with Active* BLM Applications California and Arizona October 2009 California Arizona Total Projects 49 32 81 MW 39.913 60.S.720 22% Thermal Electric 25.000 $8.000 MWhs annually. the table below represents a reasonable profile and inventory of potential new capacity additions which shows the enormous scale of the solar thermal electric market in the southwest deserts. is a 280 MW parabolic trough solar plant with 6 hours of storage which will produce approximately 900.000 Arizona’s 280 MW Solana Project – Abengoa’s Solana Project in Gila Bend.6 GW of Utility‐Scale PV Projects California Energy Commission Announced or Under Power Purchase Agreement ‐ October 2009 Utility‐Scale PV Projects Thin‐Film 1‐Axis Tracking Silicon Totals Projects MW 5 1.920 800 14.842.762.17 7. As such. The project developers for most of these 81 projects have demonstrated commitment and have gone the additional step of submitting the required “recover fee” deposits to compensate BLM for application processing.095 45.000. PPAs Announced for 1.3 Another 60 GW of Utility‐Scale Solar in the BLM Pipeline for California and Arizona Nowhere in the world is there more evidence of the explosive growth in utility‐scale solar than in the southwest U.271 PV 13. over the past 2 years. 81 of these applications representing 60 GW of projects have moved forward in development and advanced to filing required “Plans of Development” as of October 2009.358 20. 2‐12 . PV accounts for 22% of proposed projects with equal installed capacity of PV silicone and Thin‐film. There has been a literal "land rush" since 2007 by solar developers and speculators who have made massive filings for rights‐of‐ways to lock‐in large tracts of U. Projects which have filed “Applications For Certifications” to CEC and the other projects which have announced PPAs which involve BLM lands have been screened out of the 81 projects.456 20.000 $3. government‐owned desert lands to site central solar projects.153 2 440 7 1. In over a year. The step between filing a BLM right‐of‐way application and submitting a major technical and engineered document such as the “Plan of Development” requires resources and separates out the land speculators. In November 2008.S.500. there were approximately 119 applications before the California and Arizona BLM requesting land for some 83 GW of solar projects. 1.000 * Assumes average costs of $6.500.913 60.050 Not Known/ Other 7.938 7.1 Domestic Solar Hot Water (SHW) systems require 50°C (120°F) heat and a variety of collector systems can deliver such low‐temperatures. for the balance of the world.978.118 Dish Stirling Fresnel 2.335 20.223 14.545 900 900 39.000 solar hot water heaters by 2017.000/kW 9 Solar Hot Water Market Solar Hot Water Systems 9. California has invested $250 million in a new SHW market development program which will provide cash incentives to install 200.000.163 $6. In the U.895 29.385 Power Tower 750 4.300 5.000.585 800 7. October 2009 PV Thin Film 6. The scale of the massive program is evident since annual installations will need to 2‐13 .1 GW of new installed capacity which will drive demand for collector fields and power blocks for installations ranging from 250 kW to 3 MW.358 7.Utility‐Scale Solar Projects with Active* BLM Applications California and Arizona.3 Billion California Solar Hot Water Market As it has with Distributed PV.545 2.1.000.271 7. Solar Hot Water Collectors Installed Capacity MWth Glazed Flat Plate Evacuated Tube Air Collector Glazed US 1. and México glazed flat plate collectors are most often deployed and.335 *Active means that either a "Plan of Development" has been filed with BLM 8 New Distributed Generation Electricity Markets The California and Arizona DG electricity market for Distributed solar thermal electric is estimated to be at least $7 billion through 2020.478. evacuated tubes are the most common collector worldwide primarily due to low‐cost evacuated tubes made in China.391 74.S.329 405 151 México 311 ‐‐‐ ‐‐‐ World 46.938 California Arizona Total Projects 49 32 81 MW PV CPV 0 0 0 Trough 14. This market represents more than 1. California has been equally aggressive in providing incentives to develop a massive solar hot water (SHW) market in the state. Distributed Generation Electric Market ‐ California and Arizona 2008 ‐ 2020 Market Value* MW CA Utility Feed‐in‐Tariff ≤3 MW 750 $4.000 AZ Non‐Residential Utility DG 413 $2.000 Total 1.120 197 9.2 New $1. 000 $22.103 1.800 $6.1 Solar Market Demand The size of the solar market in California and Arizona between 2009 and 2020 is projected to be over $90 Billion.000.000.000 $12.500 Program Incentives $250 million Market Value of Installations $1.000.000 units.000 Residential Collector Area 8.000 m² Per Unit Area 40 ft² 3. Projections of market demand were collected from the various governmental programs and from renewable energy requirements for utilities through 2020.000 $6.000.300.7 Businesses and residential owners who install solar hot water systems also qualify for the new 30% Federal Investment Tax Credit which is available through 2016 with no cap on equipment costs.000 $25.000. An estimate of the demand‐side to the solar market was calculated using industry standard “installed unit costs” by solar technology and official projections from incentive programs and mandatory RPS requirements.088 CA RPS Utility‐Scale Solar Thermal CA RPS Utility‐PV CA California Solar Initiative ‐ Distributed PV CA 750 MW Utility Distributed Generation CA Solar Hot Water + 200.380.500.740.003.972 2‐14 .S.300 750 520 ‐‐ 15.720.500 $2.300.000 ft² 740.000 10 Summary of Solar Market Potential in Arizona and California 10.000 $7.282.000 systems CA New "Renewable" Transmission CA Total AZ RPS Utility‐Scale Solar Thermal AZ RPS Distributed PV AZ Total CA+AZ Total Projected Demand‐Side Market MW 7.000 SHW systems installed in the entire U.261.000 $1.088 $92. New SHW Installations to 2017 200.000 ‐‐ ‐‐ Market Value of Solar Projects Leveraged by Incentives $29.500 $7.377.235 3.18 In 2009.588 $9.500 ‐‐ ‐‐ $4.869 16.000.increase from 1.000.000 $6.298 3.7 m² New Installed SHW Capacity MWth kWth/m² Collector 518 MWth 0.645.000.000 $4.529 340 1.000.000 to 25. The demand‐side of the solar market in California and Arizona projected to be more than $90 billion.638.880.000 $83.000.000 SHW Program Average System Costs $6. New Annual Installations ‐ California 25.003.192. there were only 2. The basis for this projection is provided in the following table: Demand‐Side to Solar Market – Estimated Market Value of Installed Solar Capacity for Existing Programs and Policies in California and Arizona in 2020 Installed Costs $/MW $4.000 $7. 000.000 $22.1 Utility‐Scale Solar Generation A prime business model for developers of proprietary large‐scale concentrating solar thermal technology is to develop and execute PPAs or feed‐in‐tariff contracts which generate long‐term revenues for subsidiary project companies which in turn place orders for solar equipment from the company’s manufacturing/supply chain subsidiary. if not all.000. Demand‐Side to Solar Market: Estimated Market Value of Solar Installed Capacity for Existing Programs and Policies 2020 in California and Arizona Installed MW Costs $/MW 7.300 $7.000 $1.000 ‐‐ ‐‐ Market Value of Solar Projects Leveraged by Incentives $29. the business models throughout the various segments of the solar market are structured to optimize opportunities to create investment‐worthy businesses and projects with strong returns by leveraging know‐how and proven solar technology along with and construction and operational experience. Supply‐side to the market could be as large as $109 Billion which assumes that only 25% of the BLM projects advance to commissioning.10. 2‐15 .000.003.500. modular and based on 3rd‐party sales.000 $12.588 $9.740.380.103 ‐‐ 1.2 Solar Market Supply For comparative purposes a supply‐side estimate for the solar market in California and Arizona was prepared using active project information from utility‐scale solar projects that have been permitted or are in permitting. PV is scalable. business models for utility‐scale solar thermal companies are structured around the vertical integration of most.000 $83.500 $7.300.645.282.000.000 $4.000 systems New "Renewable" Transmission Total RPS Utility‐Scale Solar Thermal RPS Distributed PV Total CA+AZ Total Projected Demand‐Side Market 11 Business Models Business models vary greatly between solar thermal electric and PV.000.638.261.800 750 $6. parts of the value chain from R&D and manufacturing to IPP project development and long‐ term solar plant operations.720.529 340 1.500 ‐‐ ‐‐ 15.235 $7.000.192. For generators. Unlike PV. This difference is due largely to the massive size and costs of solar thermal projects along with the fact that power tower.377.000 3.000. projects that have been announced with a PPA. PV project developers and system integrators can choose PV modules from a variety of technologies and from a variety of vendors as PV fast approaches commodity‐status as the market matures with grid‐parity predicted in 5‐8 years. 11. trough and Dish‐Stirling technologies are not “products” and are unavailable for 3rd party sales.000 $6.000 520 $6.880.869 16. between utility‐scale and distributed markets and between solar generators and the solar supply chain.000 3.500 $2.088 CA CA CA CA CA CA CA AZ AZ AZ RPS Utility‐Scale Solar Thermal RPS Utility‐PV California Solar Initiative ‐ Distributed PV 750 MW Utility Distributed Generation Solar Hot Water + 200.003.298 $4. and projects which are active with BLM in advancing their applications for rights‐of‐way and have incurred costs including engineering and preparation of plans of development.000.088 $92.000 $25.972 $4. The value of the deferred electricity expenses will increase over time due to inevitable and volatile annual rate increases. accelerated depreciation and Performance‐Based Incentives accrue to the benefit of the company. SES developed proprietary Dish‐Stirling technology and made international news by winning 2 PPAs in California for a total of 1750 MW.1 Commercial Customer‐Owned PV Model In the company ownership model the company puts up the capital to install the commercial PV system and bears the performance risk of ownership. Solar Millennium had previously acquired Flagsol to gain exclusive use of its proprietary trough technology.1. In 2004 Solargenix won a PPA with Nevada Power for a 65 MW project and was acquired by the large renewable energy Spanish company Acciona. A recent example of this model is Solar Trust of America LLC (STA) which was formed in October 2009. CitiGroup and Deutsche Bank joined STA to raise $6 billion in project financing for utility‐scale solar projects under Power Purchase Agreements with California utilities. The PV may also contribute to significant reductions in demand charges through peak shaving. A characteristic of a PPA is that the electricity generated is not used on‐site and is sent to the grid through a transmission line to a sub‐station. In 2008 SES was acquired by the Irish company NTR plc. Solargenix developed trough technology which was the center piece of the “U. A variation of this model is that the company becomes an acquisition target which is what happened to Solargenix and Stirling Energy Systems (SES). Procurement and Construction (EPC).11. 11. STA19 is a vertically‐integrated industrial solar company formed through a joint‐venture to integrate the capabilities of its partners in Project Development. Engineering.2 Distributed Solar Business Models 11.3 PPA/IPP Project Company Model In this model Independent Power Producers (IPPs) develop and acquire Power Purchase Agreements (PPA) after which a project company is established to execute and perform under the PPA. Trough Initiative”. turnkey construction and financing of large‐scale solar thermal power plants. 11. The company could yield equity with new investors or leverage a large capable industry partner and share control. Ownership of the project company includes the project developer with various provisions for equity and tax equity shareholders. Nevada Solar One was commissioned in 2007 as the first large solar project in more than 20‐ years.2 Residential/Commercial Solar Services Agreement Model More than 80% of the commercial/industrial solar installations in California are accomplished through a third‐party ownership model using a Solar Services Agreements (SSA)/Power Purchase Agreement (PPA). The company also benefits through deferred operating expenses with the output of the PV system off‐setting electricity expenses. The project company is isolated for liability issues and for structuring project finance in which the value of the PPA contract.S. Companies use different payback periods for capital investments and a PV project would under 11.1.2. All incentives such as tax credits. 11.1 Turn‐Key Joint Ventures This model leverages a partner’s proprietary and exclusive use of certain solar technology with the capabilities and experience of other partners which join together for project development. Recently Acciona won a major PPA in California.2. financial resources and Operational Management. 2‐16 .2 “Post‐PPA Acquisition of Technology Developer” Model This model applies to developers of proprietary solar technology who have advanced the technology sufficiently to win a major Power Purchase Agreement with a utility but without the financial strength to raise financing and overcome perceptions of financial institutions of “performance risk” of new technology. project equity investments and project leveraged financial incentives are the only sources of revenues to retire debt which is usually structured in an 80:20 debt‐to‐equity ratio.1. Solar Trust includes the German industry giants Solar Millennium and MAN Ferrostaal AG who formed MAN Solar Millennium GmbH as a 50‐50 joint venture in August 2009. S. Banks. National banks such as U. and electricity as installed renewable capacity increases. The solar leasing company accrues the benefits of tax credits. 12 Trends in Solar Incentives 12. incentives are structured to decline in direct proportion to the reduction of renewable energy costs or as installed capacity limits are reached. Bank and Wells Fargo are very active in the market and often set up dedicated “solar funds” with system integrators. A typical SSA is structured with the public entity entering into long‐term agreement with the SSA company and agrees to buy solar electricity generated on‐site at a fixed kWh price (usually the current price) for the term of the agreement which is generally 10‐20 years. If such entities pursue a direct acquisition of solar equipment. accelerated depreciation and utility incentives. they pay the full installed costs where taxable entities pay the full costs but can recover 30% through the Federal ITC. Public policy drivers are: Reductions in greenhouse gases by off‐setting fossil generation Demand‐side market development by establishing required renewable generation targets Supply‐side market development by subsidizing the high capital costs of renewable systems as the market develops in order to stimulate supply and accelerate deployment Economic development leading to jobs and private investments in the manufacturing and installation of renewable products and systems Energy security through domestic‐based electricity generation to reduce energy import dependency As the market develops. The SSA company leverages the tax credits to buy down the cost of the installation.11. For example the 30% Federal Income Tax Credit (ITC) on PV installations is not available to non‐taxable public entities. cities. A variation of this model is when a PV manufacturer establishes an SSA company with installation and financing partners to provide a reliable project pipeline for sales. 11. systems. volume‐based cost reductions are expected to lower the price of renewable products. counties and other public entities in California use SSAs for PV installations as a means to benefit indirectly from federal and state solar tax credits. installers. Some projects are also structured to generate pass‐through losses to investors.2. Generally. 2‐17 . 11.2.3 Public Entity SSA Model Most schools.4 SSA Company Model Companies offering SSAs are generally joint ventures between system integrators. PV suppliers and financial partners with access to tax equity investments and debt financing.2.1 Declining Incentives for Distributed PV There are multiple public purposes driving government mandated Renewable Portfolio Standards (RPS) and renewable incentives. The lease payments are calculated on annual PV production and on an agreed upon fixed long‐term price per kWh. corporations and large‐net‐worth‐individuals provide the tax equity investment funding.5 Solar Equipment Lease Model Under this leasing model. the solar leasing company installs finances and owns the solar system and leases the solar system equipment to the property owner who benefits from the lease by consuming the solar electricity output and by off‐setting electricity costs from the local utility. California public entities have many choices of companies in a highly competitive SSA market place. 00 per watt for smaller systems and can be adjusted annually by the utilities. 2‐18 . The APS PV incentive program for non‐residential will pay up to 60% of a project’s capital costs in a PBI over a 10.694 $126.4 Structure of Arizona Incentives for Distributed PV Arizona Public Services (APS) and Tucson Electric Power (TEP) submit annual RPS Compliance Plans to the Arizona Corporation Commission for approval.650 2. Though APS reduced its fixed kWh‐based PBI by 9% during 2009.008 $925.39 $4.20 A scenario analysis of the value of declining incentives is illustrated in the table below which uses a typical 500 kW roof‐mount commercial PV systems as a base configuration: California Solar Initiative Scenario Analysis of 500 kW Commercial Installations Under Declining PBI Payments CSI Cumulative MW PBI System Installed $/kWh Costs 170 $0.14 $5. CSI is using Up‐Front Incentives and Performance‐Based Incentives to leverage 2. 2 No.22 PBI Payments $1. The installed cost for the average system over 10 kW is $8.050 $0.25 to $3. 12.02 $7.067.000 520 $0. Utility incentives in Arizona range from $2. The utilities establish core PV incentive programs for residential and non‐residential PV and adjust their incentive rates in the annual program plans.22 $3.697 $378.000 1.09 $3. Arizona Public Services use PBI for all non‐residential systems and Tucson Electric Power for commercial systems more than 20 kW.010. 4 CSI Program Step Step2 Step 5 Step 7 Step 10 System Size $/W $8. The PV system owner receives a fixed per kWh payment based upon kWhs produced for 5 years.067.09/kWh after 1 GW to just $. The program started at PBI payments based upon $.6 GW of new PV capacity.9 GW of cumulative installed capacity.22 $6.600 $0.683 Average Annual Output Over 5 Years of PBI ‐ kWhs 5‐Year Annual Average kWh/kW 12.50 per watt for systems of 100 kW or less and are reduced after certain installed capacity targets are reached.231 PBI % of System Costs 41% 26% 12% 4% 500 kW 841.03 $3.3 Performance‐Based Incentives California and Arizona use Performance‐Based Incentives (PBI) for larger PV systems.641. 15 or 20 year program.650 Project Scenario No.02 per watt.12.03/kWh after 1. this means that APS will be paying 9% less to purchase Renewable Energy Certificates (RECs) with the owner still receiving his total incentive payments but over a longer period of time. Incentives under the California Solar Initiative (CSI) for PV are structured to decline at a rate of 7% each year.542 1. 3 No. The goal of the California Solar Initiative is to accelerate the installation of 3 GW of Distributed PV by 2017.2 Up‐Front Incentives RPS incentive programs in California and Arizona use Up‐Front Incentives (UFI) for smaller PV systems which provide a one‐time per watt cash incentive. The CSI program uses PBI for systems of 100 kW and larger. In California the first 70 MW of small PV received $2.609.39/kWh moving to $. 1 No. 80% 9.50% 18. State. The following Internal Rates of Returns (IRR) are expectations in the following segments of the solar market: Residential PV – Expected IRRs for homeowners in California ranges from 9.182 9.50% 12. The incentives are considered temporary market development tools and intended to improve the economics of solar ownership which will lead to market growth through volume additions.70% 19.90% 8. The expected IRR for residential homeowners under the Arizona Public Services incentive program is 8.3%22 2‐19 .Arizona Public Services Non‐Residential PV Declining PBI Rates Term Apr 09 Oct 09 Reduction 10 Years $0.7%.5 Internal Rates of Return and Incentives The goal of public policy in providing and setting incentives and rates for renewable energy is to accelerate the development of a market and to inversely correlate the amount of incentive payments to installations.70% Final Net Cost $48K $45K $43K $31K $33K $30K $16K $16K $17K $20K Residential Solar Hot Water – The expected IRR for residential solar hot water systems in approximately 9. costs decline through volume reductions. Residential IRR by PV System Size PV System Year.202 $0.50% 21.10% 20. Other factors leveraging incentives for improved economics are rising electricity costs and declining installed costs.180 $0.162 10.9% to 24. Installed costs of PV are expected to decline as the installed capacity of PV increases due to an assumption that costs are reduced through increased volume. Size and Rating Type 2009 CA PG&E 9 kW CEC 2009 CA SDG&E 9 kW CEC 2009 CA SCE 9 kW CEC 2009 CA SDG&E 6 kW CEC 2009 CA PG&E 6 kW CEC 2009 CA SCE 6 kW CEC 2009 CA SDG&E 3 kW CEC 2009 CA SCE 3 kW CEC 2009 CA PG&E 3 kW CEC 2009 AZ APS 5 kW STC Pre‐Solar Monthly Electric Bill $499 $460 $373 $278 $258 $219 $97 $81 $74 $89 Usage Cost kWh Before /month Incentive 1650 $81K 1650 $81K 1650 $81K 1100 $55K 1100 $55K 1100 $55K 550 $28K 550 $28K 550 $28K 800 $41K Pre‐Tax Annual IRR 24.9% 15 Years $0.187 $0.6% 21depending upon system size and which utility area the home is located since electricity costs vary considerable on tariffs.60% 23.0% 12. In California incentives are reduced in steps as installed capacity increases with the assumption that as capacity increases.2% 20 Years $0. rate schedules and peak periods. the low‐rate in part explained by the lower electricity rates in Arizona. Utility.30% 13.168 10. depending on specific project risk.175/kWh. lower installed PV costs.S. The “safe harbor” provided by the solar leasing model is based upon the business transaction being a lease of equipment and not the sale of electricity.15/kWh with conventional power plants. the costs of grid power will be increasing each year. Grid‐parity for Distributed PV in 2015‐2018 – PV is expected to achieve parity with natural gas peaker plants in 2015 at $. and rising electricity rates. PV grid‐parity will likely be greatly influenced by geography and will come sooner to California and Arizona than to other U. significantly higher IRR may be required.25 2‐20 . utility‐scale solar thermal electric plants is expected to reach parity at $. Grid‐parity for Solar Thermal Electric in 2011‐2012 – By 2011.24 12.6 Legal Issues with SSAs in Arizona Legal issues regarding the regulation of Solar Services Agreements in Arizona have to a great extent stalled PV installations using this business model. As the costs for PV decline. Utility‐Scale IPPs – IRRs of 10%–20% are generally expected from IPP projects although. states because of superior solar resources.25/kWh and parity with conventional power plants at $. The value proposition of PV also includes the un‐monetized value of “green marketing” to customers. Actual IRR depends to a great deal upon system costs. The well respected Silicon Valley venture capital firm of Khosla Ventures makes the following projections: Peak‐parity for Solar Thermal Electric in 2009 – utility‐scale solar thermal electric plants are considered to be at parity with the electricity costs of California’s natural gas‐fired peaker power plants at a peak price of $.7 Grid‐Parity Grid‐parity is the point in time at which electricity generated from renewable energy is either equal in cost or less expensive than grid power. It is legally ambiguous if the owners of SSAs who sell electricity to 3rd parties should be considered public utilities and therefore subject to regulation by the Arizona Corporation Commission (ACC). due to the shortage of tax equity caused by the global financial crisis. One structural steel company estimates that there is a backlog of $300 million in PV projects in Arizona which are on hold until the ACC resolves the issue. Commercial PV – Owners of commercial PV systems in California are expected to see after‐tax IRRs in the 3% to 8% range which is comparable to other business investments.23 SSA Companies – The expected after‐tax financial returns for tax equity investors was 6% to 11% but. Some system developers in Arizona are using the solar leasing model until the ACC issue is resolved. Grid‐parity will be achieved from predictable volume‐based cost reductions and no technical breakthroughs are required to achieve solar PV cost reductions.22/kWh in 2018 Declining incentives are directly related to “grid parity”. 12. financial expectations have increased to 13%. 12.700 kWh of PV production per installed kW which is some 70% higher that New Jersey’s system output of 1. Source: Khosla Ventures26 12. consumers in all market segments will have the choice to self‐generate their own electricity at the same or lower price as their grid supplied power with the added value proposition that solar electricity delivers environmental benefits. The average PV system performance in California and Arizona is 1. In comparison. semi‐peak rate. As solar loses its reputation as being “expensive”.000 kWh per kW.9.9 Post‐Grid‐Parity Market for Distributed PV 12. Grid‐parity for Distributed PV will not arrive all at once but instead be achieved in certain market segments and will be strongly influenced by geography.1 Post‐Parity Boom for PV as the Market Matures The global solar industry considers grid‐parity as the “Holy Grail”28 and most in the industry believe that once grid parity is achieve there will be an entirely new level of market expansion. It is expected that grid‐parity will come first to certain markets in California and Arizona. intermediate and base. New Jersey needs 2 GW of solar capacity to meet solar RPS state‐mandated RPS requirements.8 PV Grid‐Parity Will Come First to California and Arizona There are a large number of predications from the solar industry as to when and how grid‐parity will “arrive”. Grid‐parity will also be influenced by the location of the PV project and the jurisdictional utility and its tariff rates and the hours scheduled for peak. a senior analyst at Deutsche Bank Securities. has been on the international solar conference circuit speaking on the effects of grid‐parity and provided several predictions29: 2‐21 . Grid‐parity will likely come first in certain segments of the Distributed PV markets which have the highest solar resources and utilize either the lowest cost thin film PV modules or the most efficient PV modules with 1‐axis tracking which adds approximately 20% more output over fixed flat‐plate PV.9. 12. The economic effect of New Jersey’s lower production is evident from the average payback period being over 20 years27.2 Industry Shakeout as PV Moves to Commodity Pricing For more than a year Stephen O‘Rourke. pdf 7 Solar Millennium – “The parabolic trough power plants Andasol 1 to 3”. May 30. the cap‐and‐trade programs mandated by the Governor of California and the President of the United States will be phasing in.pdf 2 http://www. Tucson Electric Power Corporation”. Technology innovation is expected to provide very low‐cost. utility‐scale solar thermal electric with energy storage will have reached grid‐parity at base and intermediate loads. National Renewable Energy Laboratory.org/ fileadmin/Documents/Brochure‐indicateurs_26_pays.9.ppt 3 Kholsa Ventures (2007) “Mostly Convenient Truths from a Technology Optimist”.pdf 8 See http://www. September 2007 4 http://www.com/doclib/energy/az_solar_electric_roadmap_study_full_report. See http://www. will likely make grid‐solar the preferred generation source for new capacity additions based primarily upon competitive price with the environmental attributes important but secondary. See http://www. Enormous build‐out of capacity Even greater corporate financing activity Improved PV stock performance after a shakeout with PV cell and module manufacturers with the departure of many weaker companies Cyclical growth of PV moving to a more mature industry Broad cost convergence over the next 6 plus years The most profitable parts of the value chain – o Selling energy on a commercial scale o Manufacturing and selling silicon when the shortage returns 12. January 2009 10 California Public Utilities Commission (2009) “33% RPS Implementation Analysis Preliminary Results”. 2008. See http://www.org/csi/index.pdf 6 “Photovoltaic Solar Resource: United States and Germany Map”.org/galleries/default‐file/PVMap_USandGermany.html 9 California Public Utilities Commission (2009) “California Solar Initiative ‐ Staff Progress Report”.gosolarcalifornia. long‐term energy storage systems for utility‐scale solar thermal electric.publicforuminstitute. Tucson Electric Power Corporation”.irecusa.org/fileadmin/user_upload/IRECGeneral/2009_annual_meeting/IREC_2009_Annual_ReportFi nal. * * * Interstate Renewable Energy Council (2009) "2009 Updates & Trends Report". September 2007 1 2‐22 . Utilities will have an alternative compliance strategy and can buy Renewable Energy Credits (RECs) as carbon off‐sets but is unknown how the mandatory carbon market will affect the value of RECs. Salt River Project. May 2006. June 2009 11 California Public Utilities Commission (2009) “33% RPS Implementation Analysis Preliminary Results”. As such. Salt River Project.azcommerce. During this period. June 2009 14 “Arizona Renewable Energy Assessment ‐ Final Report for Arizona Public Service Company.seia.org/activities/2008/tx2/Opportunities%20in%20Renewable%20Energy_v2. September 2007 13 California Public Utility Commission (2009) “33% RPS Implementation Analysis Preliminary Results”. The ability of utility‐scale thermal electric to shift production to match a utility’s load profile through energy storage will likely give such projects increasing value in the energy markets.solarmillennium. June 2009 12 Black and Veatch (2007) “Arizona Renewable Energy Assessment ‐ Final Report for Arizona Public Service Company.3 Long‐Term Solar Competitiveness Cap‐and‐trade programs for greenhouse gas (GHG) emission reductions are universally assumed to increase the price of electricity generated from fossil fuels which will make the costs of solar electricity increasingly more cost competitive and accelerate grid‐parity and below grid pricing. As solar incentives decline with the price of PV over the next 5‐7 years. Most forms of renewable energy are expected to be competing at less than grid‐parity by 2020 and each will compete based upon its inherent strengths as a supply source in adding value to the Utility and Distributed energy markets.pdf 5 International Energy Agency‐Photovoltaic Power Systems Programme (2006) “Compared assessment of selected environmental indicators of photovoltaic electricity in OECD cities”. See http://www. October 2009.eupvplatform. Black and Veatch. the cap‐and‐trade carbon market in the southwest U.S.de/ upload/ Download/Technologie/eng/Andasol1‐3engl. solartrustofamerica. Maui. “The Cost of New Jersey’s Solar PV Transition” 28 BP Solar Frontiers (2005) “Going for grid parity”.pdf 27 Blue Summit Consulting and New Jersey Board of Public Utilities. Stephen (2008) 16 15 2‐23 . Also see http://www. October 2009 21 On‐Grid Energy Systems (2009) “Payback on Residential PV Systems with 2009‐2016 Uncapped 30% Federal Investment Tax Credit”.500/kW.com 18 “CSI‐Thermal Program Energy Division Staff Proposal for Solar Water Heating Program”.ca.pdf 24 National Renewable Energy Laboratory (1999) “Financing Solar Thermal Power Plants”.energy. Dish Stirling at $2. data See http://www.com 29 O‘Rourke. Hawaii 25 O‘Rourke. Buffalo. See on‐line newsletter at http://www. Trough at $4. Prepared for the Proceedings of the ASME Renewable and Advanced Energy Systems for the 21st Century Conference. See http://www.theclimategroup.html Average capital costs by technology are derived from applications and industry data. Stephen (2008) “Solar Photovoltaic Industry ‐ Solar PV Economics and Industry Outlook –November 2008”.000 and Utility thin‐film at $5. to the American Solar Energy Society 22 http://www. NREL/CP‐550‐25901.com 20 Lawrence Berkeley National Laboratory (2009) "Tracking the Sun II: The Installed Cost of Photovoltaics in the U.gov/siting/solar/index. KhoslaVentures.html 17 Abengoa “Application for a Certificate of Environmental Compatibility ‐ Solana Generating Station”.SolanaSolar. May 2009. 1999.energy. 2009 19 http://www." LBNL‐2674E.xls 23 http://www. Presented at Solar 2009. from 1998‐2008.edu/~ccat/econprojects/Econ309solarhotwaterheaterII. 2008.gov/siting/solar/index. April 11‐14.000/kW. submitted to the Arizona Corporation Commission on August 4.net/papers/PVAdvancedCommEconAndFinancingSlides. http://www. California Public Utility Commission. Deutsche Bank Securities 26 “See Scalable Electric Power from Solar Energy”.bp.humboldt.org/assets/ resources/Scalable_Electric_Power_from_Solar_Energy. Compact Linear Fresnel at $2.850. New York. Power Tower at $3.S.000/kW.000.ongrid. February 2005. Utility 1‐axis tracking silicone PV at $7. July 15.ca. markets which include third‐party distributor/supply agreements.S. subsystems. Opportunities exist for Mexican companies to compete in all tiers of the solar supply chain such as: Tier 1 Supplier – A direct designer and supplier to the solar technology construction company key systems. Please also see Appendix 3 for additional information on “solar sector market opportunities”. direct‐sale Power Purchase Agreements with U. California. There are numerous business models and market entry strategies for Mexican companies expanding into U. solar hot water systems and solar street lights. systems or subsystems. These opportunities range from the export sale of utility‐scale solar thermal electricity from northern México to the global distribution of solar products such as photovoltaic panels. assemblies or components and assists in continuous product development and improvements Tier 2 Supplier ‐ A supplier to Tier 1 Suppliers or a direct supplier of less critical components.S. Nevada and New México.1 Business Type 1 – Small PV System Integrators “Business Type 1” is generally a small company integrating solar photovoltaic systems primarily for rural off‐grid and grid‐connected commercial. As the price of PV has declined over the past 2 years. bars. solar receivers. Tier 3 Supplier – A supplier of engineered materials and special services such as rolls of sheet steel. industrial and residential systems in regional domestic markets. There is also an emerging domestic solar market in México and in Latin and South American. utilities and large commercial customers and large self‐generation/carbon projects using solar. structural supports and engineering services. 2. and especially in the southwest states of Arizona.1. this type of company is emerging as one of the most common in the industry. heat treating. The work force for this company is between 4 and 12 employees with at least 2 engineers. etc.1 Representative Profiles of SMEs 2.Section 3 Solar Sector Market Opportunities 1 Introduction There are numerous and diverse niches in the various sectors and segments of the global solar market which present a wide‐range of opportunities for Mexican companies to participate in the growth of exports to the U. reflectors. México is well positioned to benefit from the continued growth of a domestic solar market and to be a leader in the export of solar goods and services. surface treatments. joint‐ventures and wholly‐owned subsidiaries as system integrators.S. 2 Profiles of Mexican SMEs This section describes various types of Small and Medium Enterprises (SMEs) and shows the range of companies that form the base of México’s current and emerging solar industry. Perhaps the largest market potential is positioning Mexican companies as strategic players in the supply chain for the enormous capacity additions of utility‐scale solar power plants near the border in southern California and Arizona where great opportunities exist to supply mirrors. The company does not develop technology and would likely have PV module supply 3‐1 . Some companies may import evacuated tubes from China and manufacture the balance of the system in México. The workforce is variable but many have 4 to 10 employees with companies having annual income after 5 years in a range of USD 1. market.000. commercial and industrial customers and is the most prevalent type of solar company in México largely due to low costs for SHW. This type of business is generally a regional company servicing industrial clients and has developed new capabilities to offer low‐ and medium temperature solar industrial hot water and process heat using flat plat and evacuated tube collectors.2 “Business Type 2” is an energy engineering firm with experience in electrical and/or thermal industrial processes which has added capabilities to design industrial systems with solar PV and solar thermal heat for industrial process heat and process hot water. A key aspect of the ESCO work is identifying energy efficiency measures with a payback analysis of energy savings from reduced usage and demand charges. The annual income for such companies varies but is generally around USD 500.000 and USD 1.3 Business Type 3 – ESCO (Energy Services Company) An ESCO “Business Type 3” company designs.000. Such companies are also a key part of the backbone to México’s emerging domestic solar industry but are not likely candidates for export markets. 2.000 and the companies are seeing large sales increase in 2009 and are very optimistic about the future growth.000. installs. Such companies are the backbone to México’s emerging domestic solar industry but are not likely candidates for expanding into the U. Business Type 4 – Solar Hot Water System Integrators 2.500.S.1. Such companies are generally regionally‐based with a workforce of at least 5 employees with larger commercial/industrial focused companies having as many as 40‐50 employees.1.000 to USD 5. a very favourable payback period of 18‐36 months and demand from government housing programs.relationships with distributors for Kyocera panels manufactured in Tijuana or for silicon or thin‐film (CIGS) panels from ERDM in Veracruz.000. and in many cases finances retrofit and upgrade projects to improve the energy efficiency of commercial and industrial buildings and facilities.000 and USD 1.000. Some ESCO’s are incorporating PV and solar thermal energy into commercial and industrial projects to demonstrate to the public the company’s commitment to being “green”. Many of these companies work in local and regional markets and have greatly benefitted and have expanded due to participation as subcontractors in governmental programs for large national housing programs through Infonavit which provides affordable housing for low‐income workers through programs such as Casas de Interés Social and Hipoteca Verde (“Green Mortgage”).000. Many of these companies also install solar hot water systems or evolve as small ESCOs (energy services companies) which integrate other products and services as described in Business Type 3 below. 3‐2 .4 “Business Type 4” is a system integrator that installs solar hot water (SHW) systems for residential. The workforce may vary from 4 to 20 employees with at least 4 engineers and an annual income is at least USD 1. Business Type 2 – Energy Engineering Firm 2.1. Often the business model calls for the ESCO being paid from the energy savings over time. Annual income would likely range between USD 500. These companies have seen strong annual sale increases for 2009 as the costs of PV continue to decline. These companies may also be distributors of imported and domestically manufactured solar hot water systems.000. maintains. 000.000.1. The workforce of such companies is at least 60 employees with annual incomes well above USD 5.2. These are strong companies with multiple office locations with capacity to work projects nationwide or in a team on international projects.000. hotels. Such businesses are often part of Engineering. Tier 2 and Tier 3 suppliers.6 “Business Type 6s” are existing HVAC design and installation companies working in commercial and industrial markets on projects such as manufacturing plants. utility solar market and will continue to do so for the foreseeable future.000. Annual incomes are well above USD 1. Business Type 6 – Large Commercial HVAC Contractor 2. Procurement and Construction (EPC) companies and work in “turn‐key” project development partnerships. hydro and biomass CDM carbon projects.1. regional and/or national markets as Tier 1. Annual incomes are in the range of USD 1. civil and structural capabilities. Many of these companies are working in “turn‐key” project development teams on large‐scale wind and hydro projects and can easily expand to projects involving large‐scale solar electric.000. Such companies work in the national and regional markets with many having multiple locations and a workforce of at least 20 employees who are mostly technicians. sheet metal. Such companies currently serve local. 2. malls. The workforce varies depending on the degree of vertically‐integration but generally consists of 10 to 50 employees with mostly skilled technicians.5 Business Type 5 – Design Engineering Firm “Business Type 5” is a full‐scale design and energy engineering firm for large‐scale energy projects with electrical. mechanical. Some of these companies may have recently started development or construction on large‐scale wind. cooling and ventilation with no experience or knowledge of the potential to integrate solar thermal systems as a secondary heat source for thermal‐based heating and cooling systems.S. Annual incomes are generally 3‐3 . and high‐quality welding along with a variety of others process capabilities.1. Companies without CDM‐type experience are likely new entrants to the market and have certainly watched the energy and carbon market trends in México for self‐generation and CFE projects. Such companies are key candidates to become earlier adopters of solar thermal cooling using low‐temperature solar thermal collectors and the new medium‐temperature parabolic troughs. 2.000.7 Business Type 7 – Large Commercial Electrical Contractor “Business Type 7s” are successful electrical contractors working on utility‐scale electricity and transmission projects for CFE and for large Self‐Generation for industrial and commercial customers. and steel buildings.000. The workforce is generally 20 or 30 employees comprised of mostly engineers.000 to USD 5. antennas. “Business Type 7” companies are strong candidates with significant financial strength which can provide EPC services for utility‐scale PV and solar thermal electric projects. Such companies have a track record working for CFE and large Self‐Generation projects with many having experience in carbon projects under the UN’s Clean Development Mechanism (CDM) as part of the Kyoto protocols. Strong opportunities exist as outsourced lower‐cost engineering services for international utility‐scale solar projects and especially for the large Spanish technology providers/system integrators which are dominating the Southwest U.8 Business Type 8 – Machine Shop “Business Type 8s” are small‐ and medium‐sized machine shops and/or metal workshops with capabilities to make structural supports and components such as transmission towers.1. Fabrication‐related processes are diverse and include Aluminum extrusion. large‐ scale billboards. These companies work with conventional “commercially‐available” systems for heating. and universities. water‐jet cutting. 3 Business Type 12 – Mining.1. and various salt banks for nitrates. a company workshop with 10 equipment units operating at 68% capacity would generate USD 1.000. metrology for Quality Assurance and industrial design engineering (CAD and CAM capabilities). 2.2 Non‐SME Business Profiles 2.2. as a baseline. Procurement and Construction (EPC) companies and/or work in “turn‐key” project development partnerships. molybdenum. 2. silicon. Such companies are critical components to building a domestic utility‐scale renewable energy sector and to export construction services for global renewable projects.2. This lack of an adequate supply chin is considered a barrier to solar development especially as solar approaches grid‐parity with expectations of commodity pricing.between USD 500. medical devices.000. move from permitting to construction. The existing global supply chain for solar glass can not come close to meeting the near‐ and long‐term market demand. Great opportunities exist also for teaming with the global solar development companies as they too consider entering new markets in the Americas. arsenide. 2. These companies will likely see significant growth starting with expanded demand in the near‐term as many large projects in the U. the workforce is between 10‐25 employees with most employees working as individual equipment operators supported by design engineers. selenide.000 annually.2. Such large Mexican companies have the capability to lead large‐scale solar electric development in México along with selective markets in Latin and South America. There are significant opportunities for Mexican flat glass manufacturers to form strategic supply partnerships with the PV module manufacturers and with the solar technology developers now entering the California and Arizona markets. cadmium. aerospace.9 Business Type 9 – High‐Precision Metal Work Shop “Business Type 9” includes well‐established and technologically advanced “high‐precision metal shops” currently working for the automotive. Annual income varies widely but.2 Business Type 11 – Flat Glass Manufacturer The “Business Type 11” glass company has the potential to play a significant role in the global supply chain for “solar glass” which crosses all segments of solar technology from PV modules and solar hot water collectors to large‐scale solar thermal concentrators. Chemical and Fertilizer Companies “Business Type 12” companies are Tier 3 suppliers of raw materials used for many components and parts in the solar industry. 3‐4 . optics and machine design industries. The potential large role for such companies in global energy development is clearly evidenced by the dominance of large Spanish and German construction companies which have teamed with technology providers and have entered the California and Arizona utility‐solar market after successfully building‐out Spain’s solar thermal industry. Due to a high level of automation. zinc.000 and USD 5. 2. New opportunities exist to also supply the emerging energy storage market using phase‐change materials along with thermal and battery storage systems.1 Business Type 10 – High‐Level Construction Company “Business Type 10s” are often part of Engineering. tungsten.S. silver.000. The level of precision and quality control requirements for components requires CNC equipment. These are new and emerging technologies and México has great potential in supply this market with extraordinary resources in cooper. 2.1 Solar Value Chains PV Industry Value Chain 2.3.3.3 2.2 Utility‐Scale Solar Thermal Electric Value Chain 3‐5 . even when the sun is not shining. enormous opportunities open up for Tier 2 and Tier 3 domestic suppliers. 3‐6 . A recent renewable energy assessment for Arizona utilities prepared by Black and Veatch1 characterized utility‐scale solar electric development as being “constrained in the near term due to the practical limitations of the industry’s supply chain”. o The average BrightSource Energy solar plant is 100 MW and consists of 50. flat mirrors which are more efficient. simpler to manufacture. This section matches the above “business‐types” to the PV and the solar thermal electric value chains. o BrightSource’s LPT 550 heliostats consist of two flat‐glass mirrors.2 3. and cost less to install than parabolic mirrors used in solar troughs.2. o BrightSource reports that it uses smaller. Much higher solar‐to‐energy conversion efficiencies are possible with concentrating solar technologies than for flat‐plate PV. a support structure. As large Mexican companies become Tier 1 suppliers of components and systems for utility‐scale solar projects. The mirrors are mounted onto the pylon and track the sun in two dimensions.1 Concentrating Solar Optical Components The core components to the optical systems of concentrating solar thermal technologies are precision reflective materials to collect and concentrate direct sunlight. México’s strong industrial base. world‐class manufacturing capabilities and “Asian cost” structure offers extraordinary opportunities for SMEs and for large companies.4 Matching México’s Supply Chain to Solar Value Chains Enormous opportunities exist for México’s SMEs and large engineering. 3 3. collectors and concentrators. It was expected that “demand for solar thermal equipment and for the supporting engineering and construction services is at an unprecedented level worldwide. The hot salt can be stored extremely efficiently to allow power production to match utility demand.1 Supply Chain Demand for California and Arizona Solar Markets Undersized Supply Chain and Unprecedented Demand Through 2020 The existing supply chain in North America cannot come close to meeting the demand for PV. BrightSource is the largest developer of power tower projects in the southwest U. a pylon and a tracking system. It is assumed that the near term supply chain constraints in the industry will be alleviated by 2013”. reflectors and lenses for a wide‐array of types of solar modules. utility‐ scale solar or for solar hot water systems.1.000 heliostats.S. This solar thermal demand is concurrent with the projected growth in global PV production at 5 times the current capacity by 2012 with monocrystalline silicone (c‐Si) dominant and with Thin Film seeing greater growth. The heliostats are highly accurate with a 35‐year useful life with practically zero maintenance with the exception of cleaning. The grid‐scale concentrating solar industry requires enormous quantities of high‐performance mirrors. reflecting the sunlight onto a boiler atop a tower. A brief overview on the use of reflectors and mirrors for the main concentrating solar thermal technologies follows: Power Towers – Thousands of ground‐mounted heliostats (mirrors) use 2‐axis tracking to focus direct beam radiation onto a tower‐mounted central receiver filled with a molten‐salt working fluid that produces steam. manufacturing. and construction companies to participate in all aspects of the various solar value chains while continuing to build a strong national solar industry and becoming a major diversified player in the long‐term global solar supply chain. A special multilayer paint coating protects the silver on the back of the mirror.4 Reflector Area per MW Capacity – The size of the reflective surface area for 1 MW of concentrating solar thermal varies considerably between the technologies5: Parabolic Trough 5. All current parabolic trough power plants use glass mirror panels manufactured by Flabeg GmbH. When the reflectors focus on the receiver. Several glass/mirror manufacturers outside of the solar industry are evaluating the market. thin glass. The receiver carries a row of specially coated steel pipes in an insulated cavity. improve reliability.800 m² Power Tower 5. long‐life and have reduced costs which are 50% less than traditional trough mirrors. or increase performance. The mirrors have a solar‐ weighted specular reflectivity of about 93.7 3‐7 . special low‐iron or white glass with a high transmittance.3 Parabolic Dish‐Stirling – A highly‐reflective parabolic dish is used to concentrate and focus direct beam radiation onto the head of a thermal receiver which external heat to drive a Stirling engine. Colorado. on advanced reflectors that will be high‐reflective.6 Considerable R&D is also being done at the National Renewable Energy Laboratory in Golden. saturated steam at approximately 270°C (518°F) is produced as cooler water is pumped through the receiver pipes and thereby heated up. Parabolic Trough – A parabolic trough system uses linear mirror collectors with 1‐axis tracking to maintain the optical focus of direct beam radiation upon a linear oil‐filled receiver to collect heat which is transferred to generate steam to power a steam turbine. The steam is then used to drive a turbine to generate electricity.500 m² Dish Stirling 1.5%. The glass thickness is 4‐milimeters and is a thick.519 m² Key Reflector Materials – Glass Thick Glass (>3 mm) Thin Glass (~ 1mm) Mirror Coatings Equipment Vendors Non‐Glass Anodized Aluminium Polished Metal Silvered Polymer Films Alternative Reflector Designs and Materials – A number of alternative mirror concepts have been under development to reduce cost. and front‐surface mirrored glass. Considerable R&D has been and is being conducted on options using silvered or aluminized films.234 m² Compact Linear Fresnel 9. Each mirror panel has an area of approximately 2 m². Linear Fresnel Systems – Ausra’s Compact Linear Fresnel Reflector technology consists of a series of slightly curved linear solar reflectors that concentrate solar energy on pipes in an elevated receiver structure approximately 17 m (56 feet) tall. The mirrors used for parabolic trough collectors are dual‐surface silvered glass mirrors which have the reflective silver layer mounted on the backside of the glass. Alanod offers an alumized polished aluminium reflector with a nanocomposite oxide protective layer.8 o Alanod‐Solar GmbH & Co.S.217 12.2 Receivers There are only 2 German supplies providing receivers to the global trough industry – Schott AG and Siemens AG which acquired the Israeli company Solel Solar Systems in October 2009.10 MW 4. Schott Solar opened a USD 100 million production facility in Albuquerque. Alanod’s reflecting surfaces use various materials with a total solar reflectance ranging between 85% and 95%.992 24.533 m² 99. which will establish the production capacity for high‐precision parabolic mirrors which are used to help generate electricity at large‐scale solar power plants.236 19. The peak production capacity will be 400 MW for trough receivers which incorporate coated steel absorber tubes in evacuated glass envelopes. Nevada and New Mexico to 2020 Power Tower Trough Dish‐Stirling Total Hectares Acres 3.753 2. is one of the world’s leading manufacturers of reflective and absorptive solar surface solutions. Pennsylvania.922. 3. The factory will have a capacity of up to 1 million parabolic curved mirrors and had orders for 700. through 2020 is almost 100 million square meters.000‐square‐foot manufacturing facility plant is near Pittsburgh.207 Collector Area 23.969. Flabeg broke ground on its first Solar Mirror Plant in the U.173 m² 9.500 m² 73. Almost 75% of this reflector area is required for parabolic trough projects which totals approximately 24 million individual mirrors comprising some 74 million square meters of surface area. Germany. Projected Quantities of Reflectors and Mirrors for Concentrating Solar Thermal Electric Projects in California.2 Projected Component Volume for Near‐Term Solar Thermal Projects 3. The plant will also have a peak production 85 MW for 225‐watt polycrystalline PV modules.000 mirrors at the time of ground breaking. KG – Alanod‐Solar9 of Ennepetal.193. New Mexico in May 2009 to make components for the utility‐scale parabolic trough and photovoltaic markets.2.S. Many of the new generation of Distributed troughs use Alanod “brushed aluminium” reflectors.S. Arizona. Solel has self‐ supplied its own project companies with receivers for projects in the U.691 Share 23% 74% 3% 3‐8 . and Spain.140 m² 2. The new 209. Key Suppliers – there is a very limited supplier‐base for manufacturers of solar mirrors and reflectors with 2 key German suppliers dominating the market: o Flabeg GmbH – In August 2008.2.759.1 Reflectors and Mirrors for Utility‐Scale Concentrating Solar Thermal Electric The projected reflectors and mirror supply for concentrating solar thermal projects in the southwest U. The LUZ LS‐3 collector uses a bridge truss and galvanized steel. and the 280 MW Abengoa Solana project under a PPA with Arizona Public Services.920 Number Receivers 3.11 3. Solargenix/Acciona uses an organic space frame hubbing structure with extruded aluminium using 70 to 80% recycled content. The Nevada Solar One figures are used to show the magnitude of the supply chain requirements by key components and not to provide precise figures.400 Mirrors ‐ number 243 Receivers ‐ number 4 m Receiver ‐ length 122 Spaces frames 42.915 mT MW Collector Area Trough 12.603 12. Arizona.969. Arizona. Nevada Solar One was built by Solargenix/Acciona using a proprietary collector design.800 m² Mirror surface area 2.3 Aluminum ‐ metric Tons 3‐9 .753 73.140 m² 7. Nevada and New Mexico to 2015 Number Mirrors 30. A key design requirement is sufficient strength to withstand wind loads during maximum wind speeds to prevent catastrophic damage. The metrics for the Acciona project were used as the basis for projecting the per MW volume of the supply chain for key components. Receivers and Structural Supports for Concentrating Solar Thermal Electric Projects in California.2.2.3 Structural Supports All utility‐scale trough systems require structural metal support system. Some of the new smaller Distributed trough systems use a combination of metal and lightweight composite panel materials for reflector backing. Abengoa uses a Torque tube with stamped steel cantilever mirror support arms. Most of the trough structures use steel or aluminium for supports and space frames to hold the reflector.4 Supply Chain Requirements for U.S. These structures rotate in a 2‐ axis or 1‐axis depending upon technology.400 Hectares Unit Basis per MW of Trough 5. The basis for 12. Nevada and New Mexico which assumes just 25% of all trough projects which have completed “Plans of Development” will go online.3. 8 GW of future BLM‐sited projects in California. 250 MW of Distributed trough which represents 33% of new capacity additions under California Distributed feed‐in‐tariff program.607.7 GW of trough projects is the combined total of: 12 trough projects with 4. Trough Projects This estimate uses detailed quantities and technical parameters from Nevada Solar One12 which went online in 2007 as the 1st utility‐scale trough installation in the world since the 1980's. The Stirling Energy Systems dish units requires a more substantial pedestal which holds an approximate 90 m² parabolic collector and a 25 kW Stirling engine mounted on a boom connected to the pedestal all of which tracks on a 2‐axis drive system.101. Pedestals supports are used for each 2‐axis tracking heliostat mirror unit for power towers.8 GW of new capacity which is undergoing permitting by the California Energy Commission or have announced PPAs.406 km Space Frame Metal 539. The actual supply chain requirements will vary between projects and between various proprietary trough designs. Projected Volume of Parabolic Trough Mirrors. Trough systems use linear collectors which consist of pylons and mirror support structures which track on 1‐axis. 4 Climate Change Pressures on the Supply Chain Creates Opportunities Global climate change initiatives will create increasing pressures to reduce the carbon footprint of all aspects of the solar supply chain and to reduce the embodied energy content of materials used in solar components and parts. These climate change initiatives will also create new opportunities in the solar supply chain for existing, new and emerging Mexican companies which understand and anticipate these trends by implementing carbon‐reducing policies and practices which go far beyond previous “Greening the Supply Chain” initiatives. Additional opportunities will come from companies working to provide materials with lower “embodied” energy. 4.1 Beyond ISO 14000 Traditionally the “greening of the supply chain" referred to buyer companies requiring suppliers and vendors to practice a certain level of environmental responsibility in core business practices which in the past may have required the company to become certified to ISO 14000 standards. ISO 14000 is a series of international standards on environmental management which were developed after the 1992 Rio Summit on the Environment. It provides a framework for the development of both the system and the supporting audit program. During the 1990’s “environmentally‐conscious manufacturing” and “waste minimization” were also terms associated with the “greening” of the supply chain. Suppliers will gain competitive advantages as the global solar industry will increasingly expect and demand reduced carbon‐footprints for all aspects of the supply chain. Manufacturers adopting self‐ generation projects to provide renewable electricity, industrial process heat and process hot water will reduce their carbon footprints and enhance their value and position in the long‐term solar supply chain. 4.2 Opportunities for Alternative Materials with Lower Embodied Energy There will on‐going opportunities for supply chain companies to identify, develop and source alternative and recycled content materials with lower embodied energy content for renewable energy systems, components, and parts. “Embodied Energy” is the total energy required to fabricate a given material or component, from extraction of raw materials to manufacturing, and all transport steps along this chain. In addition, “end‐of‐life” disposal options, including recycling, land filling, and incineration, are accounted for. This is often referred to as “cradle‐to‐grave” accounting.13 As an example, a recent analysis by the National Renewable Energy Laboratory found that the embodied energy of the curved glass mirrors which dominate all trough collector designs is 61% higher than a new alternative light‐weight solar film. 3‐10 The embodied energy of a new solar film‐based mirror is comprised of an Aluminum support substrate (62 MJ/m²), a new ReflecTech® polymer substrate (22 MJ/m²), and a Reflec ‐Tech® silver layer (1 MJ/m²) with a total embodied energy total is 85 MJ/m². The embodied energy of the EuroTrough’s curved glass mirrors is comprised of the curved glass (345 MJ/m²) which includes the silver layer and the back‐coated layers along with the transportation of the mirrors to the project site (20 MJ/m²) which totals 365 MJ/m². 14 The making of steel releases 2 tons of CO₂ for every ton of steel produced. With steel and Aluminum being the predominant material for the space‐frame support structures for trough collectors, considerable opportunities exists for companies looking at composites as an alternative light‐weight, high‐strength material with lower embodied energy content. 5 Export Sales of Solar Electricity to U.S. Perhaps the largest near‐term solar opportunity for Mexican companies is to initiate the development and construction of utility‐scale solar power plants in México for the export sale of electricity to the United States. Specifically there is a new and emerging market for the export of solar thermal electricity from northern México to California by Mexican Independent Power Producers (IPPs). The export of renewable electricity to California has already begun with recent sales of geothermal and wind by CFE and IPPs to California utilities. For California to meet its Renewable Portfolio Standards of 33% by 2020, the California Public Utility Commission expects that 17% of its renewable electricity will come from out‐ of‐state which equates to 4.1 GW of renewable capacity additions which will provide more than 12,000 GWhs of electricity.15 5.1 5.1.1 U.S. Anticipates Renewable Export Electricity from México US‐México Bilateral Framework on Clean Energy and Climate Change The “US‐México Bilateral Framework on Clean Energy and Climate Change”, agreed to by Presidents Calderon and Obama in April 2009, builds upon cooperation in the border region and promotes efforts to reduce greenhouse gas emissions and to strengthen the reliability and flow of cross‐border electricity grids along with facilitating the ability of neighboring border states to work together to strengthen energy trade. 5.1.2 California and Arizona California has anticipated that renewable energy generated in Baja California will contribute to state utilities meeting their Renewable Portfolio Standards (RPS). California’s Renewable Energy Transmission Initiative (RETI) has identified renewable resources in California and adjoining areas that can deliver energy to California to meet its RPS requirements and to identify the necessary transmission to deliver this energy. RETI has included the northern part of Baja California as part of the assessment area. Arizona also expects to import a portion of its renewable energy requirements.16 5.1.3 Western Renewable Energy Zones The Western Governors’ Association and U.S. Department of Energy launched the Western Renewable Energy Zones (WREZ) initiative in May 2008. Participating in the initiative are representatives from throughout the Western Interconnection which includes 11 states, two Canadian provinces and areas in northern México. 5.2 5 GW of Solar Thermal Potential in Northern México The quality and quantity of northern México’s solar resources are as good as anywhere in the world. México’s best solar thermal resources are in the northern states of Baja California, Sonora, and Chihuahua. There is 5 GW of solar thermal generation capacity in Baja California which has the potential 3‐11 to generate 11.6 GWhs of solar electricity annually.17 Though there has been considerable wind development planned for northern Baja for export to the U.S., there are considerably more solar thermal resources than wind.18 Solar Resources in Baja California Renewable Generating Capacity (MW) Solar Thermal DNI ≥7 kWh/m² day Baja North 3,980 Baja South 1,012 Total 4,992 Share 63% Wind Class 4 & Class 5+ 1,684 1,253 2,937 37% Baja 5,664 2,265 7,929 Renewable Generation (GWh) Solar Thermal DNI ≥7 kWh/m² day Baja North 9,274 Baja South 2,357 Total 11,631 Share 57% Wind Class 4 & Class 5+ 5,169 3,745 8,914 43% Baja 14,443 6,102 20,545 5.3 Selling Electricity to California Direct sales by Comisión Federal de Electricidad (CFE) of electricity transmitted through the interconnected Western States Coordinating Council grid between Baja California and California o In February 2009, CFE agreed to sell the City of Los Angeles 100 MW of geothermal electricity in a 3‐year agreement with the Los Angeles Department of Power and Water. The power comes from CFE’s Cerro Prieto geothermal facility in Méxicali, Baja California.19 There are 2 mechanisms to sell renewable electricity generated in México to the U.S.: Direct sales by Independent Power Producers of electricity transmitted through dedicated cross‐ border interconnections to utility substations in Southern California which is then delivered to California utilities and/or large industrial customers The United States and México have traded electricity since 1905, when privately owned utilities located in remote towns on both sides of the border helped meet one another’s electricity demand with a few interconnected low voltage lines.20 The 1992 reform of the Electric Energy Public Service Law21 made certain changes that allowed the private sector to invest and participate in activities for exporting electricity generated in México22 such as: Independent Power Production – Private investment is allowed in larger generation plants with a minimum capacity of 30 MW for the sole purpose of selling electricity to or for export. Import and Export – Private investors are allowed to participate in the import and export of electricity. México has an active electricity trade with the U.S. and in 2007 exported 1,300 GWhs of electricity to the U.S. while importing 600 GWhs. Companies have built power plants near the U.S.‐México border with the aim of exporting generation to the United States. Any company seeking to establish private electricity generating capacity or to begin importing/exporting electric power must attain a permit from 3‐12 which have the greatest demand for renewable energy and which expect solar to play the a major role in the renewable supply mix. own and operate power plants and enter into long‐term contracts with utilities or large industrial customers to supply electricity in a long‐ term Power Purchase Agreement (PPA). construct. Baja California. best‐fit” for Investor‐Owned Utilities The procurement of renewable energy in U.2 IPP Projects Require Dedicated Transmission to U. The largest exporter is Sempra Energy’s 700 MW combined‐cycle natural gas plant near Méxicali. The Southern California grid is undergoing major upgrades in order to support large‐scale renewable capacity additions from the California desert and from Baja California.23 To meet the growing demand for electricity and natural gas. The electrical grid for Baja California is isolated from México’s National Electric System (SEN) and is connected to the Western Electricity Coordinating Council (WECC) in the Unites States and Canada. CRE has issued permits to 4 private companies which has led to a major expansion of electricity exports to the U. requires dedicated cross‐border transmission lines. markets is much different than in Europe.4.S.S.Comision Reguladora de Energia (CRE). The main flows of electricity between the U. 5.1 Cross‐Border Grid Interconnections México has 9 transmission interconnections with the United States and 5 of these lines are high‐voltage direct current connections that operate only in emergency situations. The siting of solar projects along the U.4 Transmission Interconnection 5. PowerLink Transmission Lines 5.S.4. Los Angeles and Phoenix which are within a 200‐300 mile radius. Since 2007. are being sited with transmission access to the U. Currently some major wind export projects in the La Rumorosa. and México are between SEN in Baja California and the Western Electricity Coordinating Council (WECC).1 Competitive RFPs and “Least‐cost. the cross‐border transfer of significant amounts of electricity and natural gas is increasingly being integrated into the energy sectors of both California and Baja California.5. where there is a medium voltage (230 kV) connection capacity of 800 MW.S.1 GWhs.5 Business Models for Mexican IPPs for Sales to California Independent Power Producers (IPPs) develop. The standard business model for utility procurement of renewable energy is competitive Request For Proposals (RFPs) 3‐13 . finance./México border provides far more options for optimal locations close to grid interconnections than wind since wind must be located at a specific place due to the site‐specific character of the wind resources. The border area of Baja California is an ideal location to generate solar electricity for deliveries in San Diego.S.S. totaling some 12.S. Solar projects can be sited based upon proximity to transmission since the solar resources are inherently non‐site specific. just a few miles away.S. 5. Grid New IPP solar generation in northern México for export to the U.24 Baja California and Sonora border California and Arizona which are the 2 states in the U. 5. The terms of the PPA must then be approved by the CPUC or ACC which considers estimates of indirect costs associated with the project including new transmission investments and ongoing utility expenses resulting from integrating and operating the proposed renewable energy resources. This would be the equivalent of a fixed price of USD 222/MWh. California Department of Water Resources.865 2.925 Imperial Valley ID 4.305 761 Pasadena 1. By 2020. Such multiple parties could be publicly‐owned utilities or large industrial customers or a combination of both. an investor owned utility.000 MWh annual under a 30‐year PPA with the total PPA value of USD 4 billion. It is not unusual for a mine and an investor owned utility to joint‐venture in such agreements in the southwest U. Using Abengoa’s Mojave Project as a baseline.S. These publicly‐owned utilities include Los Angeles Department of Water and Power (LADWP). The terms of contracts are not disclosed but sometimes the kWh sale price of electricity can be inferred from Press Releases and permitting applications.5. and is larger than San Diego Gas and Electric. LADWP is the largest municipal utility in the U. 5.466 Burbank‐Glendale 2.783 3‐14 .441 1.154 8. best‐fit” in reviewing renewable RFPs which allows the utility to select the project based on the value to the ratepayer and the utility.25 Renewable Requirements for California Public Utilities Planning Area Annual Consumption Forecast (GWH) and RPS 33% RPS Utility Planning Area 2018 2020 LADWP 27. The utility selects and “short lists” a project and enters into negotiations with the IPP proposing the project.S.917 18. Standard procedure is to negotiate utility PPAs with options for capacity additions in future phases.with the bidder proposing a long‐term price generally over a 20‐year PPA period. Imperial Valley Irrigation District and the Cities of Pasadena and Burbank‐Glendale. For example Abengoa’s Solana Project for Arizona Public Services generates 600.301 429 Publicly‐Owned Utilities 56. In September 2009 publicly‐owned utilities became subject to Renewable Portfolio Standards (RPS) for the first time when the Governor signed Executive Order S‐ 21‐09 which increased the RPS requirement to 33% by 2020 for all publically‐owned and investor‐owned utilities.8 GWh of renewables into their electricity sales and 5 of 6 utilities are well within 200 miles of the Tijuana‐Méxicali border area. states.8 GW to meet the RPS requirements for publicly‐owned utilities in 2020. Multiple‐Party PPAs – A common energy purchasing strategy is for multiple parties to join in a multi‐ party PPA to benefit from shared lower costs from larger contracts which no party alone could manage.851 4.961 SMUD 12. Utilities use a selection process called “least‐cost.241 California DWR 8. it would require 30 x 250 MW trough projects with a combined capacity of 7. Sacramento Municipal Utility District. Abengoa’s Mojave project is a USD 1 billion 250 MW trough project with annual production of 615 GWhs. the 6 largest publicly‐owned utilities are required to add 18. Utilities often issue annual renewable energy RFPs and file annual renewable energy procurement plans to the California Public Utility Commission (CPUC) or the Arizona Corporation Commission (ACC).2 Export Sales to Publicly‐Owned California Utilities A new niche market is the direct sale of renewable electricity to publicly‐owned utilities in California which provide 18% of the state’s electricity. 5.1 Utility‐Scale Projects It is assumed that the same global solar system integrators which are dominating the competitive utility‐ scale solar markets in California. there are at least 3 conceptual scenarios for the sale of solar electricity with (“bundled”) and without (“unbundled”) the environmental attributes which maybe qualified as Renewable Energy Credits (REC) or as Certified Emission Reductions (CER): 3‐15 .200‐1.6 Specific Opportunities The market demand from California presents significant opportunities for developing utility‐scale solar thermal electric and utility PV projects by IPPs in Baja California for exporting solar electricity. The companies likely to be considering sites in the Méxicali/San Luis Río Colorado area are Acciona. Iberdrola and BrightSource. Prime locations are the flat desert areas just west and east of Méxicali and the area around San Luis Río Colorado bordering Yuma County. This part of the solar utility market offers additional opportunities and better access to the market for Mexican IPPs to develop projects since the PV technology is available and “on the market” unlike the utility‐scale solar electric market dominated by global project developers with proprietary solar technology.2 Utility‐Scale PV California utilities are diversifying their solar portfolios and are entering into long‐term PPAs for utility PV projects sized between 45 MW and 550 MW which use thin‐film or one‐axis tracking silicon modules.6. Arizona. For large‐scale solar projects located in México. Solel.6. 5. Abengoa. Nevada and New Mexico are actively considering locations in Baja California. A typical 250 MW utility‐scale parabolic trough project with no storage represents a USD 1 billion investment requiring substantial engineering services and some 1.500 construction jobs along with 200 permanent jobs for operation.7 Opportunities for Large‐Scale Carbon Projects on the Border The large‐scale wind projects being developed in México are “self‐generation” where the electricity is used by large Mexican industrial customers and the either the entire project and its carbon credits or just the carbon credits are sold to European investors such as large utilities who are in a mandatory carbon market and require carbon off‐sets. 5. These projects are qualified for under the United Nation’s Clean Development Mechanism (CDM) as provided under Kyoto. Map of Méxicali and San Luis Río Colorado Area Opportunities exist to locate utility‐scale solar thermal electric plants which are generally sized 250 MW to 1000 MW. Solar Millennium. Arizona. 5. 15/kWh.500 $285.S. 5. “Self‐Generation” Project for Mexican Industrial Customers/Sell CERS to Europe: An “unbundled” IPP “self‐generation” project which sells the electricity to large Mexican commercial/industrial customers and sells the CERs to European carbon investors.439.62 Certified Emissions Reduction (CER) Sales ‐ USD $9.5% of the USD 1 billion capital cost for the solar plant. the equivalent of .016 more per kWh.8 Carbon Off‐Sets for a Representative Utility‐Scale Solar Project Using a USD 25 per Certified Emissions Reduction sale price for the offset of the equivalent of 1 metric ton of CO₂. being implemented by the U.S.S.300.532.300 11.2 million annually in additional income for a typical 250 MW solar thermal electric project using trough technology in greater Méxicali area.000. for every MWh of renewable energy generated.000. This scenario requires a project site near the border since a dedicated cross‐border transmission is required to interconnect with a U. This scenario uses an emissions factor of .3% in additional income from providing USD . would be expected to be higher than 10.S. Using an electricity sales price of USD . Environmental Protection Agency and the by the Air Resources Board of the State of California.62 for México which means that. Projected tCO₂ Emissions Reductions Typical 250 MW Trough Solar Thermal Electric Plant Northern Baja California Location Electricity Production México Emissions Factor MWh tCO₂e/MWh 615. This scenario is the business model for most of México’s wind projects currently under development.000.000 CAPEX USD1. utility sub‐station. This projection uses the average capital costs for a project in California.000 0.15 kWh Additional CER Price Value USD . The sale of CER credits would add USD 285 million to project revenues over the lifetime of the project which is some 28.016 kWh +10. Export Solar Electricity and RECs to U.3% 3‐16 . Utilities: A “bundled” IPP project with export sales of electricity with RECs to California and Arizona utilities which must comply with Renewable Portfolio Standards (RPS) and require the RECs for mandatory compliance.250. the sale of CER credits would contribute about 10.845.000 12.3%.S. Project can be located near the customer’s location using a distribution interconnection. carbon off‐sets would produce about USD 92.000 Electricity Sales ‐ USD $92. Solar offers an interesting alternative to wind for self‐generation projects since wind requires higher transmission costs than solar due to the distance between remote wind farms and the industrial point‐of‐use.975.62 tons of CO₂ is offset.: An “unbundled” IPP “self‐generation” project which sells the electricity to large Mexican commercial/industrial customers and sells the CERs to the new carbon markets in the U. as a share of total revenues. “Self‐Generation” Project for Mexican Industrial Customers/Sell CERS to U.000 Size Annual 30‐Years tCO₂e 381.000 $1.000 USD 25 CER Price tCO₂e Electricity Sale Price USD . Cost reductions of 20‐30% or more are anticipated for a project located in northern México which means that the carbon revenues. solar hot water and PV is well known.S. desalinated water and “distributed‐scale” thermal power blocks for electricity and heat. There are now numerous companies from Europe. heating. 6. Global Final Energy Demand26 Medium‐ and Low‐Temperature Heat ≤ 250°C (480°F) 44% Transport Fuels 29% Electricity 17% High‐Temperature Process Heat 10% The market potential for utility‐scale solar thermal electricity. The replacement of direct combustion fossil fuels by solar thermal has a potential to reduce more GHGs than PV and even utility‐ scale solar thermal electric. cooling. 6.2 New Distributed Troughs for Medium‐Temperature Applications A new generation of scaled‐down parabolic trough collectors is entering the market which will create great opportunities to generate electricity and drive thermal applications for cooling. engineering services and manufacturers of the solar thermal generation systems and the thermal conversion equipment and systems used to transform heat into productive “work”.6 Global Thermal Energy Market Most of the world’s energy is used to generate heat which consumes more than 2 times the energy that is used for electricity and 50% more than is used for transportation. The use of direct solar thermal energy for process and for conversion applications is the least known and least developed sector of the solar industry. combustion‐based generation for a wide range of thermal applications and processes. Key products of direct solar thermal which present great opportunities for México are industrial process heat and process hot water. The following list shows operating temperatures for representative Distributed trough collectors from 5 companies: New Generation of Medium‐Temperature Troughs DE – Trough Solarlite DSG 330°C DE – Trough SOLERA Sunpower GmbH SPR 240/300 (oil) 90°C‐300°C DE – Trough SOLERA Sunpower GmbH SPR 120/300 (oil) 90°C‐250°C 204°C‐288°C US – Trough Sopogy SopoNova Next Generation 93°C‐204°C US – Trough Sopogy SopoNova 4. the U. Unlike any other solar technology.0 DE – Trough NEP Solar PolyTrough 1200 220°C DE – Trough Solitem 200°C 3‐17 626°C 194°F‐572°F 194°F‐482°F 400°F‐550°F 200°F‐400°F 428°C 392°C .1 Opportunities Significant opportunities exist for Mexican companies in all aspects of the emerging direct solar thermal market. There may even greater opportunities to use low‐ and moderate‐temperature solar thermal heat in direct applications to displace fossil‐fuel electricity generation and to replace the direct combustion of fossil‐fuels for heat. Such solar thermal collectors can be configured in hybrid operations with natural gas or biomass and with energy storage system to extend the hours of operation to near base load capabilities as well as peak. and Australia entering the new market for Distributed solar thermal with new designs for “Distributed” parabolic troughs. These opportunities include system integrators. Solar thermal will soon have a great advantage over PV as global incentives shift from performance‐ based incentives on kWh produced to actual kgs of GHGs and CO₂ reduced. industrial heat and desalination. these types of Distributed solar thermal systems allow extraordinary capability and flexibility to reduce or replace fossil fuel‐driven. Solar thermal energy out‐ performs PV in Greenhouse Gas reductions due to a much higher solar‐to‐energy conversion factor. Thermal energy represents 54% of the global final energy demand with electricity accounting for just 17%. 27 Industry consumes 41% more thermal energy than electricity28. engineering . glass and ceramics o Pulp and paper o Food processing Process Temperatures for Industrial Applications Industrial Process Heat Applications and Temperatures Industrial Sector Process Food and beverages drying washing pasteurizing boiling sterilizing heat treatment Textile industry washing bleaching dyeing Chemical industry boiling distilling various chemical processes pre‐heating of boiler feed water heating of production halls 3‐18 Temperature °C 30 90 40 80 80 110 95 105 140 150 40 60 40 80 60 100 100 160 95 110 120 30 30 105 300 180 100 80 7. 7 Industrial Process Heat Europe has long understood the potential of using solar thermal energy for industrial processes and has lead efforts for many years through the International Energy Agency’s Solar Heating and Cooling Programme and the European Solar Thermal Industry Federation’s “Intelligent Energy” initiative. There are great opportunities to manufacturer these Distributed trough collectors in México to achieve significant cost‐reductions which will accelerate market entry and create numerous opportunities for Mexican companies in product design. More than half of the industrial heat used by industry is low‐ and medium‐temperature heat – More than 50% of the thermal energy needed by commercial and industrial companies for production processes and for heating large industrial facilities is below 250°C (480°F). 7.2 All sectors .1.1. steel and aluminum o Petroleum refining and fertilizer production o Cement.1 Industrial Thermal Markets Industry accounts for 30% of global energy usage which is more than any other sector – For industrialized countries. the industrial sector has a 30% energy consumption which is higher than all other sectors such as transportation. services and residential sectors. installation and operations and maintenance. system integration. Key thermal markets by industry sectors: o Iron. lime. manufacturing. The potential is also well known by researchers at the Centro de Investigación en Energía. distribution and/or channel partner relationships with the global technology providers of low‐ and medium‐temperature thermal‐based “chillers”. Medium‐temperature solar thermal heat is between 90°C and 250°C and can be provided by evacuated tubes and by the new generation of small‐scale parabolic trough collectors. These are fairly straight‐forward technical designs which require just the addition of an additional hot water inlet to the feed water for a boiler or for the bottle washing hot water tank. who have been participating in the Solar Heating and Cooling Programme of the International Energy Agency’s work.7. Specific opportunities exist for Mexican companies to enter into the manufacturing. Perhaps no other solar application can contribute more to reducing peak electricity usage. peak demand and greenhouse gas emissions that solar cooling. 8 Solar Cooling One of the largest global applications for low‐ and medium‐temperature solar thermal is to drive thermal‐based space cooling. Direct solar thermal applications include: “Useful process heat” for generating large quantities of hot water for bottle washing in the beverage industry. There are 3 primary technical configurations for thermal‐based solar cooling: Low‐temperature flat plat collectors providing 60°C heat to drive adsorption chillers for small commercial and residential applications Evacuated tube collectors providing 90‐100°C heat to drive single‐effect absorption chillers for small‐ and medium‐size commercial/industrial applications New generation of medium‐temperature parabolic troughs providing 150‐200°C to drive double‐ effect absorption chillers for commercial/industrial customers with minimum cooling loads of 350 kW (100 Tons) 8.1 Available Thermal‐Based Chillers The potential of solar cooling is well known by Europe policy makers. Several Mexican system integrators have already made the transition from using solar hot water systems for domestic hot water to providing industrial hot wash water for large multi‐national beverage bottling plants and for pre‐heating boilers. The global market for higher temperature industrial process heat is wide open with significant opportunities available for system integrators and industrial process engineers to integrate the thermal output of a solar collector field into industrial processes using direct heat or heat exchangers.1. thermal buffers and storage systems.3 Applications Low‐temperature solar thermal heat is below 90°C and can easily be generated by low‐cost flat plat and evacuated tube collectors. for and for commercial laundries and car washes “Use supply heat” for preheating natural‐gas fired boilers Drying and dehydration México’s solar industry is most experienced in solar thermal due to the growth and market share of solar hot water systems. 3‐19 . Universidad Nacional Autónoma de México (CIE‐UNAM). Several Mexican companies have developed proprietary industrial solar hot water units and integrated solar collectors and solar drying for agricultural products. research institutions and a handful of SMEs. 5‐2.5 Tons SolarNext AG (Germany) 12 KW 3. Entropie. Type of Chillers and Thermal Requirements Coefficient of Performance 1. Yazaki from Japan has dominated the small commercial market with single‐effect absorption chillers from 100‐350 kW (30‐100 Ton) and has some 100.2 Solar Cooling Opportunities Significant opportunities exist for Mexican companies to participate in at least 2 aspects of the solar cooling value chain: Companies which enter into manufacturing and distribution agreements with European technology providers of chillers Energy/HVAC system integrators which develop the integrated engineering capabilities and standard designs for solar thermal collector fields and chillers for commercial/industrial installations Low‐cost manufacturing of adsorption and absorption chillers in México will lead to an accelerated market entry for solar cooling in the hot arid areas of the Americas.4 Ton Sonnenklima (Germany) 10 kW 2.000 units installed world‐wide.S.5‐20 Tons 2. Carrier. Toshiba.8 Ton Climatewell (Sweden) 10 kW 2.3 Tons 1. It is 3‐20 . The size range of the chillers is 350 kW to 5.6 MW (100‐1600 Tons). A new generation of smaller chillers has been developed in Europe which offers great potential for small commercial and residential markets world‐wide and particularly in the southwest U.8 Tons 8. and Colibri. Hitachi. México offers very promising near‐term low‐cost manufacturing opportunities. Mitsubishi.5 Cooling Technology Absorption Chiller ‐ Double‐Effect Absorption Chiller ‐ Single‐Effect Adsorption Chiller Thermal Requirement 163°C 325°F 88°C 190°F 60°C 140°F The global manufacturers of commercial/industrial absorption chillers include TRANE/Thermax.35 0.3‐4. York.3 Ton Adsorption SorTec AG (Germany) SolarNext AG InvenSor (Germany) 5‐75 kW 8‐15 kW 5‐10 kW 1. Ebara. New Small‐Scale Solar Chillers Absorption EAW (Germany) 15‐30 kW 4. Sulzer Escher Wyss. and northern México. MacQuay. LG.3‐8.7 <. Broad. Given the import barriers of high European manufacturing costs and the extremely high currency conversion for Euros‐to‐Pesos and Euros‐to‐US Dollars.8 Ton Pink (Austria) 10 kW 2.8 Ton Rotartica (Spain) 5 kW 1. to achieve low‐cost economies of scale. The incentive is paid based upon production which is measured using a BTU meter installed at the chillers’ inlet pipe to register inlet temperature and flow rates of the heat transfer fluid from the collector field.119/kWh for kWh produced until 60% of the capital cost is paid back. 8. there are great opportunities for new companies to lead in the roll‐out of solar cooling in North America as the market is wide open with perhaps only 2 or 3 small system integrators/engineering companies with technical know‐how capable of serving the Arizona and California market. The other approach was to scale‐down parabolic troughs for small distributed applications such as industrial process heat and to use smaller power blocks adapted from the geothermal industry to generate electricity. this new generation of turbines is smaller. 9 Thermodynamic Converters for Solar Thermal The global commercial and industrial market for Distributed solar electric is estimated at USD 750 billion with the current market penetration at less than 1%. Monthly BTUs are divided by 3412 to produced kWhs and the utilities will then pay the owner approximately USD . Perhaps the greatest opportunities are to add solar cooling to the large manufacturing plants along both sides of the U. One path was to optimize non‐concentrating flat plate and evacuated tube collectors to deliver higher temperatures. These new power blocks include thermodynamic converters such as Organic Rankine Cycle (ORC) turbines and new “distributed” steam‐ based turbines. The availability of the new scaled‐down solar collectors delivering medium‐temperature heat has led to an emerging market for scalable power blocks matched to the thermal outlet temperatures of the new collector fields.29 A substantial part of this market can be served by the new generation of medium‐temperature trough collectors integrated with several new technical approaches to generating solar electricity with smaller thermal‐based power blocks. In exchange for this incentive. Such projects offer great potential for new and emerging companies entering the solar cooling market to package such projects for the sale of carbon‐offsets and to finance the installations with long‐term loans from the North American Development Bank for energy‐efficiency improvements. Arizona Public Services and Tucson Electric Power offer owners of solar cooling systems performance‐based financial incentives equal to 60% of the capital costs of the solar collector field and the new chiller equipment.3 Solar Cooling Opportunities in Southwest U.30 Several initiatives were launched over the past 5 years in the U. 3‐21 . scalable and modular and work at lower temperatures and can be sized from 30 kW to 20 MW. Parallel technical paths were taken with proven solar technologies. the utilities will own the RECs generated by the solar cooling system which are used by the utilities to comply with mandatory Renewable Portfolio Standards.S. solar trough projects had to be larger. 9. Unlike the conventional steam Rankine power blocks used for central solar plants.S./Northern México Perhaps no market in the world has more demand and better incentives for solar cooling than California and Arizona./México border which are facing increasing energy costs especially for summer intermediate and peak period rates/tariffs and demand charges. California is adopting new incentives for solar cooling which will are expected to be comparable to those in Arizona. the prevailing wisdom was that in order to be economic and successful.expected that Mexican manufacturing could reduce costs for solar cooling chillers by 40% or more over European manufacturing.1 New Approach to Distributed Solar Thermal Electricity Until recently. and Europe to develop and demonstrate smaller parabolic trough technologies in the 80°C to 250°C temperate ranges.S. or integrated with natural gas plants. Distributed solar thermal electric can directly compete against Distributed PV in installations sized 30 kW and larger at lower installed costs while providing more electricity per installed kW. As an emerging segment of the solar market. a demonstration project implemented by Arizona Public Services outside of Tucson. Traditionally ORCs were powered by waste industrial heat to provide cooling and then became used in the geothermal industry. Arizona. The project used a smaller Solargenix parabolic trough collector with a 1 MW Organic Rankine Cycle (ORC) turbine from Ormat. Advantages of Distributed trough collectors include: Collector fields can be sized from a few collectors to a 5 MW field and be operated unattended Lower kW investment costs available on a Distributed basis which were previously only achieved through economies of scale on utility‐scale solar plants Collectors are a half to a third smaller in height than utility‐scale collectors allowing the use of lighter weight structures and smaller drives motors Operating at lower temperatures and lower pressures allows the use of less expensive and fewer high‐performance components such as hydraulic pumps. 9. receivers and glass mirrors Water can be used as the heat transfer fluids for systems operating at 200°C or less.l. IT 450kW ‐ 1500 kW 1980 GET GmbH DE 220kW 2003 GMK GmbH DE 500kW ‐ 5MW 1999 Adoratec GmbH DE 300kW to 1. was the first solar project to use an ORC turbine as the power block for a down‐ sized trough collector and is largely responsible for driving the recent resurgence of interest in manufacturing new generations of ORCs to power the emerging Distributed solar electricity generation. In 2005 the International Energy Agency (IEA) launched a development initiative to improve and demonstrate multiple approaches to medium temperature collectors with concentrating and non‐ concentrating collectors. a leading geothermal developer and ORC manufacturer. In the 2006 the project was commissioned and recognized as one of the top solar projects in the world. For higher operating temperatures to drive power blocks for electricity the heat transfer fluid is mineral oil which is used in the large solar plants. Most of the new ORCs designed for waste heat and renewable applications are from Europe as shown in the following list: Manufacturers of Medium‐Temperature Organic Rankine Cycle Turbines Year Company Country Sizes Introduced United Technologies Corporation US 200kW 2004 Global Energy US 30kW ‐250kW 2008 Conpower Energieanlagen GmbH DE 30kW ‐ 120kW 2008 ORMAT US 1980's 200kW ‐ 20MW Turboden s. In the U.S. The 1 MW Saguaro Project near Tucson..2 Organic Rankine Cycle Turbines Organic Rankine Cycle (ORC) power blocks have been used very successfully for geothermal power plants and for industrial waste for decades.6MW 2004 3‐22 Inlet Temp 74°C + 125°C + 75°C‐105°C 150 °C + 100‐265°C 98°C + 95°C ‐ 400°C 320°C . Minimum temperatures for ORCs are in the 95°C range with higher temperatures producing higher efficiencies. the National Renewable Energy Laboratory focused upon developing “Distributed Trough” which led to the 1 MW Saguaro Project.r. 9. It is understood that SES.500 MW.6 GW which requires the manufacturing of 72. to manufacture its Stirling engines but insolvency led to its closing in 2007‐2008.33 DSG eliminates the need for an intermediate heat transfer fluid and steam‐generation heat exchangers and allows the solar field to directly operate at higher temperatures resulting in higher power cycle efficiencies and lower fluid pumping parasitics. based on high temperature reservoirs. SES has executed Power Purchase Agreements with 2 California utilities for 2 projects comprising 1. These companies include SES. ABB and MAN Turbo which offers new possibilities for Distributed Energy generation. DSG generates steam directly in the receiver tubes with preheating.4 Stirling Engine Manufacturing Of all solar technologies.000 25kW Dish‐Stirling units each of which has a 380cc. Stirling Sun Power International which is commercializing the SBP 10kW and 25 kW EuroDish and Infinia which is bringing a 3 kW and larger units to market. the engine block. in 2008.31 9. a German company.25%. Dish‐Stirling has the highest solar‐to‐electricity conversion efficiency and. The global market potential for Distributed solar thermal electricity will not be realized without significant cost reductions in the manufacturing of the 3‐23 .35 There are just a handful of players in Dish‐Stirling due to the difficulty of producing reliable Stirling engines which require high‐precision. Environment and Technological Research) and DLR (German Aerospace Center). medium‐volume manufacturing. The unexploited potential of base‐load geothermal energy is estimated at over 1. SES has initially sourced the manufacturing of the Stirling engines with a medium‐sized Canadian engine plant which is a key supplier to the Detroit auto industry. 32 One disadvantage of the conventional Rankine cycle is the limited upper temperature (400°C) of the fluid circuit due to thermal stability of the oil. with an installed capacity of 960 MW. SSPI planned on using SOLO.34 Much of the focus of DSG has been at the European solar test center at Spain’s Plataforma Solar de Almería where testing continues to be conducted by Spain’s Ceimat (Center for Energy. Solarlite GmbH has developed the highest medium‐temperature trough collector which generates up to 330°C which allows the use of direct steam generation with a new generation of small steam Rankine power blocks for projects as small as 2 MW.5 Opportunity for México to be Global Lead in Distributed Solar Thermal Electric The manufacturing of this new generation of power blocks is almost exclusively confined to low‐volume production in Europe which have the highest manufacturing costs in the world compounded by consistently high Euro conversion rates. Stirling Energy Systems (SES) set the world’s solar efficiency record of 31. a generator and electronic controls.There may be opportunities to leverage the medium‐temperature solar thermal market and México’s low‐temperature geothermal potential to drive the market for domestic manufacturing of ORCs. With this temperature limit. Recently small steam Rankine power blocks in the 2 to 8 MW range have become available in Europe from Siemens. evaporation and superheating occurring in different row sections within the solar field. SSPI and Infinia are seeking to develop and continuously improve their respective supply chains for the Stirling power block which consists of a high‐temperature thermal receiver. México is currently the third largest producer of geothermal energy in the world. 4‐ cylinder engine. 9. Low temperature reservoirs have been solely used for recreational purposes but a project is planned to assess and map the full potential of these low enthalpy reservoirs. a radiator.3 Direct Steam Generation and Distributed Steam Power Blocks Direct Steam Generation (DSG) has been considered an alternative and promising approach to thermal energy generation from parabolic trough systems. Traditional trough systems use a heat transfer fluid (oil) which is heated and pumped through the absorber/receiver which is transferred to the steam cycle of the Rankine power block through a heat exchanger. the power cycle efficiency is limited as well. energy storage and sustainable industrial development. more than 10 companies from Europe and Canada have developed and brought PV‐T products to the marketplace. Some PV‐T systems are actually Concentrating PV‐T and incorporate a linear concentrator or lens system. Over the past 4 years.thermodynamic converters such as ORCs. Green Building Council’s LEED (Leadership in Energy and Environment) certification requirements for “green buildings” than multi‐ functional PV‐T systems. residential neighborhoods and industrial facilities. The active cooling system offers additional performance gains by preventing the overheating of the PV cells.36 3‐24 . segment of the solar market which is potentially larger than utility‐scale solar thermal and PV.1 Concept An innovative concept is being developed in Germany which integrates new approaches to incorporating solar thermal energy with power into “smart” electric/thermal micro‐grids. product developers and manufacturers to leverage existing capabilities in the design of new proprietary low‐cost. Perhaps no other building system can assist developers and owners meet the U. shopping centers. The tradition function of a micro‐grid is to improve the quality and reliability of electrical power. These systems will generate approximately 2 to 4 kWhth for every 1 kWhe which provides net solar‐to‐energy conversions of well more than 60%. México could lead in developing this little known. PV‐T systems are roof‐mounted or building‐integrated into a south‐facing wall. The micro grid can switch over to island operation in the event of a grid fault. 10 PV‐Thermal for “Green Building” Markets Opportunities exist for México’s energy entrepreneurs. space heating and space cooling using adsorption chillers. The advantages of PV‐T are ideally matched to meet the requirements for low‐carbon. during maintenance. The electrical loads can be further sub‐divided into groups within the micro‐grid according to the required grade of power quality and reliability. Industrial or commercial micro‐grids are typically connected collections of critical and/or sensitive loads requiring high power quality and reliability such as data centers. or when grid energy prices are high. but emerging. 11 “Low‐Carbon” Industrial Parks with Renewable Electric/Thermal Micro‐Grids 11. university campuses.S. periods of poor power quality. The heat transfer fluid is typically water and the usable temperatures ranges from 50°C‐95°C with higher temperatures coming from concentrating systems. The efficiencies of PV‐T systems are much higher than PV since the solar‐to‐energy conversion includes both the electricity and the thermal energy generated through an active cooling system of the PV cells. A PV‐Thermal (PV‐T) system uses arrays of modules with each module producing electricity from PV cells and thermal energy by collecting the unused heat off the PV cells through an active cooling system using air or a fluid which transfers the thermal energy from the modules to a central heat exchanger which is then stored or distributed for productive uses such as hot water. McGraw‐Hill Construction estimates that the size of the current green building market for residential and non‐residential buildings is USD 36‐49 billion and that the market will double in size by 2013 to USD 96 ‐140 billion. Stirling engines and small steam power blocks. Manufacturing such turbines are ideally suited to the capabilities of México’s automotive and industrial manufacturing industry base and represents a significant global solar opportunity by manufacturing and deploying Distributed solar thermal electric in the Mexican market place through targeted self‐generation and CFE projects which demonstrate the use of the new scaled‐down troughs for Distributed solar thermal electricity while reducing México’s GHG emissions. Much of the research being done on PV‐Thermal systems was started in 2005 through the International Energy Agency’s (IEA) work with the “PV‐Thermal Solar Systems" component to the Solar Heating and Cooling (SHC) Programme. high‐quality PV‐Thermal systems products and systems. high energy‐performance for residential and commercial/industrial buildings. Bio‐diesel fueled generators would also part of the back‐up strategy. or provide process hot water for a bottling or dehydration operation. space cooling. The hot water for one building may drive a variety of thermal applications such as a double‐effect absorption chiller for space cooling and/or for cooling injection molding machines.S.2 How It Works The new micro‐grid model incorporates the functions of an electrical micro‐grid and incorporates for the first time solar thermal electricity into the electrical supply loop along with a parallel “hot water”‐based solar thermal energy micro grid.11. cooling and process heat delivered through an integrated electric/thermal micro‐grid backed by energy storage and the national grid. process heat. The delivery of solar‐based industrial process heat provides unprecedented flexibility to meet an industrial customers needs. Such solar‐based parks serve as an alternative to the self‐generation wind projects for large industrial energy users which requires 3‐25 . the new generation of commercially‐available Distributed parabolic trough technology would be used which is offered by multiple U. a technical team is developing a “virtual” grid project in Abu Dhabi which will incorporate the first use of NGK’s sulfur sodium Battery Energy Storage System which will provide a 300 MWhs of electricity over 5‐6 hours. Each industrial facility would have different and varying thermal loads which can be accommodated by the thermal micro‐grid. Such a renewable electric/thermal micro‐grid is completely scalable and modular. The solar generation would be sized to handle intermediate and peak loads for the industrial park tenants and backed up by the national grid for electricity and by natural gas for thermal energy.3 A New “Self‐Generation” Model Using Solar Electricity and Thermal for Carbon “Off‐Sets” A conceptual business model for the industrial park’s owner would be to provide reliable. The park would designed to be flexible. The thermal micro‐grid would have a hot water distribution loop piped to each industrial building. The process flow for such a “low‐carbon” industrial park follows: An industrial park would be developed along with an adjacent concentrating solar thermal generation facility which would provide for the first time the full‐value chain of thermal energy products to the park’s industrial customers including electricity. For solar. The industrial property developer can recruit energy‐intensive companies and offer enhanced value to park tenants by being identified with “world‐class low‐carbon” sustainable development. Each tenant may use the heat to drive specific thermal‐based applications. For example. 11. Distributed trough generates temperatures in the range of 90°C‐300°C (194°F‐572°F) which is ideal to generate electricity with smaller steam power blocks at less than 20 MW and to generate thermal energy for applications such as district cooling. The park’s energy micro‐grid would balance the supply and demand of electricity and thermal heat by and between the individual electrical and thermal loads of the industrial buildings. The energy performance goal of such a park would be to reduce the amount and load demand of grid‐supplied electricity and natural gas and reduce GHG emissions and serve as a model for sustainable development. etc. Short‐ term 1‐4 hour energy storage could be achieved with low‐tech hot water or chilled water storage available at a central location and on‐site with the industrial facilities depending upon demand. carbon‐free electricity and thermal energy which will reduce and provide predictability to the energy costs for industrial tenants while reducing their intermediate and peak energy demand and usage. Options for thermal energy storage are well known but new technologies are entering the market to store electricity for load shifting and backup. domestic and process hot water. and German vendors. scalable and modular to integrate new generation and storage technologies such as advanced energy storage as they are deployed in the market. mechanical. engineers and turn‐key energy or industrial equipment installation companies to enter this space by scaling‐up existing capabilities. Roof‐mount collectors add structural. civil and structural as well as competencies in energy efficiency.8 billion. the largest functional use category will be institutional microgrids.S. weight and wind effects./México border which can leverage the advantages of geography through proximity to the U.4 Micro‐Grid Markets in North America A recent market research study37 predicts that 3 GW of new microgrid capacity will come on‐line globally by 2015 which represents a cumulative investment of USD 7. maquila‐like industrial parks across México and especially along the U. followed by commercial/industrial and community grids. Opportunities also exist for Mexican commercial and industrial real estate developers to replicate the business model as a new competitive advantage in the Americas as well as national markets. hydraulic/plumbing. In North America. low‐cost thermal storage can easily be added to solar plants to not only increase capacity factor but to shift on‐demand solar thermal output for 1‐6 hours. The technical challenges for low‐ and medium‐temperature projects is the integration of the solar collector field and the closed‐loop hydraulics of the heat transfer fluid (usually water) which is delivered either as a pre‐heat to a boiler or to a heat exchanger in an existing system with the solar usually supplementing the existing heat source. markets and to exploit the region’s world‐class solar thermal resources.extensive and costly transmission lines and/or wheeling costs for new wind projects.S. Complicating such systems is the need to provide thermal energy storage to buffer uneven cloud‐ induced variations in solar resources. North America is expected to be the largest market for microgrids during this period with 74% of the total industry capacity. national and regional markets. industrial processes. cooling industrial heat or combined heat and power. 11. install and operate a solar cooling system on the premise of a commercial/industrial customer and to sell to the customer process heat. cooling. However. In addition to selling turn‐key Distributed solar thermal systems. 12 Need for System Integrators and Multi‐Disciplined Engineering Perhaps the greatest gap in the value chain for Distributed solar thermal is a shortage of experienced system integrators. energy services companies. This new field of system integrators requires competencies in a wide‐range of engineering disciplines such as electrical. solar cooling. Companies can specialize in clean water. design and cost complications with existing roof‐mount HVAC equipment and with issues such as mounting structural supports. and power blocks for local. a promising opportunity may exist for system integrators to design. The technical system integration expertise gained by Mexican companies in establishing and operating such a low‐carbon models for sustainable industrial development would provide a solid base for exporting the model and creating business opportunities for Mexican companies. As such the market potential for thermal microgrids could be much more than 6 GW world‐wide. clean water or electricity in a long‐term thermal‐type Solar Services Agreements now being extensively used in the U. Such commercial/industrial projects require extensive site‐specific engineering and integrated technical design at a level far beyond that required for PV or solar hot water.S. desalination equipment. Solar’s ability to reduce peak energy usage and demand can offset the lower capacity factors for solar thermal compared to high‐quality wind projects. analysis and management. environmental. project developers and multi‐disciplined energy engineers who can package turn‐key solar industrial process heat. Clear opportunities also exist for companies to enter into exclusive relationships with the technology providers of the low‐ and medium‐temperature solar collectors and of the conversion equipment such as the chillers. Industrial thermal heat at temperatures under 250°C represents some 44% of the global final energy demand38 which is more than twice that of electricity. solar desalination and small thermal electric projects. This concept has great potential for developing low‐carbon. There are significant opportunities for energy project developers. 3‐26 . must have their products tested and certified under various standards. 13. Niche export opportunities exist as the company anticipates expanding production capacity to more than 50 MW over the next few years. 13.1 Solar Hot Water Heaters Most of México’s proprietary products are solar hot water heaters which is the largest segment of the domestic solar market.S. batteries and LED lights and have great potential as an export product to the U. ERDM achieves very low production costs due to low setup. Such projects in México also have additional value by generating carbon off‐set revenues by being packaged as carbon off‐set projects. product certification is required if the product is used in installations subsidized by Federal or state renewable energy financial incentives. Department of Transportation. d C. and solar thermal collectors (flat‐ plate.4 Certifying Mexican Solar Products for the U.V. manufactured and installed proprietary solar street lights on national highway projects.S.2 PV Modules ERDM is the largest domestic manufacturer of PV panels for domestic markets with some 40 distributors across México. Importantly. evacuated tubes). Product‐ and component‐level certification applies to concentrating and non‐concentrating PV modules. These products use PV panels.S. labor and operational costs leveraged with production facilities in rural Veracruz. Sun and Wind Energy Magazine published a survey of 61 global manufacturers of solar hot water systems which included 2 Cuernavaca companies which have designed and manufactured proprietary systems: Commercializadora General Solar.3 Solar Street Lights Several companies in México have developed.S. metering equipment.S.) and silicon cells from Q‐Cells (Germany) for its high‐quality panels. (Módulo Solar) Sunway de México S. Markets Solar product manufacturers exporting solar products to the U.V. The company uses both thin‐film from Global Solar (U. certification programs and independent test laboratories for the California and Arizona market include: California Energy Commission (CEC) – All solar equipment that is eligible for incentive programs in California is listed in the “eligible solar electric equipment” database. 13. Key listings. 13. In June 2009. and to the rest of the Americas. inverters. These are low‐ cost high‐quality products which are strong candidates for export to the California and Arizona markets. de C.S.A. 13 Export of Proprietary Solar Products Several Mexican SMEs have developed and are now manufacturing proprietary solar products for the domestic market and are starting to export to Europe and to Latin and South America. a highly‐regarded simulation software for project analysis.The industrial customer benefits from reliability and from long‐term predicable energy rates.S. and is included as the reference baseline by the National Renewable Energy Laboratory which incorporates technical and performance parameters from the CECs database into the Solar Advisory Model software. The solar incentive program for Arizona Public Services refers to the “technology specific qualification requirements developed by the 3‐27 . Recently 2 Mexican manufacturers were recognized among the world’s top solar hot water system providers. S.39 This is generally regarded as the most comprehensive database in the U. These products will need UL certification and evidence of conformance to the standards of the U. Florida. is considered a cost‐effective alternative to extending transmission lines and is becoming increasingly part of national grid plans. SRCC operates a certification and testing program for solar collectors and evaluates the maintainability of solar collectors and the thermal performance rating characteristic of all‐day energy output of a solar collector under prescribed rating conditions. IEEE 1262. Its staff is experienced in the analysis and full testing sequence of commercial Si solar cell technologies required by IEC 61215. Nationally Recognized Testing Laboratories (NRTLs)41 – Compliance with electrical safety standards for solar equipment are certified by private 3rd party NRTLs which are recognized by the U. In addition. highway lights. NRTL relates to solar‐related electrical equipment with California requires a NRTL Certification Letter all solar electric generating technologies that are not flat‐plate non‐concentrating photovoltaic modules. remote mobilizations and installation logistics.1 Global Off‐Grid Market – 7 GW by 2020 The off‐grid market in the developing world is enormous with more than 1. etc. there is an off‐grid market which is mainly confined to remote residences. rural electrification. some 20% of PV installations are off‐grid. Residential SWH systems are certified to SRCC OG‐300 standards and solar collectors used in multifamily residential. several Mexican energy entrepreneurs have designed and now manufacture patented “hot water”‐type flat plate collectors which heats air that is delivered to a self‐contained 3‐28 . space heating. In the industrialized world. The test lab can also run IEC testing and certification for parabolic trough collectors. In the U. TÜV PTL is an affiliate of the internationally recognized‐TÜV Rheinland and is a comprehensive independent laboratory capable of testing.S. However. It is one of three such unique facilities in the world testing modules from manufacturers around the world. sensing equipment. cooling. evaluating and certifying all current international standards related to PV and solar thermal technologies such as the International Electrotechnical Commission (IEC). and UL 1703. Occupational Safety and Health Administration (OSHA). TÜV Rheinland Photovoltaic Testing Laboratory LLC (TÜV PTL) – Newly located in Phoenix.6 billion people without electricity which represents more than one‐quarter of the world population.. The Off‐Grid market for solar electricity is expected to grow approximately 16% annually through 2012 and to account for 13% of the global PV market by 2020 with some 7 GWp of installed capacity expected.S. commercial. TÜV/PTL performs photovoltaic module qualification testing and related activities. These are ideal candidates for energy‐efficient PV‐powered DC appliances such as refrigerators which favorable payback and substantial less monthly expenses for energy. Some 4 out of 5 people without electricity live in rural areas of the developing world. as an autonomous micro‐grid. communities and industrial applications such as cell towers. or industrial water heating are tested and certified to the SRCC OG‐100 SWH System Certification40. A major segment to this market is SMEs who use diesel‐generators for electricity to power inefficient AC appliances as part of off‐grid enterprises.S. IEC 61626. (Canada and Germany).5 million43 people live “off‐grid”. and water heating.42 In México more than 6. Solar Rating and Certification Corporation (SRCC) – Located in Coca. Globally off‐grid projects see much higher installed costs due to one‐off and small‐quantity equipment prices. There are 19 certified NRTLs with just 2 labs located outside of the U. Arizona.California Energy Commission” as an acceptable standard for solar equipment in Arizona. The scope of the program includes collectors used for swimming pool and recreational heating. 14 Off‐Grid Solar Products 14. 14. reliable and low‐cost products in order to transition from subsidized international donor projects to market‐based competitiveness. March 2007. David (2007) “Parabolic Trough Collector Overview”. Such “off‐grid parity” is possible already in some niche markets due the high costs of “portable” fossil fuels and the disproportionately higher share of remote family income and business expenses going to energy. power tools. This strategy is now being applied by a few Mexican companies which are bringing lower‐ cost DC products to off‐grid solar‐powered projects and consumers. there will be significant demand from millions of new “consumers” in a market traditionally undervalued as being off‐grid and poor. Carrizo Solar Farm”. power tower figure is from BrightSource. the system integrator uses multiple small renewable technologies such as solar hot water.3 Types of DC Products Needed for Off‐Grid Markets With some 7 GWp of new PV capacity predicted by 2020. Very often. August 25.dehydration unit used to dry fruit. Such electronic and electrical products ideally match the product design. engineering and manufacturing capabilities of many Mexican manufacturers. 2008 9 See http://www. fans.A. vegetables.2 Need for Products Designed for Off‐Grid Solar Applications Most off‐grid rural electrification projects in México are installed through international development programs for rural electrification which mainly bring imported PV systems.”. Dish‐Stirling figure is from Stirling Energy Systems.S. Almost all PV products are manufactured in Europe. Such components can be redesigned and reengineered to match the requirements for remote applications in order to achieve lower‐costs and maintain high‐performance and reliability. pico hydro. and the linear Fresnel figure is from Ausra 6 Kearney.flabeg. source the balance of the unit domestically and assemble a low‐cost high‐quality product for the Americas and/or for global distribution. Key to these projects is the unique skills and capabilities of the sustainable development/energy engineers and system integrators who design. National Renewable Energy Laboratory 7 U. This market needs high‐quality. and are designed for grid‐connected applications in industrialized countries. redesign and manufacture balance‐of‐systems for off‐grid PV. Asia and the U.alanod‐solar. Press Release. small wind and biomass. etc. March 2009.com 10 Schott Solar ‐ Press Release. feature‐rich and are not designed for the requirements of the off‐grid rural market. ice‐ makers. Colorado 8 Flabeg GmbH (2008) “Start off for FLABEG’s first Solar Mirror Plant in the U.S. radios.com/en/index. Salt River Project. These products are highly‐engineered. extremely efficient. Great potential exists for Mexican companies to simplify. This off‐grid PV market represents great opportunities for developing and manufacturing DC‐powered refrigerators. September 2009 3 Also see “http://www. Dr. install and train the rural communities on how to use and maintain the systems. durable. air conditioners. TVs. residential and street LED lighting. Some rural electrification system integrators are finding ways to directly compete against the current energy prices paid in off‐grid communities for candles. kerosene. CSP Technical Track”. 2009 1 3‐29 . inverter/charge controllers and battery banks to remote communities and homes. and diesel. Parabolic Trough Workshop. hand‐helds. September 2007 2 Renewable Energy Test Center (2009) “Solar Energy ‐ Harvesting the Sun and Reaping Its Benefits”. Office of Energy Efficiency and Renewable Energy (2009) “DOE Solar Energy Technologies Program Peer Review. meat and other products for rural agricultural enterprises. Denver. May 11. Acciona and Solar Millennium collectors. 14.html” 4 California Energy Commission(2007) “Volume 1 – Application for Certification. October 2007 5 Sources for collector area per MW: parabolic trough figure is an average per m² from Abengoa. The Mexican company may import certain keep components. A well practiced strategy for Mexican companies is to enter into an exclusive manufacturing and distribution agreement with an off‐shore technology provider. PCs. Tucson Electric Power Corporation”.S. * * * Black and Veatch (2007) “Arizona Renewable Energy Assessment ‐ Final Report for Arizona Public Service Company. CSP Today. See http://social.pdf 14 See http://www. Vienna.php 21 “Comision Federal de Electricidad ‐ A Vertical Integrated Company”. 29 Kimura. January 26. 2009.php 12 11 3‐30 .csptoday.flagsol‐gmbh.erdm‐solar.ca. and Monga.org/wga/initiatives/wrez/ 19 http://www.nrel.com/v2/proyectos. 2007. San Diego Regional Renewable Energy Study Group.gov/csp/troughnet/solar_field.gov/emeu/cabs/México/Electricity. Rice University.html 35 http://www1. (2007) “Renewable Energy for Industrial Applications in Developing Countries”.osha. Proceedings of ISES World Congress 2007 (Vol. 2009.solar‐rating.html 40 See http://www. Eugenio Laris.html 24 “Potential for Renewable Energy in the San Diego Region”. See http://www. Black and Veatch.pikeresearch.ece 20 United States‐México Chamber of Commerce. V) Solar Energy and Human Settlement 27 Weiss. (2007) “Renewable Energy for Industrial Applications in Developing Countries”.org 37 http://www.com/pdfs/EmbodiedEnergyWhitePaper(ReflecTech).N. I – Vol.org/b‐nafta10. IEA Industry Workshop Lisbon. June 15.nrel.gov/equipment/index.org/wga/initiatives/wrez/WREZ%20Map%20and%20Tables%20Only. Renewable Energy Forum.gov/csp/troughnet/power_plant_systems. March 2006 31 Inter‐American Development Bank (2009) “IDB Public‐Private Sect or CTF Proposal ‐ México Public – Private Sector Renewable Energy Program” 32 http://www.eere.reflectechsolar.gov/solar/review_meeting/pdfs/prm2008_martin_stirling. 13 October 2006 28 Salem.N. June 2009 16 “Arizona Renewable Energy Assessment ‐ Final Report for Arizona Public Service Company. Werner (2006) “Task 33: Solar Heat for Industrial Processes”.com/ 30 National Renewable Energy Laboratory (2006) “Solar Trough Organic Rankine Electricity System (STORES) Stage 1: Power Plant Optimization and Economics”. (2009) “Shrinking CSP to scale new markets”. V) Solar Energy and Human Settlement 39 See http://www. P.rechargenews. U. Tucson Electric Power Corporation”. see http://www.org 41 See http://www.gov/csp/troughnet/power_plant_systems.westgov. “Abengoa Mojave Solar Project Power Plant Licensing Case Docket Number: 09‐ AFC‐5 “Application For Certification” 26 Wohlgemuth.html#steam 33 http://www.eia.pdf 15 California Public Utilities Commission (2009) “33% RPS Implementation Analysis Preliminary Results”. Leonardo Energy ‐ The Global Community for Sustainable Energy Professionals. NREL/SR‐550‐39433. P. Salt River Project.reflectechsolar. 2009.html 42 Wollny. and Monga. I – Vol. “Specialty Glass Needs for the U. a White Paper.westgov. see http://www. November 2. 2006 22 The Global Energy Market: Comprehensive Strategies to Meet Geopolitical and Financial Risks – Nuclear Power Trends in the World”. Institute for Public Policy.com/research/microgrids 38 Wohlgemuth.com/pdfs/EmbodiedEnergyWhitePaper(ReflecTech).com/energy/geothermal/article171238.S. J. 2009 43 See http://www. Solar Industry Workshop” . Office of Energy Efficiency and Renewable Energy. May 2008 23 http://www.pdf 18 “Western Renewable Energy Zones Initiative Renewable Energy Generating Capacity Summary”. See http://www.gosolarcalifornia. (2007) Solar Heat for Industrial Processes.pdf 36 “Industrial or commercial micro grids”.gov/dts/otpca/nrtl/index.leonardo‐energy. September 2007 17 Solar thermal resources were inventoried as part of the Western Renewable Energy Zones Project.doe.php?idcat=37 34 http://www. SMA Solar Technology AG presentation at European Union Sustainability Wee February 9‐13. Proceedings of ISES World Congress 2007 (Vol. February 1.html Sources consulted for Nevada Solar One data include: Extrusion Americas Unit of Hydro Aluminum ‐“Seeing the Light ‐ The Use of Aluminum Support Structures in Concentrated Solar Power Energy Generating Facilities”. August 2005 25 California Energy Commission. 2008 13 See http://www. United Nations Industrial Development Organization.usmcoc.com/flagsol/cms/front_content. Western Governors Associations.nrel. D.S.energy. M (2009) “Best Technological Solutions for Rural Electrification”. See http://www. Section 4 Overview of México’s Solar Sector 1 México’s Solar Market 1.1.7 GW which is 67% of the world’s PV installed capacity.1 PV Solar Resources in México The quality of México’s photovoltaic (PV) and solar thermal resources is widely known as being among the best in the world.4 GW of installed PV. Spain and Germany are the global PV leaders with a total of 8.4 4‐1 .2 PV Performance Compared to Germany and Spain México’s average solar resources for PV (5 kWh/m² per day) is more than 60% higher than the best solar in Germany which has 5. 1.1 Photovoltaic Resources Average Global Horizontal Irradiation (GHI) is approximately 5 kWh/m² per day which is the energy equivalent of 50 times México’s annual national electricity generation. 1.1 70% of the territory has GHI values greater than 4.1.06% of the Mexican national territory would be sufficient to generate the overall electricity consumption of México in 2005 according a GTZ report3.5kWh/m²2 Just 0. 606 1.9 1.3 1.0 1.1 17.4 1.484 1.6 1.0 1.1 1.7 1.3 1.7 2.0 16.752 4.606 1.971 5.008 5.666 1.935 5.1 18.6 20.0 2.3 16.5 1.081 5.8 18.727 1.6 16. Energy Pay‐Back and Energy Return5 GHI kWh/m² Day Year 6.9 1.5 2.7 1.5 1.484 1.7 999 2.9 15.6 16.424 1.8 1.5 1.935 5.3 México has an “Energy Pay‐Back Time” Much Higher than Germany and Spain PV installed in many cities across Northern and Central México has an “energy pay‐back time” (EPBT) of less than 2 years which is the time required for these PV systems to produce the amount of energy that was required to manufacture all of the PV components.825 5.666 1.394 1.9 1.7 1.3 15.363 1.4 1.9 1.5 2.606 4.3 1.9 15.5 2.008 5. Spain Tepic Mérida Reynosa Cuautla Madrid.8 1.6 20.394 1.636 1.4 1.9 2. Germany kWh/kW 1.6 15.9 2.458 1.935 5.8 1.7 1.7 1.5 1.825 4.2 15.643 4.2 15.5 1.789 4.6 2.193 960 839 809 1.6 1.143 2.008 5.789 4.6 1.7 1. PV Performance.5 2.8 18.4 18.4 1.363 1. Germany Cologne.643 4. Juárez San Luis Río Colorado Distrito Federal Mazatlán Cd.716 4.8 1.6 1.363 1.935 5.081 5.0 1.8 13.4 1.8 18.818 1.789 4.0 8. Altamirano Culiacán Sevilla.5 1.1.6 1.2 14.044 5.6 16.3 1.6 Guaymas Cd.5 1.5 19.666 1.2 18. The EPBT is based upon a figure of 2.154 5.515 1.190 5.787 1. Germany Berlin.7 2.333 1.1 18.7 1.7 1.6 15.6 16.460 1.606 1.515 1.8 1.5 1.1 18.8 1.825 5.679 4.697 1.0 1.0 17.190 6.6 3.5 1.2 19.727 1.4 9.446 3. Spain Munich.484 1.484 1.6 20.424 1.7 1.1 2.7 1.0 17.515 1.7 1.8 18.660 4.789 4.643 4.190 6.9 1.0 2.5 1.818 1.Comparative Solar Resources.5 1.0 2.4 1.818 1.1 Energy Return Factor 20.2 10. Spain México ‐ 70% of Country Tampico Piedras Negras Monterrey Barcelona.7 972 Energy Pay‐ Back Time ‐ Years 1.754 4.606 1.716 4.008 5.5 19. Obregón Hermosillo Chihuahua Durango La Paz Guadalajara Puebla Nogales Los Tuxtlas Méxicali Riviera Maya Oaxaca Acapulco Poza Rica Matamoros México ‐ Average Cd.5 1.0 3.9 1.9 1.666 1.525 kWh 4‐2 . 6 years for Munich.S.2 Solar Thermal Resources Northern México’s Direct Normal Insolation is equivalent to best in the U. a square of 25 km in Chihuahua or in the Sonora desert would be sufficient to supply all of Mexico’s electricity. This 2.3 4‐3 .5 times higher than the ERF for Germany and is equal to most of Spain. The EPBT varies according to the PV location’s solar resources. The average ERF for PV systems in México is 1. The ERF is the number of times that the embodied energy from the PV manufacturing is produced over the life of the system.6 1.525 kWh figure was used by the International Energy Agency in a 2006 report titled “Compared assessment of selected environmental indicators of photovoltaic electricity in OECD cities”.which is the electrical energy required to manufacture 1 kW of a complete PV system. wires.7 years compared to 2. 1. Southwest and in the North African deserts. The ERF refers to the amount of electricity produced over a 30‐year period less the electricity required to manufacturer the complete system. This figure is 1.4 México has an “Energy Return Factor” Much Higher than Germany and Spain The “energy return factor” (ERF) for PV installed in most of México produces 17 times the electricity that is required to manufacture the PV system.1. Assuming a net system efficiency of 15%. 1. This kWh figure includes PV panels. and electronic connection devices. 4 19.8 GW 14 GW 24.0 13% There are no solar thermal electricity plants in México 80% of PV installations in México is for rural electrification and are off‐grid7 78% of all solar hot water installations is for swimming pool heating8 1.4 1.1. expects that solar thermal and PV electricity will account for up to 5% of the country’s energy supply by 2030 and 5‐10% by 2050.4 135.7 One estimate presented at the recent “Global Renewable Energy Forum – Scaling Up Renewable Energy” in León in October 2009.10 11 México Solar Market Potential Solar Thermal Electric Western RE Zone Project ‐ Baja California Photovoltaics Institute of Electrical Investigations ‐ Off‐Grid 2015 GTZ 28 Cities ‐ Residential Grid Connected GTZ Study (10% x 2.000.0 7% PV 18. México Solar Installations by Type 2007 ‐ 2008 Installed Capacity Annual Growth MW 2007 2008 MW % Solar Thermal Electric 0 0 0 0% Solar Hot Water 108 116 8.7 Million enterprises) 5 GW 15.8 GW in new capacity additions by the end of 2017.3 GW Solar Thermal Hot Water SENER & GTZ ‐ m² collector area 35.5 “Huge” Potential Solar Market México’s photovoltaic and solar thermal market potential is as large as 45 GW which is approximately 75% of México’s 2008 electricity generation capacity. Solar thermal is expected to play a greater the role in heat generation rather than generating electricity with 5‐10% of México’s heat expected to come from solar thermal in 2030 and 10‐15% by 2050. In 2008.000 kWth/m² Total Potential Solar Market 0.5 GW 45.5 GW of total installed electricity generation capacity9 and expects to add 10.8 GW 0.0 5% Totals 126.02 GW 1. 4‐4 . México had approximately 59.4 Existing Market by Type of Solar Installation México’s extraordinary solar resources have largely gone untapped but the solar sector is emerging with a very promising future.4 9. 19 2 Government Policies 2. Sonora.14 5‐10% 10‐15% 2030 0‐5% 0‐5% 2050 5‐10% 5‐10% 1.2 Rural Electrification The Institute of Electrical Investigations (IIE) estimated a total potential for off‐grid PV systems at a range between 10 MW and 20 MW for the period 2005‐2015.. There is 5 GW of solar thermal generation capacity in Baja California which has the potential to generate 11.1 “Subsidized” Residential Energy Market Photovoltaic electricity is “unsubsidized” in México and competes against “subsidized” residential electricity rates.Solar Potential in México by Use 2030‐205012 Electricity Generation PV Solar Thermal Heat Solar Thermal 1.5.1 5 GW of Solar Thermal Potential in Northern México The quality and quantity of Northern México’s solar resources are as good as anywhere in the world.1 Potential Solar Hot Water Market The potential for solar hot water is approximately 35 million m² of collector area which could provide 115 PJ of energy per year which equates to 2. the market potential would be 14 GW. The potential industrial/sector market is 2.7 million enterprises which represents 98% of all enterprises. In 2006 residential electricity subsidies accounted USD 9 Billion which represented more than 33% of total electricity sector revenues and equated to 1% of the gross domestic product.5% of the final energy consumption in México. Over 66% of electricity subsidies go to residential consumers and the volume of subsidies to residential customers increased by 46% between 2002 and 2006 in real terms. Residential electricity rates in México are subsidized by the government and were described by a recent World Bank report as among the largest electricity subsidies in world.3 GW of additional capacity with a market of at least 1.18 1.S. the market potential for solar hot water is 24.16 If just 10% of these enterprises installed 50 kW PV systems.6.5 GW of installed capacity. México’s best solar thermal resources are in the states of Baja California. there are considerably more solar thermal resources than wind.17 This is approximately 35 times greater than the current installed capacity and all of this potential is considered “economically feasible”.7 kWhth for every m² collector.5 million homes.20 4‐5 . followed by industrial and commercial applications which had 14% of sales. The most developed market is unglazed collectors for water heating for swimming pools which accounts for 78% of all sales. Using a factor of .6 GWhs of solar electricity annually. 1.6 Potential PV Market In 2009. and Chihuahua. SENER and GTZ released a landmark report on “Market Niches for Grid‐connected Photovoltaic Systems in México”15 and estimated that the potential residential market 26 cities under the “optimistic scenario is 1.13 Though there has been considerable wind development planned for Northern Baja for export to the U.6. Nevertheless and even with subsidies in place.e. reductions in residential grid demand and usage means a corresponding reduction from higher tariff blocks of electricity to lower tariffs. the regions with the highest solar radiation in country. it seems very likely that photovoltaic systems will become cost‐saving for middle and upper class households and most companies throughout México in the near future. Any cutbacks of these subsidies would directly increase market niches for photovoltaic systems in México. It is likely that the net effect of this market penetration of PV will increase the total amount of subsidies the Mexican government has to pay since less electricity is used at the unsubsidized tariff rates. The “optimistic outlook” was expected to occur over 5 years with the installed costs for residential PV dropping by 50% to MXN 51.500 to MXN 45. do ‐ for social policy reasons ‐ receive as well the highest subsidies.500 households over the 20‐year useful life of a PV system compared to grid‐electricity purchases. low‐cost is the fundamental driver for PV market penetration since “feed‐in‐tariffs” are unconstitutional21.1 “Unsubsidized Renewables” in a “Subsidized” Electricity Market México is a fundamentally different market for solar when compared to the industrialized countries such as Europe using feed‐in‐tariffs and the U.100 for 50 kW to 500 kW PV systems. PV can provide cost savings to some 824. The subsidies currently granted to households pose a barrier to PV market development in México.1. under the “optimistic scenario” for PV costs dropping by 50%. The GTZ Report concluded that. above all if we take into account that those regions with the best conditions for the use of photovoltaic systems.500 per kWp and for industrial/services costs dropping to MXN 50. In México. 4‐6 .2.S. the GTZ Report went on to conclude that the potential market penetration of PV could be 3 times greater if there were no tariff subsidies. This makes it even more difficult for PV systems to be competitive against electricity prices since these are kept artificially low. The 2009 SENER/GTZ report on “Market Niches for Grid‐connected Photovoltaic Systems in México”22 considered the PV market for 26 cities with varying tariffs rates under 3 PV cost scenarios from 2009 to 2014. As PV approaches grid‐parity. Importantly. The GTZ Report makes several key comments regarding the penetration of PV and the effect of subsidized electricity markets: Subsidies cause significant market distortion to the disadvantage for the application of PV systems. i. using tax credits and renewable portfolio standards as market drivers for solar. "Optimistic Outlook" on Residential PV Costs "No Tariff Change" "No Tariff Subsidies" GW Households 1.8 824. in coordination with the Secretary of Finance (SCHP) and SENER.533 7. Perhaps of greatest significance is that the LAERFTE shifts responsibility from CFE to CRE for developing a clear and transparent tariff system for power producers. In addition. purchase and exchange of electricity from renewable sources. The main objective of the Law is to regulate the use of renewable energy resources and clean technology and to establish a national strategy and financing instruments to allow México to scale‐up electricity generation based on renewable resources.4 Billion USD 34 Billion 2.607.3 5. and should take into account different kinds of renewables and regional available sources) Defining transmission expansion plans to connect power generation from renewable energy to the national grid Promoting the development of renewable energy projects to increase access in rural areas The CRE is responsible for developing rules and norms regarding the implementation of the Renewable Energy Law. This 4‐7 .24 2.2 New Renewable Energy Law The “Renewable Energy Development and Financing for Energy Transition Law” (LAERFTE)23 became effective in November 2008 and mandated SENER to produce a National Strategy for Energy Transition and Sustainable Energy Use and a Special Program for Renewable Energy. including provisions for promotion. CRE. The following functions are the responsibility of SENER. Payments will be based on technology and geographic location. the Mexican Congress took the first key steps to address the lack of regulatory and pricing certainty for renewable energy project implementation.111 Market Size USD 8. among others: Defining a national program for ensuring a sustainable energy development both in the short and the longer term Creating and coordinating the necessary instruments to enforce the law Preparing a national renewable energy inventory Establishing a methodology to determine the extent to which renewable energies may contribute to total electricity generation (such a contribution must be expressed in terms of minimum percentages of installed capacity and minimum percentages of electricity. SENER and Comisión Reguladora de Energía (CRE) are responsible for defining those mechanisms and establishing legal instruments to allow México to increase renewable power generation. CRE will set rules for contracting between energy generators and suppliers. will determine the price that suppliers will pay to the renewable energy generators.3 “Net Metering” In July 2007 a resolution was passed by CRE allowing investors the possibility to set up small scale grid‐ connected photovoltaic systems (up to 10 kWp for households and up to 30kWp for companies). obliging the latter to establish long‐term contracts from renewable sources. production. With LAERFTE. normal electric bill). such as wind. especially in the transportation.interconnection is regulated on the principle of Net Energy Metering that allows the owner to offset the cost of the electricity use with the energy fed into the grid. if net metering is available. Most electricity meters accurately record in both directions. A recent World Bank study on low‐carbon development concluded México could reduce its carbon emissions by at least 42% (or 477 million tons) per year by 2030 without sacrificing economic development. is used in the sense of meaning "what remains after deductions" — in this case.1 Recent Major Development Investments into México’s Climate Change Strategy World Bank Provides USD 1. the rules vary significantly by country and possibly state/province. in this context.4. if and how long you can keep your banked credits. and new programs to finance green 4‐8 . for its initials in Spanish). industrial.5 billion loan aimed to develop public policies to support the stimulus of the economy while strengthening the framework for long‐term sustainable growth.28 Inter‐American Development Bank provides USD 400 Million Loan in September 2009: Finally. Approximately 61% of México's CO₂ emissions are a result of energy consumption.5 Billion Loan in October 2009: The World Bank approved a USD 1. A new Climate Change Policy General Directorate within SEMARNAT (México's Environment and Natural Resources Ministry) has been established to take charge of climate policy and the implementation and monitoring of the PECC. and how much the credits are worth (retail/wholesale). key to generate a low carbon growth model. regulatory.25 2. Most net metering laws involve monthly roll‐over of kWh credits. with the formulation of public policies at federal and state level.27 2.26 Renewable energy will play a key role in GHG emission reductions in all sectors of the economy. Under net metering. expanded participation in carbon markets. México initiated a landmark study of the economic impact of climate change on its territory which provided the first compelling evidence that concluded that the costs of mitigation and adaptation to climate change in México could be considerably lower than the no‐ action alternative. This will help consolidate efforts to link emerging scientific and technical knowledge under the responsibility of the National Institute of Ecology (known as INE). monitoring and financial frameworks will be developed for low greenhouse emissions evolution of the urban transport and energy sectors. and residential/commercial sectors. the deduction of any energy outflows from metered energy inflows. This resolution opens up opportunities for a wider use of photovoltaic systems in México – beyond the currently prevailing application as isolated systems. require monthly payment of deficits (i. and annual settlement of any residual credit. a system owner receives retail credit for at least a portion of the electricity they generate. However. allowing a no‐cost method of effectively banking excess electricity production for future credit.e. México is one of the first developing countries to commit to a specific reduction of emissions through the use of clean and efficient energies. PECC) that establishes short‐ and medium‐term mitigation and adaptation objectives and includes commitments with measurable results for priority sectors.4 Renewable Energy is Key to México’s Climate Change Strategy México is internationally recognized for its increasing leadership role in global efforts to accelerate and expand new climate change initiatives to reduce greenhouse gas emissions after the Kyoto Protocols expire in 2012. The Mexican government is now implementing a National Climate Change Program (Programa Especial de Cambio Climático. solar power or home fuel cells. In order to achieve this. "Net". under the new PBL México will set in motion a series of financial mechanisms to jump‐start investments in renewable energy and energy efficiency. a small monthly connection fee. Net metering is an electricity policy for consumers who own (generally small) renewable energy facilities. These will include the Fondo de Transición Energética (energy transition fund) that was established under México’s recently adopted renewable energy law (LAERFTE. GEF. GEF. are most often the sponsors of large‐scale solar development. Policy/Program/Project Institutions Technologies Sectorial Program of Energy SENER All Action Plan for Removing Barriers to the Full‐ scale Implementation of Wind Power in México Large Scale Renewable Energy Development Project Integrated Energy Services for Small Rural Communities in the Southeast of México Solar thermal project Agua Prieta II Program for Sustainable Energy in México Program for the Promotion of Solar Water Heaters in México Draft Program for the Sustainable Production of Bioenergy Inputs and for the Scientific and Technological Development Draft Program for the Introduction of Bioenergy Program for the Substitution of Open Stoves by Ecological Stoves Sustainable Rural Development Project for the Promotion of Alternate Energy Sources in Agri‐ business. CRE. BM SENER. often in conjunction with international development entities. BM SENER. IIE.1 Government Housing Programs The Mexican government has implemented several major housing programs which has driven the market demand for PV and solar hot water systems. GEF.1 “Hipoteca Verde”/ “Green Mortgage” Programme INFONAVIT is the National Workers’ Housing Fund Institute headquartered in México City and is a 4‐9 . 3.energy through México's national development banks (such as NAFIN). programs and projects related to renewable energies. ANES SAGARPA SENER SEDESOL Wind Wind Solar. CFE. bio‐digesters FIRCO SHCP CONACYT. BM. Often solar is a key component to programs focused upon providing affordable housing and promoting rural development. hydro.31 Many of these programs have been stimulated by GTZ and also serve as carbon off‐set projects for German investors. CONUEE. which are implemented by the Federal Government. GTZ. wind. promoting energy efficiency in the Agricultural Sector Accelerated Depreciation Sectorial Fund CONACYT‐Ministry of Energy‐ Energy Sustainability SENER. and that energy efficiency is an essential element in México’s sustainable national housing policy. GEF. PNUD SENER. solar heating.29 The following table is from SENER’s 2009 Report “Renewable Energies for Sustainable Development in México”30 and summarizes the different policies. Housing is a key sector in México’s efforts to reduce the greenhouse gas emissions that cause global warming. wind. SENER. bioenergy Concentrating solar power All Solar water heating Biofuels Biofuels Firewood stoves Solar photovoltaic. GTZ CONUEE.1. SENER All All 3 Governmental Support Programs for Solar Government programs. Housing consumes more than one quarter of the electricity and most of the liquefied petroleum gas (propane) produced in México. and the demand for natural gas in the housing sector is growing. 3. Guerrero.3 million mortgage loans and 22. “Hipoteca Verde” provides additional credits of up to MXN 16.000 and it includes an average of USD 600 in green technology.3 Planned Large‐Scale Solar Thermal Projects Currently there are no grid‐scale solar thermal electricity generation plants in México but 3 small Solar Combined Cycle System (ISCCS) plants have been proposed for northern México.000 with attractive interest rates which allow the borrower to invest in ecological technologies such as solar water heaters or energy‐savings. 3. including a World Bank loan of USD 15 million. 2 projects with a combined solar thermal capacity of 61 MW may be operational in 2011. promoting the incorporation of sustainability criteria in the homes that INFONAVIT finances. are to cover 30% of the hot water demand through solar energy.8 million m² of newly installed collectors from 2007 to 2012.1. through the Integrated Energy Services Project.2 Rural Electrification – Southeast México The Ministry of Energy.4 México City In 2006 a new environmental requirement went into effect in México City which requires new facilities which require hot water for their activities. This rule applies to all hot water that is used domestically.000 to 28. Infonavit has granted more than 60.000 for acquiring a home. INFONAVIT is the largest originator of residential mortgages in México and initiated a new lending program called “Green Mortgage” several years ago. will be providing solar electricity to 50. supporting the National Strategy for Climate Change. 3. Infonavit has granted 5. Beneficiaries of this program are mostly indigenous populations among the municipalities with lowest human development index in the States of Chiapas. Oaxaca and Veracruz. Private households and entrepreneurs with no more than 51 employees are not subject to this solar obligation. in kitchens. including swimming pools and companies with more than 51 employees.32 Since its foundation. 4‐10 . the Mexican Federal Government helps workers who earn less than USD 320 per month with a subsidy up to USD 4.4% of México’s population live in a house financed by Infonavit.000 households and approximately 250.000 new residential solar hot water systems in México beginning in 2010. almost 50 thousand have been acquired by low income workers with the subsidy from the Federal Government.1. a Global Environment Facility (GEFWorld Bank) grant of USD 15 million. The cost of the houses goes from USD 15.000 “green mortgage loans” during 2009. and ensuring energy and water savings that will make homes more affordable. The investment costs of the solar water heater are not “subsidies” and can be refinanced by savings on monthly energy bills over a longer period with typically pay‐back in 4 years. and includes a contribution of USD 60 million by the participating States and beneficiary municipalities.2 GTZ 25. as well as for washing and cleaning.000 inhabitants.national home lending institution that provides housing for low‐income workers through direct loans. Of these. The resources for its development will consist of USD 100 million. As part of its Vivir Mejor Strategy (Live Better).3 Procalsol Procalsol is a national program to promote the use of solar collectors and is an initiative of the National Commission for Energy Efficiency (CONUEE) in collaboration with the National Solar Energy Association (ANES) and GTZ. SCCS technology uses conventional parabolic trough systems to generate solar steam to assist in driving a conventional gas‐ fired combined cycle generating plant. The goal of the program is to accelerate the solar thermal market and to promote the installation of 1.5 million program which will assist in the installation of 25. 3. of which. 3. 3. The “Green Mortgage” program is aimed at improving the environment. through the National Housing Commission.000 Solar Roofs Programme The German Agency for Technical Cooperation (GTZ) is funding a new EUR 2. GTZ will offer a subsidy of around EUR 100 per 2 m² and 150 liter tank system.1. 2002 for the Méxicali II plant to be located near San Luis Colorado at the eastern side of the Méxicali Valley.5‐3 7‐9 Commercial/ Industrial 2‐3 5‐7 .1 Sonora ‐ Agua Prieta 31 MW Solar Project ‐ 10‐years in Development In 2006. 4. México is benefiting from an enormous global oversupply of modules as additional PV production capacity has been added in the past 1‐2 years as demand in certain key markets has declined or slowed.34 The project grant is funded through the Global Environmental Facility Trust Fund of the World Bank. markets.3. The project will demonstrate the benefits of integrating a 31 MW parabolic trough solar field with a 535 MW conventional thermal facility using combined cycle gas turbines which will contribute to reducing the long‐term costs of the technology to reductions in greenhouse gas emissions. uncertainty in the U.9 GW in 2009. Sonora. PV prices are now approaching the GTZ Report’s “optimistic pricing” scenario for 2009‐2014 already in 2009. The total output of the ISCCS plant was to generate between 198 MW and 242 MW at summer design conditions. Payback periods were reported by system installers during TechBA interviews during November 2009.36 4 Market Trends 4.3 Baja California ‐ Méxicali 30 MW Solar Project ‐ Cancelled Due to Lack of Solar Expertise CFE studied the excellent solar thermal resources in the Méxicali area and assessed the technical and economic feasibility of an ISCCS component to a new gas power plant.35 3.3.2 Very Favourable Payback Periods and Near‐Term Grid‐Parity Generally payback periods for solar hot water systems are 1. and slower adoption rates for PV in France and Italy.3. An October 2008 market report37 predicted the overcapacity in PV module production in 2009 as the demand for solar was reduced due to Spain capping its feed‐in‐tariffs for PV.2 Baja California ‐ Rosarito 25 MW Project ‐ A new ISCCS plant with a 25 MW solar component is planned at the Rosarito III generating plant scheduled to enter service in April of 2011. The solar component was incorporated into the tender requirements issued by CFE on March 14.1 Global Oversupply of Modules Driving Down PV Costs Photovoltaics module prices are dropping faster than all predictions which is driving unprecedented PV growth in México during 2009. The unique and specialized expertise to design the solar component of the plant caused complaints from the prospective bidders until CFE agreed to separate the bidding for the traditional and solar components.3. Payback Period in Years for Solar Installations México 2009 Solar Hot Water Systems Photovoltaics 4‐11 Residential 1. The tender for Méxicali II was subsequently postponed to be re‐issued minus the solar component. the World Bank announced the funding of a $50 million grant for a Hybrid Solar Thermal Power Plant Project at Agua Prieta. The predicted module oversupply in the fourth quarter of 2008 was approximately 400 MW which was expected to increase significantly to 3.S. In the past 2 years México has seen dramatic reductions in the installed costs for PV ranging from 30% to 60% with the variation depending under system integrator and whether the module uses silicon or thin‐film cells. The project was initially approved in 1999 with the construction contract expected to be awarded in 201033. equipment selection and installer pricing.5 to 3 years and for photovoltaics 5‐9 years depending upon regional solar resources. energy consumption. 3. During 2006. . even with carbon off‐ set funding solar is not considered “cost competitive”: Despite having world‐class renewable energy resources and the prospect of wind power and other sources achieving economic competitiveness in the short to medium term. utility‐scale solar thermal electric is not projected to be a major player in México’s long‐term energy mix. all indications are that the annual growth rate PV will increase and in the near future surpass solar hot water capacity. low‐carbon energy technologies – hydro. Annual electricity price increases of 8% is expected for the residential sector and increases of 7% are expected for the industrial and services sectors. Assuming a cost of CO2e of as little as USD 10/ton is factored in. construction and operations cost structures.S. wind.4%.3% during the period 2005‐2015 (7.As PV prices decline and “subsidized” electricity prices increase annually.4% in a conservative scenario)38.39 4.4 More Solar Hot Water Capacity but Stronger Growth of PV in 2009 In 2008 there was 5 times more installed capacity for solar hot water systems than there was for PV but. Another key factor leading to early grid‐ parity in México is that labor costs for PV and solar hot water installation are already market‐based and are unsubsidized through financial incentives which keep prices artificially high in the industrialized countries. The following figure shows CFE’s planned capacity mix for 201843 with no solar: 4‐12 . However. geothermal.7% annually to 2017 compared to the average for all sectors at 3. and efficient cogeneration – could become cost competitive options replacing much of the projected investments in conventional fossil fuel based thermal power generation in the least‐ cost scenario. Such projects in México are expected to more cost‐effective given domestic engineering. CFE expects wind and geothermal to be the dominant renewable resources in future capacity additions to 2018. for peak and for “dispatchable” solar from thermal plants using 3‐6 hour energy storage. Currently.40 SENER expects annual electricity usage by residential and by medium‐sized businesses to increase 3. it is likely that México will see grid‐parity for PV sooner than in the U.5 Solar Thermal Electric is Viewed as “High Cost” by CFE Solar thermal electric costs for all CSP technologies are already seeing grid‐parity pricing in the U. all indications are that solar is expected to play a large role in Distributed Generation and in industrial “self‐generation” but not in utility‐scale generation according to CFE’s future capacity plans. between 2007 and 2008. the renewable energy sector of México remains relatively untapped . A recent report42 by the Inter‐American Development Bank described the potential of renewable energy in México with no reference to solar as part of the mix and that. Spain or Germany.3 Annual Energy Costs Continue to Rise National power consumption is expected to grow at an annual rate of 6. For 2009. 4. biomass. .6 % in a high demand scenario and 5. the annual growth rate for PV was more than twice than the rate for new solar hot water capacity additions.S.41 These markets are key segments for photovoltaics and solar hot water and expectations are that these segments will see strong growth in solar penetration due to increasing energy consumption to 2017 and due to increases in grid tariff prices. the total installed capacity for PV was less than 1 MWp and during 2009 several companies have each reported installations approaching 1 MWp. 4.. The IIE has a staff of over 650 research specialists and over 20 experimental facilities located in different regions of the country. Finance and Administration functions are embedded in two additional divisions. It is organized in four technical divisions: Alternative Energy Sources. regulatory issues. and specialized technical services. Cuernavaca‐Temixco CIE is the principal research university in México for renewable energy with a major focus in solar R&D including the development of PV materials. Its mission is to promote and support technological innovation within México’s electric industry. investors. through applied research. In 2008. The initiative 4‐13 . Source: CFE 5 Key Organizations. energy systems such as concentrating solar. solar drying systems for agriculture products. IIE was created by presidential decree in 1975. IIE finished the construction of a 1‐kW prototype inverter for grid‐connected PV systems. optical electronics. Universidad Nacional Autónama de México (CIE‐UNAM). water treatment with high temperature solar heating systems. industry professionals. and industry training. with an operational focus on technological innovation and development. technological development. Electrical Systems. and Mechanical Systems. Research Institutions and R&D Focus 5. and solar thermal applications. system evaluation.1 Instituto de Investigaciones Eléctricas (IIE) The Instituto de Investigaciones Eléctricas (IIE) is a decentralized governmental research institution. and energy commission representatives of several Mexican states. Planning. thin films solar control coatings. 5. its suppliers and users.45 The actions of the PV Grid Connected Project GEF/PNUD‐IIE were focused on technology promotion. Course participants included project developers. solar water heating with low‐temperature system designs for domestic and industrial applications. Electronic Control Systems. optics.2 Centro de Investigación en Energía. members of PV industry associations.44 IIE represents México in the Photovoltaics Power Systems Programme of the International Energy Agency. For several years a team of researchers at the Centro de Investigación en Energía have participated in an international collaborative project “Task 38 Solar Air‐Conditioning and Refrigeration” in the framework of the Solar Heating & Cooling Programme of the International Energy Agency (IEA). Two diploma courses on PV grid‐connected systems were offered during 2008 with an enrollment of more than 50 people. will jointly develop CSP plant designs suited for México’s Sonoran Plateau. TxTec and Utility Scale Solar. The current focus of GTZ’s cooperative program with México is sustainable energy and expanding the use of renewable energy resources. agriculture. (USS Inc. one of the best solar regions in the world and ideally suited for the CSP plant configuration known as “power tower”. Best. geology.000 households. Inc. which has a long history of cooperation with industry in areas of aquaculture. “A Solar Absorption Refrigeration System operating with the Mixture Ammonia‐ Lithium Nitrate” A. García‐Valladares and V. Gómez . Rivera . TxTec has experienced faculty and researchers as well as equipped laboratories in multiple specialties such as the National Laboratory of Solar Concentration Systems in collaboration with Universidad de Sonora and Universidad Nacional Autónoma de México (UNAM). TxTec promotes university‐industry collaboration for mutual support of technology development and technology transfer to improve the socio‐economic conditions and productivity of society.4 GTZ GTZ (Gesellschaft für Technische Zusammenarbeit) is a private sustainable development company formed and owned by the German Federal Government.47 5. California announced a collaboration agreement for development of advanced CSP power plant designs featuring TxTec’s contributions to tower receiver designs and USS. For more than 30‐years. Company TxTec AC is the institute for technology transfer at the University of Sonora. energy and the environment. H. 2009 4‐14 . and provides confidential industrial research facilities as well as economic and business consulting to nurture successful new technology developments in the region.) of Palo Alto. in conjunction with advanced tower receiver designs developed and tested by TxTec. The work in this Task wants to contribute to the process of rising acceptance of the technology and to overcome the main barriers on technical and information transfer levels. development cooperation with México in the energy sector entered a new phase with the addition of KfW for financial cooperation. Under the agreement TxTec and USS. GTZ has been a cooperative strategic and development partner with México. In 2008.S. metallurgy. Inc’s breakthrough heliostat (sun tracker) technology.46 A short list of representative papers follows: R. Inc’s next generation heliostat technology at TxTec’s CSP lab plant. The two parties are also working together on a 50 megawatt power tower plant that will supply enough power to the Mexican power grid for over 53. 2009 “Nichos de Mercado Para Sistemas Fotovoltaicos en Conexíon a la Red Eléctrica en México”.3 Universidad de Sonora Developing Utility‐Scale Solar with U.. In April 2009. GTZ renewable programs will be supplemented with climate protection initiatives. O. GTZ has instrumental in launching major projects to promote renewable energy and energy efficiency and has prepared several major renewable energy assessments for SENER which includes: “Renewable Energy for Sustainable Development in México”. Inc. TxTec will deploy and test USS.“Evaluation of the Thermal Performance of a Solar Water Heating Thermosyphon Versus a Two‐Phase Closed Thermosyphon Using Different Working Fluids” 5. “Recent Developments in Thermal Driven Cooling and Refrigeration Systems” W.implements measures to accelerate market introduction of solar air‐conditioning and refrigeration with a major focus on improved components and system concepts. Ordaz‐Flores. 5. 6. The plant will assemble SANYO's HIT (Heterjunction with Intrinsic Thin‐layer) solar modules with an annual production capacity of 50 MW which will be sold in North America.S. President Calderón helped inaugurate Kyocera Solar's second PV module manufacturing plant in Tijuana. of Japan opened a new PV production plant in Nuevo León operated by its subsidiary. ANES was in 1980 is 29 years old and conducts an annual congress for solar researchers and industry stakeholders to meet and exchange technical information on all aspects of renewable energy.1 50 MW Sanyo PV Plant in Nuevo León In November 2009. SANYO Electric Co. There were at least 2 smaller FDI investments in manufacturing in European solar hot water systems and an additional FDI in a key supplier of copper tubes.5 Billion investment in Méxicali likely cancelled as the company struggles to survive with EUR 1 Billion in losses so far during 2009. 6.2 Kyocera Solar’s New 150 MW PV Plant in Tijuana49 In March 2009.V. The two‐story production facility will have a maximum annual output of 750.5 La Asociación Nacional de Energía Solar La Asociación Nacional de Energía Solar (ANES) is the Mexican chapter of the International Solar Energy Society (ISES) and is the leading solar association in México. México SANYO Energy S. Ltd. which will include Mexican‐made solar modules such as those produced at Kyocera.000 crystalline‐silicon modules which is equivalent to a nameplate capacity of 150 MW.1. More than 70% of FDI into México comes from the U.1. President Calderón also announced his intention to implement a large‐scale program of renewable energy in México.1 PV FDI in 2008‐2009 There were several PV‐related FDI investments announced during 2008 leading to 2 plant openings in 2009 by Kyocera and Sanyo and to Q‐Cells’ announced USD 3. Another key function of ANES is providing a national training program to increase the use of renewable energy which includes professional development and working with governmental programs which incorporate solar energy. 6 Foreign Direct Investments in México’s Solar Industry Solar is a promising and emerging sector for FDI investment in México which has been limited over the past few years due to the global financial crisis and the over‐supply of PV cells.48 6. The association has been a catalyst for solar research in México and has been instrumental in establish industry standards for solar hot water collectors. de C. 4‐15 .A. and the European Union. announced its intentions to develop a major thin film photovoltaics manufacturing facility at the Silicon Border Industrial Park near Méxicali. The frames are desired for their rigidity.52 6.S. Based in Norway.5 billion.000 m² with 30 employs 30 people. expects the EUR 4 Million plant to supply distributors through the Americas. Hydro’s extruded aluminum frames will be produced in the company’s Phoenix plant and fabricated at its facility in Guaymas. and in Spain. the world’s largest PV manufacturer.800 aluminum frames.3 Q‐Cells in Méxicali?50 In May 2008.org/files/pdf/ECONOMY/Pres‐Elvira‐RenEnergyMeeting_es. The company has lost nearly EUR 1 Billion in 2009 compared to a net profit of EUR 152.1.000 people in 40 countries and has activities on all continents. Hydro is the world's third‐largest aluminum supplier.pdf Inter‐American Development Bank (2009) “IDB Public‐Private Sect or CTF Proposal ‐ México Public – Private Sector Renewable Energy Program” 3 GTZ (2009) “Nichos de Mercado Para Sistemas Fotovoltaicos en Conexíon a la Red Eléctrica en México”. but promising example of FDI in México is Extrusion Americas which is a unit of Norsk Hydro. Hydro will ship nearly 15 million pounds of aluminum for the two projects during a 10‐month window. the company employs 23. México. Q‐Cells announced that it just completed third straight quarter of losses and that it was closing manufacturing facilities in Germany and Malaysia. as a 100% subsidiary and began production of its proprietary flat plate collectors which consists of laser‐welded full plate absorbers with a high selective coating and tempered low‐iron glass. Nuevo Leon. * * * http://www. In November 2009 Q‐ Cells reported that the price of solar cells has fallen 20% during the previous three months and that prices are down 40% for the year. Extrusion Americas also provided the frames for the Nevada Solar One Project in 2004 which was is a 65 MW trough project in Las Vegas which is also owned by Acciona. 6. This new facility began tube production in September 2008 and increases Luvata’s copper‐tube capacity in North America by approximately 50. Q‐Cells from Germany. The factory has an annual capacity of 100. The company developed water tanks and mounting systems with local suppliers in Guadalajara and Kioto S.5 Kioto in Guadalajara In May 2009. In early November 2009.1.S. a Spanish energy company.7 Million at the end of third quarter of 2008. Both facilities are being built by Acciona. and Spanish Solar Projects A smaller. June 2009 2 1 4‐16 . light weight.4 Finish Investment – Cooper Tubing for Flat Plate Solar Water Heaters Luvata has also expanded its manufacturing capacity by opening a USD 40 million dollar copper‐tube manufacturing plant in Guadalupe.1. México and Latin America and is part of a mid‐ to long‐term plan according to Q‐Cells. Austrian Kioto Clear Energy AG established Kioto S.000 tonnes annually for solar water heaters. The German PV manufacturer referred to the planned plant as part of its “internationalisation strategy.51 Q‐Cells will likely cease to be the world's largest cell maker in 2009 and many expect to company to collapse or be acquired. 6.A.cec.” Plans for the Q‐Cell consisted of multiple buildings built in phases. and is another example of FDI investments in facilities in Phoenix and Guaymas which are providing aluminum frames for large‐scale solar plants in the U. a global supplier of aluminum and aluminum products.53 Hydro Aluminum is supplying the extruded materials for use in the trough frames for 2 Spanish solar power plants which will together utilize 17.1. México at a projected cost of USD 3. the largest single manufacturer of primary metal and extruded aluminum products in Europe. with the construction of the first phase to have begun in the fourth quarter of 2008.6 Hydro’s Extrusion Americas Plants Supplying U. The development is dependent on the future growth of the PV market in the US. durability and tight tolerance to specifications. near Monterrey. and a leader in delivering innovative light metal solutions to the automotive and building industries worldwide.6.A. June 15. Press Release. See http://siteresources. 2009.infonavit. June 2009. Prof. Western Governors Associations. June 2009 23 http://www.mx 33 “México ‐ Second Agua Prieta Solar Thermal Project : procurement plan/México ‐ Plan de contrataciones especifico : procurement plan”. August 11.worldbank. June 2009 16 SENER and GTZ (2009) “Renewable Energy for Sustainable Development in México” 17 SENER and GTZ (2009) “Renewable Energy for Sustainable Development in México” 18 World Energy Council “Energy Efficiency Policies and Indicators – ANNEX 1” 19 Inter‐American Development Bank (2009) “IDB Public‐Private Sect or CTF Proposal ‐ México Public – Private Sector Renewable Energy Program” 20 World Bank (2009) “Residential Electricity Subsidies in Mexico Exploring Options for Reform and for Enhancing the Impact on the Poor“. N. See page 54 31 http://ase. October 7‐9. March 2008 11 Sources: Western Governors Associations (2009) “Western Renewable Energy Zones Initiative Renewable Energy Generating Capacity Summary”.diputados. 2009 28 World Bank Group (2009) “ World Bank/México: US$1. GTZ (2009) ”Nichos de Mercado para sistemas fotovoltaicos en conexión a la red eléctrica en México”. The World Bank. gets $400M PBL”.iea‐pvps.org/INTLAC/Resources/Medec_final_Oct15_2009_Eng. April 2006 6 SENER and GTZ (2009) “Renewable Energy for Sustainable Development in México” 7 SENER and GTZ (2009) ”Renewable Energy for Sustainable Development in México” 8 SENER and GTZ (2009) ”Renewable Energy for Sustainable Development in México” 9 Inter‐American Development Bank (2009) “IDB Public‐Private Sect or CTF Proposal ‐ México Public – Private Sector Renewable Energy Program” 10 México Secretaría de Energía (2008) “Dirección General de Planeación Energética. 2009. Center for Sustainable Technologies.grefMéxico2009. 4 4‐17 . 2008. June 15. León.org/products/download/rep_ar08. October 20.org/L0L83OXFL0 34 “Eco‐Innovation Policies in México”. September 17. 160 21 From personal conversation with Peter Eschenbach.gob.wikipedia. IEA Photovoltaic Power Systems Programme (2009) “Annual Report 2008. 2009. See http://www. gets $400M PBL”. México.worldbank.pdf 24 World Bank (2009) “Low‐Carbon Development for Mexico”. See http://www. OECD Environment Directorate. and SENER and GTZ (2009) “Renewable Energy for Sustainable Development in México” 12 Ravindranath. 2009 30 SENER and GTZ (2009) “Renewable Energy for Sustainable Development in México”. see http://www. Inter‐American Development Bank (2009) “IDB Public‐Private Sect or CTF Proposal ‐ México Public – Private Sector Renewable Energy Program”. World Bank Working Paper No. Report Concludes”. ERDM Solar. see http://www.westgov.H. 2009. International Energy Agency‐Photovoltaic Power Systems Programme (2006) “Compared assessment of selected environmental indicators of photovoltaic electricity in OECD cities”..5 Billion to Stimulate Green Growth”. 2009.gob.org/wga/initiatives/wrez/ 15 SENER and GTZ (2009) “Nichos de Mercado Para Sistemas Fotovoltaicos en Conexíon a la Red Eléctrica en México”.org 13 Solar thermal resources were inventoried as part of the Western Renewable Energy Zones Project. 2009 27 Inter‐American Development Bank (2009) “México partners with IADB to fight climate change. October 15.pdf 14 “Western Renewable Energy Zones Initiative Renewable Energy Generating Capacity Summary”. June 2009. 2009 29 Inter‐American Development Bank (2009) “México partners with IADB to fight climate change.mx/LeyesBiblio/pdf/LAERFTE. Director de Finanza y Desarrollo de Negocios.org/wiki/Net_metering 26 World Bank Group (2009) “World Bank: Green Growth is Possible in México.org/content/news/detail/6031 32 See http://www. Press Release. Press Release.org/wga/initiatives/wrez/WREZ%20Map%20and%20Tables%20Only. 14 November 2009. presentation at Global Renewable Energy Forum – Scaling Up Renewable Energy”. Prospectiva del sector eléctrico 2008‐2017”.pdf 25 http://en. 22 SENER and GTZ (2009) “Nichos de Mercado Para Sistemas Fotovoltaicos en Conexíon a la Red Eléctrica en México”. Press Release. October 26.westgov.pdf 5 Sources: GTZ (2009) “Nichos de Mercado Para Sistemas Fotovoltaicos en Conexíon a la Red Eléctrica en México”. see http://go. September 17. International Energy Agency”. Indian Institute of Science (2009) “Renewable Energy for Industrial Applications”. 2009.berkeley.com/energy/solar/article198527.mx/wb/ProMéxico/reasons_to_invest_in_México 49 http://www. See http://www.com/rea/news/article/2009/09/solar‐heating‐industry‐review‐2009 53 http://www. May 2005 http://www.pdf 44 Global Environmental Facility (2007) “México: Grid‐connected Photovoltaic Project – Medium‐Sized Project Proposal”. Inc. to Collaborate on Next Generation 50 Megawatt Concentrating Solar Power (CSP) Electric Plant for Sonora. 2007 39 SENER and GTZ (2009) ”Nichos de Mercado para sistemas fotovoltaicos en conexión a la red eléctrica en México”. 01‐2009” 47 Utility‐Scale Solar Inc.org/docs/Baja/RS_Baja_051805.pv‐tech.proMéxico.renewablesg.php/blog/show/Hydro‐Aluminum’s‐Guaymas‐Plant‐Fabricates‐ Extruded‐Aluminum‐Solar‐Arrays‐for‐Two‐New‐Therm. 2007 45 International Energy Agency.renewableenergyworld.gob.maquilaportal. 2009 41 SENER (2009) “Prospectiva del sector electric 2008‐2017” 42 Inter‐American Development Bank (2009) “IDB Public‐Private Sect or CTF Proposal ‐ México Public – Private Sector Renewable Energy Program” 43 SENER. “Energy Supply and Demand Assessment for the Border Region”. August 14. Press Release. (2008) “TXTEC and Utility Scale Solar. México”. November 12. Renewable Energy World. April 7.html 36 35 4‐18 . June 2009 40 Based upon TechBA interviews of solar companies during November 8‐20.rechargenews.pv‐tech. 2009.ece 52 "Solar Heating Industry Review 2009".doc 37 Lux Research (2008) “Solar State of the Market Q3 2008: The Rocky Road to $100 Billion” 38 Global Environmental Facility (2007) “México: Grid‐connected Photovoltaic Project – Medium‐Sized Project Proposal”. California Energy Commission. “Photovoltaics Power Systems Programme. September 21.org/news/_a/q_cells_plans_35_billion_thin_film_manufacturing_complex_in_Méxicali_México/ 51 Recharge News “Q‐Cells takes axe to production as losses deepen”. See http://gspp. See http://www.edu/programs/docs_EnergyForum/CEPP%20Berkeley%20August%2024‐ 25_Acosta. First Edition. Annual Report 2008” 46 IEA – SHC Task 38 Solar Air‐Conditioning and Refrigeration (2009) “Industry Newsletter.com/news/index. April 7.org/news/_a/kyocera_solar_opens_new_pv_module_plant_in_tijuana_México/ 50 http://www. 2008 48 http://www. new and emerging Mexican solar companies along the solar value chain who maybe new entrants to the supply chain and manufacturing sectors of the California and Arizona solar market. The financing tools range from traditional programs and tools for economic development and export trade now focused on the solar industry to wide array of specialized incentives and support mechanisms to drive solar manufacturing and solar energy generation. programs and practices of these enablers can be of great support directly and indirectly to existing. Targeted Financing for Solar Manufacturers – consists of national and state tax credits targeted to assist the financing of solar manufacturers along with utilities receiving “Renewable Energy Credits” for payments to solar manufacturers for sales leading to in‐state solar generation. goods and components produced domestically. The financing strategies. debt 5‐1 . Export Trade Development – existing initiatives which use direct loans and credit enhancements to assist foreign customers buying solar products. some efforts are marketed at promoting new “solar cluster development” along with “green jobs”. from donor carbon credit funds to performance‐based electricity payments. loans. The financing enablers range from national to local governments. solar incentives and financial tools used by “enablers” to leverage investment in the various value chains of the solar industry which include: Economic Development – traditionally consists of targeting individual companies with conventional grants. and from demand‐driven mandatory green energy delivery requirements to targeted Foreign Direct Investments. and tax incentives to solar companies locating and/or expanding in certain regions or locations.S. 2 Approaches to Financing the Solar Sector The general types of support programs. Private Investment/Tax Equity Financing – comprised largely of institutional and tax equity investors. and particularly in California and Arizona. from global solar companies and international development funds to cross‐border business‐to‐business relationships. some countries are targeting the renewable energy sector for export trade initiatives. Renewable Energy Generation Incentives and Portfolio Requirements – the “market drivers” for the explosive growth of solar in the US is due to a mix of voluntary incentives and mandatory requirements for generating solar energy in California and Arizona which makes large and small solar projects “bankable” which leverages equity and debt investments in solar manufacturing and in the solar supply chain. The tools of financing enablers can range from tax credits to tax equity funds.Section 5 Financing Enablers 1 Introduction The purpose of this section is provide an overview of the “financing enablers” and key financing tools being used to drive the explosive growth of all segments of the solar industry in the U. private syndicated investments and private bond placements offering equity. Ltd. and other key components of the company's solar thermal power plants to the rapidly growing utility‐scale solar power industry in the Southwest states.000‐square‐ foot. Foreign Direct Investment and Strategic Alliances/Partnerships – usually consists of equity and debt financing to build manufacturing capacity in low‐cost countries with local strategic partners in order to guarantee a supply of solar products for fast growing markets. etc.3 $2.1 California and Arizona are very aggressive in recruiting global solar manufacturing and services to their respective states.and leveraged investments with tax‐offsets and pass‐through net operating losses. 3 Traditional Governmental Support Programs Traditional economic development and export trade development programs are very active in all sectors of the solar industry and enable the leveraging of financing. The facility will be Solel's first manufacturing plant in Spain.6 Million Spanish Grant to Assist Solar Manufacturer – In September 2009. Kyoto Protocols and Post‐2012 Funds – consists of international players buying “certified emission reduction” credits from renewable energy projects which assists in financing projects and assists countries meet their carbon reduction commitments under the Kyoto. Ausra has headquarters in Palo Alto and uses a Compact Linear Fresnel Reflector (CLFR) technology that was developed in Australia. Carbon Funds. cash sales tax. Science and Enterprise of the Andalusian Region of Spain awarded a $2. 3. Examples of such successful efforts include: New Automated Solar Thermal Component Plant in Nevada – In June 2008. and 5‐2 .S.2 Competition within China for Industrial Recruitment of International Solar Companies – It is being reported that Chinese governments at the national. metal supports for solar collectors. infrastructure improvements and workforce training along with tax incentives such as personal income tax.6 Million grant to Solel Solar Systems. provincial and even local level have been competing with one another to offer international solar companies ever more generous subsidies. corporate income tax.1 Economic Development/Industrial Recruitment The Solar Energy Industries Associations reports that approximately 90% of global solar cell manufacturing occurs outside the United States and that the U. China or Germany. and cash for research and development. Ausra opened a reflector production line at its first North American facilities in Las Vegas. the Ministry of Innovation. absorber tubes. and will include lines for the production of parabolic reflectors. Investment by Solel in the first Spanish facility is $12 million. including free land. and other essential components used for conversion of sunlight to clean electricity. to be used for the construction and development of a solar thermal manufacturing facility to build solar fields components. The 130. property tax. International “Donor Trust Funds” – established to buy the environmental attributes of solar energy projects in long‐term contracts which are used to secure conventional financing. Traditional economic development tools that States and local entities offer are grants for R&D. is fifth in global solar manufacturing capacity with less than one‐third of the capacity of Japan. Nearly all of the economic development/industrial recruitment groups in the major metro areas of California and Arizona are targeting solar companies. incentives and development tools to support large companies as well and small‐ and medium‐sized enterprises. State‐owned banks are flooding the industry with loans at considerably lower interest rates than available in Europe or the United States. highly automated manufacturing and distribution center will supply the reflectors. 5N PV and Yamaichi Electronics. By the end of 2007. a leading Spanish construction company. medium‐term insurance.‐made environmental goods and services. export credit insurance. United Solar Ovonic LLC in Auburn Hills. exports of renewable energy equipment and provides financing products such as short‐term working capital. manufacturer of thin‐film solar. goods and services to international markets. The guaranteed lender is JP Morgan Chase Bank in Cleveland. in a joint venture to build three power plants with a total capacity of 150 MW.S. used a $25 million revolving credit line guaranteed under Ex‐Im Bank's 'Fast Track' Working Capital Guarantee Program to finance the export of its thin‐film solar laminates to customers in Europe and Asia. The First Solar plant went on to leverage other manufacturers in the solar‐power industry to the region including Aleo Solar. closed a project deal for a new manufacturing plant in which Germany and the European Union provided $58 million of the $150 million costs for constructing the plant. for overseas projects using ESLR panels. In 2009 Ex‐Im Bank approved a $5 million revolving working capital loan guaranty for Spire Solar as a credit enhancement to a direct loan from Silicon Valley Bank in Santa Clara.S. exported photovoltaic solar modules for the construction of five solar‐energy projects at the Gochang Solar Park in Korea. a manufacturer in Camarillo. the U. Solel has joined with Sacyr Vallehermoso. 5‐3 .S. Solar Manufacturer – In 2005 First Solar. Michigan. This program specifically targets U. solar sector in 2008‐2009 with the following export financing: Evergreen Solar (ESLR) received low interest financing (4. Spire Solar Inc.S.4 $58 Million German/EU Grant to U. medium‐ to long‐term loan guarantees. Solel commenced operations in Spain in 2006 and is supplying 15 solar thermal power plants with a combined capacity of 750 MW which are being built in partnerships with Spain's leading infrastructure companies. The Ex‐Im Bank supported the U. California. California. In addition to being a technology provider. First Solar also received wage subsidies for local workers hired who was previously unemployed. There are some 3. total investment by Solel in manufacturing plants in Spain is expected to reach $140 million. ESLR currently has 90MW of projects in varying stages of the loan app process with the bank which will cover 85% of the product cost and up to 30% of installation costs.5 3.700 workers in the solar industry in the region with more than $650 million having been invested which has lead Foreign Direct Investment Magazine to rank the region as one of the top 25 European locations for foreign investment in 2008. PVflex. project and structured finance. export credit insurance along with loan guarantees and direct loans (buyer financing). SolarWorld USA. Conergy.S. Ex‐Im Bank provides working capital guarantees (pre‐export financing).2 Export‐Import Bank of the United States6 The Export‐Import Bank of the United States (Ex‐Im Bank) is the official export credit agency of the United States with a mission to assist in financing the export of U. Ex‐Im Bank is supporting the financing of this transaction with long‐term loan‐guarantees totalling $61 million. Odersun. Germany. Ohio. the First Solar plant in Frankfurt/Oder was running at full capacity and now employs more than 600 people along with another 100 staff at its European sales and marketing offices in Mainz.9% fixed over 18 yrs) from the Export‐ Import Bank of the U.S. The Ex‐Im Bank has established an “Environmental Export Financing” program to help mitigate risk for U. companies and offers competitive financing terms to international buyers for the purchase of U.S.S. is a global solar company providing turnkey solutions for module and cell factories as well as individual equipment to feed the rapid expansion in the solar market worldwide. and long‐term direct loans. 2009. The ARRA appropriated approximately $3. only the final product need be manufactured or produced in the United States. of Santa Clara.S. the U. On March 31.2 ARRA 80% Loan Guarantees New ARRA loan guarantees are directed to open access to the traditional credit markets for debt financing during the recovery of the global recession. 4. the plant is expected to have an annual manufacturing capacity of 500 MW. 4. These governmental actions include adoption of the American Reinvestment and Recovery Act of 2009 (ARRA) and various manufacturing incentives at the state level.9 billion in funding for a new program for rapid deployment of renewable energy systems. and other manufactured goods used in infrastructure projects are procured from domestic producers.1 ARRA 30% Advanced Energy Manufacturing Tax Credit The ARRA authorized the award of $2. solar manufacturing sector are benefiting from the major financing tools and incentives resulting from governmental actions at the Federal and state level which have been taken to stimulate the economic and to develop a the supply‐side of a new manufacturing base in solar. government issued an “Interim Rule” to implement the “Buy America” requirements which provides that there is no restriction on the country of origin of components or subcomponents.7 billion in new renewable and advanced energy manufacturing projects. 8 As such Mexican suppliers can participate in “Buy America” solar manufacturing and solar projects if the final product is manufactured in the U. expanded. steel. though there are some restrictions on steel. For manufactured goods. create jobs. Germany. nor is there any domestic content requirements imposed on such components or sub‐ components. The $2. Department of Energy for due diligence and negotiation of funding to expand the production capacity of a manufacturing plant in California for SoloPower’s flat‐plate PV modules built from flexible CIGS (copper‐indium‐gallium‐selenide) cells. The largest PV cell manufacturer in the world is Suntech from China which announced in August 5‐4 . SoloPower is expecting a $190 million Loan Guarantee after being selected in July 2009 by the U.3 billion in tax credits for qualified investments in advanced energy projects which includes the support of new. The U. California used an Ex‐Im Bank €11 million loan guarantee to support the financing of $14 million in exports of solar‐cell manufacturing tools and equipment to Signet Solar LLC of Dresden.S. or re‐equipped domestic manufacturing facilities.S. The new Advanced Energy Manufacturing Tax Credit (MTC)7 offers a 30% Federal tax credit to stimulate the growth of the domestic manufacturing industry in clean energy which will thereby support the larger goals of ARRA to stimulate economic growth.S. electric power transmission and leading edge biofuels projects. The financing of solar manufacturing facilities and large‐scale solar projects are eligible activities under the loan guarantee program and at least 2 large projects representing $725 million in funding have been announced or are in final negotiations: The 1st approval was announced in September 2009 with a $535 million Loan Guarantee awarded to Solyndra to provide debt financing for approximately 73% of the project costs which will allow the company to initiate construction of a solar panel fabrication facility in California. Applied Materials Inc.3 ARRA “Buy America” Provisions The American Recovery and Reinvestment Act includes a “Buy America” requirement that iron. 4.S. Once completed. Department of Energy is offering loan guarantees up to 80% of a renewable manufacturer’s cost for new facilities and equipment. and reduce greenhouse gas emissions. 4 Solar Manufacturing Financial Support Programs All segments of the U.3 billion in MTCs can support total capital investments of almost $7. and will expire on December 31.13 From 2006 to mid‐2009. 2016. machinery and equipment which are used primarily to manufacture renewable energy systems.2009 that it will be adding a factory with 75 to 150 workers in Phoenix or Texas to facilitate “Buy America” sales. Oregon's Tax Credit for Renewable Energy Resource Equipment Manufacturing Facilities was enacted in July 2007 and provides a tax credit equal to 50% of the construction costs of a facility used to manufacture renewable energy systems.1 Extension of 30% Federal Energy Tax Credit and Accelerated Depreciation Crucial to the mix of financing and incentive tools is the ability for the owners of solar systems to be able to apply Federal tax credits to offset the installed costs with Federal tax liability. 2010. . These financial tools are key drivers on the demand‐side in creating long‐term expanding markets across all segments of the solar industry. Global Solar is a major manufacturer of thin‐film photovoltaic (Copper Indium Gallium DiSelenide ‐ CIGS) solar cells using a flexible substrate. These incentives will be available starting January 1. if it owns or makes a significant investment in any solar electric manufacturing plant located in Arizona or if it provides incentives to a manufacturer of solar electric products to locate a manufacturing facility in Arizona. To be eligible the business must meet certain minimum requirements for the quantity and quality of new jobs created. Eligible costs the building. The 50% credit is taken over the course of five years.14 5 Solar Generation Financing Support Programs An additional matrix of very attractive financial support programs is now in place in California and Arizona to support solar generation for Distributed Energy and for the utility‐scale projects.9 4. The text of this provision follows: “An Affected Utility may acquire Renewable Energy Credits . excavation. Oregon spent $386 million on tax credits for clean‐tech companies.10 4. Income tax credits and property tax incentives are now available for companies choosing to establish or expand their manufacturing facilities and corporate headquarters in Arizona. The bill stipulates different incentive levels depending on how many full‐ time jobs are created and the salary for those jobs.6 Oregon Renewable Energy Manufacturing Incentives Oregon's incentives for attracting clean‐tech firms are among the most aggressive in the nation. 5. according to the state Energy Department. The original maximum credit of $10 million was expanded to $20 million (50% of a $40 million facility) in March 2008.5 Arizona’s Manufacturing Partial Credit for Utility Renewable Requirements In 2007. a little known provision was added to Arizona’s “Renewable Energy Standard and Tariff” requirements which allows utilities a “Manufacturing Partial Credit”11 and to receive Renewable Energy Credits” (REC) in return for investing in solar manufacturing plants or for recruiting solar manufacturers to Arizona. TEP’s plans to pay Global Solar approximately $1 million in 2010 for the cumulative RECs generated in 2010 by Global Solar PV installed in Arizona which represents 5% of TEP’s required utility‐scale generation 12 with future payments adjusted annually as new capacity is installed.4 Arizona Renewable Energy Manufacturing Incentives In July 2009.” An example of the effective use of this provision to support solar manufacturing in Arizona is the annual payment made by Tucson Electric Power (TEP) to Global Solar which has a 40 MW PV manufacturing plant in Tucson. 4. at 10% each year. . The Energy Policy Act 5‐5 . The credit may also be applied to the costs of improving an existing facility which will be used to manufacture renewable energy systems. the State of Arizona created new tax incentives intended to draw renewable energy product manufacturers to the state. In a companion bill to the American Reinvestment and Recovery Act of 2009. Utilities and states take diverse approaches to leveraging RPS as a market driver for the financing of Distributed Energy and for utility‐scale projects. tax credits. For California.) The California Solar Initiative is overseen by the California Public Utilities Commission and has a budget of $2. industrial and public customers. and San Diego Gas & Electric (SDG&E. Arizona Public Services (APS) and Tucson Electric Power (TEP) offers a significant financial payment up to 60% of the project’s capital costs in a performance‐based incentive that pays over time based upon actual solar production. the RPS requirement is 20% renewable generation by 2010 and 33% by 2020. For commercial/industrial customer‐sited projects. these financial tools are the enablers for mandatory compliance with Renewable Portfolio Standards and assist in driving the explosive growth of solar in California and Arizona. 2016. Southern California Edison (SCE). The economic impact of the extension of the ITC for solar was estimated to $14. Generally funded by rate‐payers.3 Renewable Distributed Energy Generation State government and electricity utility programs offer an extensive array of upfront rebates.3 billion15 just upon the PV sector. commercial.167 million (2007‐2016)16 Arizona – In Arizona all responsibility for compliance with RPS requirements is borne by the regulated utilities and regulated by the Arizona Corporation Commission (ACC). the utility company obtains ownership of the Renewable Energy Credits (RECs) generated while the customer saves money by offsetting electricity provided by the grid with the electricity provided by the new on‐site solar system. For photovoltaic. The extension of the ITC and the 5‐year accelerated depreciation are most important tools for financing the large‐scale projects where there is a mix of equity and long‐term debt which require pass‐through net operating losses and ITCs to offer an attractive rate of turn. and performance‐based incentives for the generation of solar by residential. Arizona’s RPS ramps up to 15% by 2024 and has a requirement that 30% of all new renewable generation come from Distributed Energy for residential and commercial/industrial sectors in which on‐site generation of renewable energy is used for on‐site use. the U. The extension of these Investment Tax Credits (ITC) are key tools used by financing enablers to finance both the Distributed Energy as well as utility‐scale solar projects. APS and TEP both offer residential customers a one‐time up‐front payment of $3 per installed DC watt pay which significant with current installed costs at less that $7/watt and declining. 5‐6 .2 Mandatory Renewable Portfolio Standards Renewable Portfolio Standards (RPS) are greatly responsible for the long‐term future growth of solar in California and Arizona and provide mandatory requirements for utility companies which results in the direct and indirect financing of solar projects. California –The California Solar Initiative is part of the Go Solar California campaign and builds on 10 years of state solar rebates offered to customers in California's investor‐owned utility territories of Pacific Gas & Electric (PG&E). In exchange for financial incentives for customer‐sited solar generation.S.of 2005 provided a 30% tax credit for solar installations for both business and residential owners for a 2‐ year period which was to expire on January 1. RPS is a state mandated requirement that public utilities generate an escalating fixed percentage of electricity generation from renewable energy with a future cap. 2008. 5. RPS requirements are driving utilities to make extraordinary efforts to implement financial incentive programs to accelerate the development and use of solar energy from residential and commercial installations to large‐scale grid projects. 5. adopted the Emergency Economic Stabilization Act of 2008 which among a number of provisions extended the 30% “Business Solar Investment Tax Credit” and the “Residential Renewable Energy Tax Credit” for solar energy property for 8 years through December 31. Some 48 of these projects use parabolic trough. the global Spanish solar company.20 The basic financial model developed in the U.5. Unlike Europe. APS awarded Abengoa. for renewable energy generation is based upon a combination of tax credits.S.17 The U. power tower and Dish‐Stirling technologies with an installed capacity of 48 GW. Some 29 of these projects use parabolic trough and power tower technologies with an installed capacity of 19 GW. Arizona – In Arizona all responsibility for compliance with RPS requirements is borne by the regulated utilities and regulated by the Arizona Corporation Commission (ACC). California –There are currently 13 large‐scale concentrating solar thermal projects under permitting review by the California Energy Commission.18 The installed per kW capital costs for utility‐scale solar thermal projects being permitted in California range from $1520/kW for Dish‐Stirling to $4.19 Based upon a 2007 RFP. The capital costs are $1. Sometimes solar is stipulated in the RFP and sometimes all renewable sources are encouraged to submit proposals. government incentives for renewable energy largely consists of tax credits for renewable energy manufacturing and for renewable energy generation projects. Bureau of Land Management (BLM) currently has 64 applications for the use of public lands in California for large‐scale solar projects with a combined capacity of 64 GW. 6. Tax‐equity investments are largely driving the growth of the solar industry in the U. This model applies to Distributed Energy for the residential and commercial/industrial markets and to utility‐scale projects with Independent Power Producers. where feed‐in‐tariffs have been the drivers for the explosive growth of solar in German and Spain. a 30‐year Power Purchase Agreement to construct and operate a 280 MW trough power plant with 6 hours of thermal storage. These projects represent a combined installed capacity of 6.S. The typical 250 MW solar thermal trough project being permitted in California will have capital costs of approximately $1 billion.S. BLM currently has 33 applications for the use of public lands in Arizona for large‐scale solar projects with a combined capacity of 20 GW. U. Utilities in the California and Arizona use competitive “Requests For Proposals” (RFPs) for the procurement of IPPs to deliver grid‐ scale generation and large Distributed Energy projects where new smaller generation projects under 20 MW are located near load centers.5 billion and electricity sales over the project term are expected to be at least $4 billion.2 GW. The overwhelming majority of these projects would use concentrating solar thermal technologies with the balance being PV.1 European Feed‐in‐Tariff Financing Model Feed‐in tariffs require the grid‐operator and primary electricity supplier to purchase electricity from renewable energy generators at fixed premium prices which are guaranteed over a long‐term 5‐7 . 6 Private Investment/Tax Equity Financing There are fundamental differences in the financial support programs between Europe and the U. The overwhelming majority of these projects would use concentrating solar thermal technologies with the balance being PV.S.S.4 Utility‐Scale Solar Generation Utilities rely upon Independent Power Producers (IPPs) to produce the renewable energy resources required to assist the utilities comply with RPS requirements.000/kW for trough which varies by wet/dry cooling and by energy storage and site development costs. related to solar incentives to buy‐down the cost of solar generation. upfront and performance‐based financial incentive payments and tax strategies which leverage net operating losses and accelerated depreciation. An IPP is a non‐utility generator which owns facilities to generate renewable electric power for sale to utilities. These RFPs offer 20‐year Power Purchase Agreements (PPAs) which contract for the electricity and the RECs generated from renewable projects at a guaranteed stipulated price which the IPP uses to secure long‐term project finance which is usually a combination of equity and debt. The “Solana” project is being built near Gila Bend. a long‐term performance‐based financial incentive from a state or a utility. In Germany. A 2 MW PV plant would require 20 different investor/owner companies.32 kWh for larger projects.32/kWh ($. install. one or more of the trackers is owned per investor as part of an overall owners' association. It was reported that one installation needed less than four months to attract investors for its 130 parcels of 100 kW each. each parcel was set up as a subsidiary and was owned by several investors. The SSA company comprised of tax equity investors will own. Tax Investors are targeting returns in the 9% or more range for an Internal Rate of Return for a 20‐year term for solar third‐party ownership projects in the commercial/industrial sectors. any renewable generator can structure a project with certainty as to the revenues from power generated which makes conventional bank financing and private investments very attractive. In this single society model. or €.21 6. solar PV receives up to €. or companies. A variation was a multi‐property model.3 Tax Equity Model for Solar The key tools for tax equity financing of solar projects in the U. 23 More than 80% of the commercial/industrial solar installations in California are financed through a third‐ party ownership model using a Solar Services Agreements (SSA) which is also referred to as a Power Purchase Agreement (PPA). net operating losses and accelerated depreciation distributions along with revenues from long‐term contracts with parties buying the electricity and the renewable Energy Credits generated.45/kWh) if on a ground‐mounted site. to qualify the project for the higher tariff.2 Investor Syndicates in Spain During the peak of Spain’s feed‐in‐tariffs for PV from 2005 onward. are third‐party ownership of the project which leverages receives tax credits. and operate the solar equipment on‐site at the business. As such.performance period and are usually market or inflation adjusted. several different business models were developed for private investment syndicates to take advantage of the 20‐year guaranteed payment of approximately $.43/kWh ($. Most project developers/solar companies developed large PV projects and divided the large‐scale systems into 100 kW parcels. The business enters into a long‐term SSA with the SSA company which has access to tax equity investment capital. The business agrees to pay the SSA company for the solar electricity generated on‐site over a 10 to 20‐year period at most often a fixed‐rate which is at or below the current electricity price. All financial and tax incentives go to the owner of the solar system which is the SSA company. The business locks‐in a long‐term rate which is less than it would be paying the local utility over the term of the SSA. The tax equity model for solar typically works as follows: A commercial/industrial business wants the benefits from solar for its building but does not want to make the large upfront capital outlay for the system and/or may not be able to use all of the available tax credits.22 6.56 kWh (inflation‐adjusted annually) for projects of 100kW or less with the tariff price dropping to $.S. The SSA company pays for all capital costs for the solar equipment and bears all performance risk of the solar system.61/kWh) if on a home. The SSA company then receives a performance‐based incentive over time for the Renewable Energy Credits generated by the solar project from the local utility company which is used to 5‐8 . The expected investor return was 10% with a 10 year pay‐back. Project finance is project‐specific asset financing which usually involves a combination of equity and debt with investor returns and debt 5‐9 . reducing homeowners’ electricity costs. universities. The fund will enable the construction and permanent financing of around 35 megawatts in the next year and the combination of debt and equity enables the fund to seek a broader range of federal government incentives. The tax equity investors also receive net operating losses for the SSA company which are driven by 5‐year Federal accelerated depreciation. Prudential Capital Group. financing. Morgan Stanley. businesses and government organizations and provides from one source solar power system design. and General Electric Capital. Landon Group. A global company. commercial/industrial. 6. insurance companies and endowments. Other large institutional investors include pension funds. schools and government markets. electric utilities and companies. For larger utility‐scale projects. Major banks in the solar tax equity market include AIG. and Qualitas Venture Capital. 6.000 megawatts in development across the United States. Spain and Italy using both PV and CSP technologies.5 Institutional Investors Banks have traditionally used the tax equity markets to fund solar projects by buying the Federal and state tax credits from project owners. A variation to this model is third‐party leasing of the solar system to a property owner such the Solar City’s “SolarLease” program24 which is a 20‐year arrangement that allows homeowners to rent a solar photovoltaic system with no down payment and with fixed monthly fee starting at $55. SolarCity is a national solar provider for homeowners. Lehman Brothers. The SSA receives all Federal and state tax credits which are distributed to the SSA company shareholders based upon ownership percentage. improving project economics for prospective customers such as municipalities.4 Tax Equity Solar Funds In the US southwest. help meet state requirements for its renewable energy generation. Electric Finance Group.6 Project Finance for Large‐Scale Solar Projects “Project finance” is the primary financial structure used globally by Independent Power Producers and investors to enable the financing of large‐scale renewable projects. installation and monitoring services. The new Solar Fund V is structured to include both debt from John Hancock and equity from Renewable Ventures and Wells Fargo. Renewable Ventures has capitalized 5 solar tax equity funds with the latest $200 million fund being established in August 2009. Fotowatio has more than 1.27 Tax equity funds and Solar Services Agreements for Distributed Energy is a form of project finance. large solar system integrators and project developers are vertically integrating with large tax investors to establish tax equity funds dedicated to financing their project pipelines and to assure growth in an uncertain financial climate. Wachovia. In 2009 several Solar Equity Funds were established or recapitalized: SolarCity: US Bank and SolarCity established a $100 million solar tax equity fund for PV projects in the residential. Union Bank. 25 In 2009 MMA Renewable Ventures was acquired by the Spanish company Fotowatio which is one of the largest solar power companies in the world and an Independent Renewable Power Producer with 130 megawatts of solar projects in operation in the United States and Europe. Wells Fargo. Fotowatio is owned by GE Energy Financial Services.26 6. a partnership‐flip model modelled after the US wind industry is often used where the PPA company’s ownership is structured at 99% for the tax equity partners with this ownership “flipped” by being reduced after the benefits of the tax credits have been exhausted with substantial ownership then going to the project developer. JP Morgan. Companies also raise debt as part of their public offerings and usually in the form of convertible bonds which are included in the total offering size because they have the potential to convert into shares of the company at a later date.S. Iberdrola From Israel – BrightSource/Luz. In the U.‐México border region and certified by the Border Environment Cooperation Commission (BECC).S. execution and operation of environmental infrastructure projects located in the U. Project must remedy an environmental and/or human health problem. Nuevo Leon. states of Texas. Acciona. Public markets investment in solar energy companies as corporate equity stakes are sold on the open market. Solel From Germany – Solar Millennium Australia – Ausra 6. NADB projects must meet 3 eligibility criteria: Project must be located within 100 kilometers (62 miles) north of the international border in boundary in the four U. Project must be certified by the Border Environmental Cooperation Commission (BECC).: From Spain – Abengoa. project financing is sometimes called off‐balance‐sheet financing. 5‐10 .31 Under its charter. Coahuila.29 6. Eligible environmental sectors include priority sectors such as water supply. Chihuahua. water conservation. project finance has focused on utilizing existing state and Federal incentives in the form of tax credits and accelerated depreciation to reduce the overall cost of a solar energy system to the end user.7 Project Finance and Foreign Direct Investment The following international solar companies are using project finance for large‐scale utility solar projects in the Southwest U. project financing can be viewed as strategic investments by tax‐motivated investors to take advantage of the available government subsidies for solar installations. Arizona and California and within 300 kilometers (about 186 miles) south of the border in the six Mexican states of Tamaulipas. In 2007. they have the expectation of corporate repayment.8 Public Equity Globally public equity “dwarfed” other types of investment in solar energy as described in a 2008 study by the National Renewable Energy Laboratory titled “A Historical Analysis of Investment in Solar Energy Technologies (2000‐2007)”. and private equity surpassed venture capital investments in solar energy for the first time. they are not considered to be equity because. however. operating within the United States and México. Sonora. Indeed.repayment only coming from project revenues which are secured by a long‐term contract with a creditworthy electricity utility. As such.28 The ultimate goal in IPP projects is to arrange a borrowing for a project which will be beneficial for the private investor and at the same time be completely non‐recourse to the other activities of the parent company and in no way affecting their credit standing or balance sheet.. NADB is authorized to make loans to both public and private sector borrowers. 30 7 7.S. wastewater treatment and municipal solid waste. New México. as bonds. public equity accounted for almost two‐thirds of global non‐ governmental investment in solar energy.1 International Development Financing North American Development Bank In 1993 the North American Free Trade Agreement created the North American Development Bank (NADB) to facilitate financing for the development.S. and Baja California. At the time of the public offering. NADB extended the eligibility for projects through new “Expanded Mandate Sectors which includes renewable energy projects. 32 7. IFC approved a convertible loan of up to $100 million to support Suntech for capital expenditure and debt refinancing. Suntech designs. The project will result in the completion of twelve solar cell manufacturing lines with an aggregate nameplate capacity of 466 MW. the potential of NADB funding for a 50MW solar thermal power project in southern New México was identified in a 2005 feasibility study for the State of New México: NADB may represent the lowest‐cost source of debt for a new large‐scale solar project in southwest New México. headquartered in Wuxi.S. Large‐scale solar projects on the U./México border can be secured by long‐ term Power Purchase Agreements with utility companies which make very attractive investments for NADB. industrial. and public utility applications worldwide. NADB. Suntech Power Holdings Co.35 $75 million loan to SunPower Corporation: The US‐owned SunPower Corporation generated $1. Jiangsu Province. China. It promotes sustainable private sector development primarily by: Financing private sector projects and companies located in the developing world Helping private companies in the developing world mobilize financing in international financial markets Providing advice and technical assistance to businesses and governments International finance Corporation33 is the largest multilateral source of loans and equity finance for private enterprises in emerging markets IFC is supporting the entire value chain in solar power to promote rapid scaling‐up and cost reductions in the global solar sector. Japan. China is a global leader in photovoltaic solar cells and modules.45 billion in revenues in 2008 and is waiting for final approval of a $75 million IFC loan for a second solar cell fabrication facility in the Philippines. under the most favorable circumstance. Recently IFC’s made its first investment in solar photovoltaics manufacturing in China. which now supplies roughly 25 percent of the global market. Suntech’s key markets worldwide include Germany. The proposed IFC financing is also expected to enable Suntech to attract further long‐term capital providers. DC. IFC has 182 member countries which provide its authorized share capital of $2. develops. Spain. Although terms vary considerably depending upon the project’s credit risk. and markets various PV cells and modules to provide electric power for residential.. Established in 1956. NADB might be able to offer 25 year debt at a 6 percent interest rate.2 International Finance Corporation The International Finance Corporation (IFC) promotes sustainable private sector investment in developing countries as a way to reduce poverty and improve people's lives. It should be noted that NADB cannot accept exposure of more than 50 percent of the total capital costs. which funds infrastructure projects within 100 kilometers of the US‐México border. which will limit project debt share to 50 percent unless other debt sources are tapped. Ltd. manufactures. IFC is a member of the World Bank Group and is headquartered in Washington. IFC’s convertible loan will act as an anchor for the Company to finance its capital expenditure program and lengthen the duration of its debt.36 5‐11 . commercial.4 billion and is the largest multilateral source of loan and equity financing for private sector projects in the developing world. No large‐scale solar projects have been certified by BECC or funded by NADB however. Italy and South Korea. the United States. represents an interesting prospective funding source.34 $100 Million Loan to Suntech: In July 2009. It shares the primary objective of all World Bank Group institutions: to improve the quality of the lives of people in its developing member countries. solar market. thereby mitigating climate change while contributing to sustainable development. As such. the Kyoto Protocol also established the Clean Development Mechanism (CDM) which allows emission‐reduction projects in developing countries to earn certified emission reduction (CER) credits with each equivalent to one ton of CO2. These reductions amount to an average of five per cent against 1990 levels over the five‐year period 2008‐2012. There are many expectations that the current U. The mechanism stimulates sustainable development and emission reductions.8 Carbon Finance Carbon finance and the selling of greenhouse gas emission reductions are likely to become major drivers in the mix of financial tools to support the solar generation demand side of the solar industry. México has benefited from carbon financing of renewable projects but no solar at this time. 5‐12 . The CFU uses money contributed by governments and companies in OECD (Organization for Economic Co‐operation and Development) countries to purchase project‐based greenhouse gas emission reductions in developing countries and countries with economies in transition.2 Kyoto Protocol The 2005 Kyoto Protocol established the market for carbon funds by creating a financial mechanism to reduce greenhouse gas (GHG) emissions which are attributed to causing global warming. The Kyoto Protocol is an international treaty that established a “cap and trade” system which imposes national caps on the emissions for 37 industrialized countries and the European community for reducing greenhouse gas (GHG) emissions. Congress will voluntarily adopt “cap‐and‐ trade” legislation to regulate greenhouse emissions which would provide further stimulate the U.2% below their 1990 baseline over the 2008 to 2012 period. These CERs can be traded. Such funds can buy credits or invest in carbon‐offset projects such as solar energy generation and claim ownership of the emission reductions generated by these projects. or to use income from selling such credits to generate or enhance investment returns. On average.4 Clean Development Mechanism In addition to the market‐based emissions trading.3 World Bank Carbon Finance Unit Initiatives at the World Bank Carbon Finance Unit's (CFU) 39are part of the larger global effort to combat climate change. Unlike other World Bank development products. 8.38 8. As a party to the Kyoto Protocols. Carbon finance is the selling of emission reductions to increase the bankability of projects by adding an additional revenue stream in hard currency which reduces the risks of commercial lending or grant finance.S. but rather contracts to purchase emission reductions similar to a commercial transaction. Carbon markets have grown rapidly and have reached over $100 billion dollars of annual transactional value and have created a new mechanism to assist in financing renewable energy generation projects while delivering billions of tons of reductions in carbon emissions. sold and used by industrialized countries to a meet a part of their emission reduction targets under the Kyoto Protocol. the CFU does not lend or grant resources to projects. 8.S.37 The United States is not a party to this agreement but México is and as such has access to carbon finance. carbon finance provides a means of leveraging new private and public investment into projects that reduce greenhouse gas emissions. and go hand in hand with the World Bank and its Environment Department's mission to reduce poverty and improve living standards in the developing world. The emission reductions are purchased through one of the CFU's carbon funds on behalf of the contributor. and within the framework of the Kyoto Protocol's Clean Development Mechanism (CDM) or Joint Implementation (JI). 8.1 Carbon Funds “Carbon Funds” are an investment vehicle that seeks either to repay investors in carbon credits. paying for them annually or periodically once they have been verified by a third party auditor. this cap requires countries to reduce their emissions 5. measurable and verifiable emission reductions that are additional to what would have occurred without the project.A. 3 other wind projects comprising 274 MW were developed by 2 Mexican companies under the “Self‐Consumption scheme” included in the Public Electric Service Act or Ley del Servicio Público de Energía Eléctrica. The Clean Technology Fund includes program in the Power Sector to promote renewable energy technologies to reduce carbon intensity.44 Clean Technology Fund Investment Plan for México45 is a “business plan” agreed among.V. $300 million for Egypt and $500 million for México.V. which has installed more than 16.P.43 8.1 Clean Technology Fund’s Investment Plan for México In 2009 the World Bank announced that México. The CFT promotes the realization of environmental and social co‐benefits thus demonstrating the potential of low‐carbon technologies to contribute to sustainable development and the achievement of the Millennium Development Goals (MDBs). confined animal operations such as dairies and pig farms dairy.6. A 249 MW wind project was also funded by Spain through CEMEX International Finance Company (CIFCO) and also by the United Kingdom of Great Britain and Northern Ireland through CO2 Global Solutions International S. 8.A de C. there have been 118 approved CDM projects in México consisting mainly of projects involved in greenhouse gas mitigation and methane recovery at landfills. and Gazprom Marketing and Trading Limited. 5‐13 . its national climate change strategy and special climate change program. Eoliatec del Istmo S. gained through their long‐standing and comprehensive environmental programs in México. by the Government of México for the International Bank for Reconstruction and Development (IBRD). and Fuerza Eolica del Istmo S.while giving industrialized countries some flexibility in how they meet their emission reduction limitation targets. Egypt and Turkey are the first three countries to tap the new $5. The Spanish Carbon Fund (SCF) funded an 83 MW wind project which was managed through the International Bank for Reconstruction and Development (IBRD) as Trustee.2 billion Clean Technology Fund managed by the Bank‐ $250 million for Turkey. would provide the generated power to its consuming partners. and wastewater ponds.41 8.5 CDM Projects in México Through September 2009. the Inter‐American Development Bank (IADB) and the International Finance Corporation (IFC) to provide support for the low‐carbon objectives contained in México's 2007‐2012 national development plan. The three countries will combine the soft loans from the Fund with loans from other sources in order to implement low carbon projects in the sectors of renewable energy and transportation.40 There are currently 1842 CDM projects registered with an expected 2.6 World Bank’s Clean Technology Fund The Clean Technology Fund (CTF) seeks to promote scaled‐up financing for demonstration. deployment and transfer of low carbon programs and projects with a significant potential for long‐term Greenhouse Gas (GHGs) emissions. This IP builds on the three development banks' experience.000 MW of its wind turbines in 20 countries and over 4 continents. The structure of these wind projects offer business models for how Mexican companies can form alliances with global solar project developers and use carbon funds for project financing42: 2 wind projects comprising 364 MW were funded by Spain and developed by the Spanish giant Gamesa Energia S. and owned. The project developers and operators. The projects must qualify through a rigorous and public registration and issuance process designed to ensure real.A.I. DE C.A. There are no solar CDM projects in México at this time but there were 7 wind projects in Oaxaca approved for CDM registration since 2006 consisting of 970 MW of combined installed capacity.9 billion tons of carbon offsets until the end of 2012. cost‐effective location for a production and distribution center. Ltd. "We believe in the outstanding long‐ term prospects of the solar energy market in the United States . the sector has seen a 336% jump in the first four months of 2009 compared with the same period in 200851. which is the first of its kind.pdf http://www. plants. European Investment Bank.S.S. . rather than México. a number of favourable developments have led us to this decision. and facilities in a country at a level that is considered significant to exercise managerial control.S. 9. The aim is to support the market value of environmentally worthwhile projects amid uncertainty over the actual form that the carbon credit trading regime will take after 2012. . equipment.50 9. and is considering several states for the optimal. Direct foreign investment enterprises comprise those entities that are identified as: Subsidiaries where investor owns more than 50 per cent Associates where investor owns 50 per cent or less and Branches which are wholly or jointly owned unincorporated enterprises either directly or indirectly owned by the investor.8.com/news/releases/080630.47 Contributor banks include KfW Bankengruppe. Negotiations will take place on the post‐ 2012 commitment period in Copenhagen in December 2009 which is expected to produce a mandate that will include a comprehensive negotiating agenda and timetable for a single.1 Major Gains in 2009 Foreign Direct Investment in US Renewable Energy Sector FDI projects in the renewable energy sector in the US have seen a 3‐fold increase in 2009 with investors encouraged by new regulation in the sector brought in by the Obama administration. the increasing number of states with incentive programs for customer‐ owned systems and the federal government's recent stimulus package. will exclusively purchase and trade “carbon credits” generated after the Kyoto Protocol expires in 2012.46 In 2007. According to figures from fDi Intelligence. including the dramatic growth in utility demand for large‐ scale wholesale solar projects.S.. and in México49 are the “financial enablers” which offer the greatest potential for investments the solar sector. Shi Zhengrong.seia. 5 leading European Banks established a EUR 150 million “Post‐2012 Carbon Credit Fund”.7 Post‐2012 Carbon Credit Fund Negotiations have commenced on continuing the Kyoto Protocol from the “first commitment period” (2008‐2012) into the “second commitment period” (post‐2012). Suntech's CEO.org/galleries/pdf/Jan_09_Solar_Manufacturing_OnePager. In a Suntech Press Release. which guarantees federal‐level tax credits for renewable energy investors until 2013. In May 2009 Suntech announced plans to establish a long‐term presence in the U."53 * * * 1 2 http://www.2 Chinese Foreign Direct Investment in U. Instituto de Crédito Oficial and Nordic Investment Bank48 9 Foreign Direct Investment Global companies making “Foreign Direct Investments” (FDI) in the U.html 5‐14 . effective global agreement that builds on the strengths of the Kyoto Protocol and takes it further.52 The favourable business climate along with extensive incentives available nationally and at the state level appears to be the decision to locate in the U. FDI is inward direct investment into an organization.ausra.. of China is the world's largest crystalline silicon photovoltaic (PV) module manufacturer by volume. Caisse des Dépôt. Manufacturing Suntech Power Holdings Co. org/ 33 15 http://www.” Navigant Consulting.pdf 9 “China Racing Ahead of U.org/ifcext/gms. Draft Final Report”.org/intal/intalcdi/PE/2009/03479.pdf 20 “Solar firms lament loss of ‘tax‐equity’ buyers”.org/programs/descriptions/loan_guaranty. 2009 10 http://www. 2009 21 http://www. 2008. Egypt and México Eye Low Carbon Future”. October 2005 23 “Financing Non‐Residential Photovoltaic Projects: Options and Implications”.nrel. Solel Solar Systems.energy.dat/ Renew_Energy_2_09_solar.kfw‐foerderbank. Tucson Electric Power.euractiv.6 Million Grant From Spanish Government for Solar Manufacturing Facility”.dat/ Renew_Energy_2_09_solar.com/news/20090803‐pressrelease‐solarfundv.html 27 “Financing Solar Thermal Power Plants”.html 37 38 https://unfccc.worldbank. Press Release September 23.org/9IGUMTMED0 40 http://cdm. NREL/CP‐550‐25901. NREL/CP‐550‐25901. 2009 13 http://www.renewableventures.45875.cana. http://www. Final report.php http://www. San Francisco Business Times.gov/docs/fy09osti/43602. Lawrence Berkeley National Laboratory.pdf 19 http://www.December 2008 29 “Financing Solar Thermal Power Plants”. http://www. Photon International. National Renewable Energy Laboratory.gov/recovery/48C.renewableventures.php?id=5 47 http://www.int/kyoto_protocol/items/2830.au/kyoto/template.ca/sell2usgov‐ vendreaugouvusa/assets/pdfs/sell2usgov/BAAInterimRule_eng. in the Drive to Go Solar”.unfccc. With Renewable Projects Dominating Power Sector”.com/trade‐news/203536/Oregon‐Looks‐to‐Clean‐Tech‐for‐Revival.oregon.File.energy.unfccc. October 6.pdf 16 http://www.int/index.html 43 http://go.solarcity.worldbank.html 39 http://go. National Renewable Energy Laboratory.gosolarcalifornia.Par. International Finance Corporation Press Release. NREL/TP‐6A2‐43602. National Renewable Energy Laboratory. August 24. Environmental Energy Technologies Division.net.org/csi/index.canadainternational. China Environmental News.blm.org/SG8NYY3DK0 44 “Turkey. Press Release May 29.int/Statistics/index.pdf 46 http://www.htm 8 http://www.gov/pgdata/etc/medialib/blm/ca/pdf/pa/energy/solar.html 41 http://cdm. February 9. 2009 45 http://www. 2005.unfccc.gov/products/policies/environment/index.gov/siting/solar/index. Technical Report.gov/ENERGY/CONS/BUS/docs/Renew.html 18 http://www. February 13.html 17 http://www. April 1999 30 http://www. 2009 “Solel Awarded $2.dsireusa. 07‐22‐09 35 “Project Number 27874‐ Summary”.com/ 25 http://www. in Drive to Go Solar”.blm.doc 4 14 3 “Economic Impacts of the Tax Credit Expiration.nsf/Content/EEM_Renewable_Energy 34 “FY09 is Year of Renewables for IFC. World Bank.com/ 26 http://www.File.parc.ifc. “China Racing Ahead of U.seia.pdf 31 http://www.gov/pgdata/etc/medialib/blm/ca/pdf/pa/energy/solar.com/page/Europe's+appeal+for+foreign+direct+investment 6 http://www.org/galleries/default‐file/Navigant_Tax_Credit_Impact.S.com/rea/news/article/2009/09/feed‐in‐tariffs‐go‐global‐policy‐in‐practice 22 “Survey Shows Spanish Market for Large‐Scale PV Set to Grow”.timesfirst. Minerals and Natural Resources Department. Mark Bolinger.de/DE_Home/Klimaschutzfonds/PDF_Dokumente_Klimaschutzfonds/ Post_2012_Carbon_Credit_Fund_brochure_Nov08.S. New York Times. Black & Veatch http://www.executivetravelmagazine.cfm 7 http://www.Par. Prepared for New México Energy.exim. July 1.org/ 11 Arizona Administrative Code R14‐2‐1807 “Manufacturing Partial Credit” 12 “2010 Renewable Energy Standards and Tariff Implementation Plan”.renewableenergyworld. April 1999 28 “A Historical Analysis of Investment in Solar Energy Technologies (2000‐2007)”.html 42 http://cdm.int/index.com/en/climate‐change/european‐fund‐support‐post‐2012‐climate‐projects/ article‐172007 48 http://www.ifc.gc. 2009 5 http://www.com/event/723/emissions‐trading‐and‐carbon‐finance. Ltd. http://www. August 25.pdf 5‐15 . January 2009 24 http://www.iadb.html 32 “New México Concentrating Solar Plant Feasibility Study.org/ 36 “Project Number 27807‐ Summary”.nadb.ifc.45875.ca. ”.renewableenergyfocus.S. Suntech Power Holdings Co..com/view/1900/suntech‐plans‐pv‐module‐manufacturing‐in‐the‐usa/ 5‐16 . May 11.asp?ID=621 51 “Huge leap for US alternative energy FDI”.oecd. Ltd. Press Release.. Foreign Direct Investment Magazine. 2009 53 http://www.49 50 See “Section 4” for a listing recent FDI investments into México’s solar industry http://stats.2009 52 “Suntech to Manufacture Products in the U. August 18.org/glossary/detail. fast‐changing global “carbon market” in which the dominate drivers will be greenhouse gas (GHG) reductions and reduced “carbon footprints”. modules. engineering and installation of renewable energy systems.Section 6 Policy Recommendations This section provides several policy recommendations for consideration as tools to accelerate the development of an export solar industry in México. engineering.3 Export Renewable Electricity to U.1 Sector Development Enhance Competitiveness of the SME “Gazelles" in the New Carbon Market The changing “low‐carbon” economy will affect all sectors and segments of TechBA’s portfolio of companies. To a great extent the solar sector plays a part of a larger. Commission a short‐term study to define the solar thermal potential of Northern México for the export trade of renewable electricity to the U.S. Many steps can be taken to further build the capacity of México’s emerging solar sector to compete in a dynamic global and national marketplace while also meeting goals to reduce greenhouse gas emissions. exploit opportunities for German SMEs to establish Mexican manufacturing and distribution relationships for export of solar products and components to North and South Americas. German Solar Industry 20081 Manufacturing companies of cells. 1 1.2 Form New Linkages to the European Solar Industry Germany is the world’s leader in the design. As such there are some 15. Provide technical support on how companies can take proactive steps to become more energy efficient. Assist TechBA portfolio companies understand the impact and opportunities of new mandates for GHG reductions. 1.000 companies in Germany involved in the solar manufacturing industry. Following the lead of large‐ scale Foreign Direct Investments.S.000 Establish TechBA‐Germany to accelerate linkages between German and Mexican SMEs for design. Most of these German companies are SMEs with little export experience and are key candidates for partnerships with Mexican SMEs. manufacturing and distribution partnerships.000 Total 200 15. components and products. There is a noticeable absence of any reference to the solar thermal potential of Baja which is greater than wind in terms of renewable resources. Recent studies and assessments by the California Energy Commission and California Public Utilities refer to the potential of wind and geothermal from México to supply California as part of its Renewable Portfolio Standards. with particular focus upon California and 6‐1 .000 Solar Thermal Industry 100 5. 1. to incorporate more renewable energy technologies and to reduce the carbon footprint of companies. collectors Installation storage units and other and supply components Companies PV Industry 100 10. PV modules. Initiate efforts to identify and designate the best solar zones for utility‐scale solar power plants and begin land assembly. The study could include: quantifying solar resources.5 Developing Export Markets Expand exports of manufactured solar goods by Mexican companies to U. the value of solar offering heat and power for industrial processes. stakeholders on the role that México’s renewables can play in cross‐border electricity trade and inform entities such as the California Energy Commission. supply chain and operations. permitting and infrastructure planning and development so that the best sites will be pre‐permitted and available for dedicated solar energy generation parks. 1. Inform U. proximity of generation to point‐of‐use. cross‐border transmission capacity development.S. identifying transmission and regulatory constraints.‐type “tax credit” financial incentives for Distributed and self‐generation renewable energy development or for “low‐carbon” energy generation. Compare advantages and disadvantages related to transmission.S. Prepare a comparative assessment of project siting.. and the Arizona Corporation Commission. energy and carbon analysis of promising opportunities such as: moving future energy demand for industrial development to areas with high potential for wind and solar which can reduce transmission investments and GHG emissions.S. 6‐2 . capacity factors. construction companies. Assess the value of U. balance‐of‐systems components. Review the role that “tax equity financing” could play in leveraging investment in México’s renewable energy industry. etc. permitting. interviewing Independent Power Producers and solar thermal technology companies to assess opportunities and barriers. construction and operational costs between a representative 250 MW parabolic trough project in Southern California and an identical installation in Northern México. the California Independent System Operators. utilize the mapping and analytic data on Baja California being developed as part of the Western Renewable Energy Zones project of the Western Governors Association. and establishing renewable electric/thermal micro‐grids for low‐carbon industrial development. Products include solar hot water systems. etc. Compare the energy and financial performance of large‐solar thermal electric scenarios for self‐ generation power projects by a large industrial customer and compare to a representative wind project now dominating México’s self‐generation market. the California Public Utilities. Assess “low‐carbon” industrial development opportunities through economic. etc. Establish a governmental affairs initiative to track issues related to: the export of renewable energy from México to the U. 1. the load profile and value of solar thermal with energy storage for intermediate and peak versus intermittency of wind.S. Arizona. as required for installation codes and for projects funded by Federal and state incentives. identifying optimal areas for solar plants and realistic solar thermal generation capacities.S. solar lighting.4 Targeted Analysis The following studies would be instrumental in leveraging near‐term opportunities for Mexican solar companies: Develop turn‐key cost estimates for representative utility‐scale and Distributed generation solar thermal electric projects located in Northern México which maximize the use of domestic engineering. by assisting with product‐ and component‐level certification requirements in the U. blades and balance‐of‐plant equipment for units in the 100 kW to 1.S. México's President Felipe Calderón and U. from biomass and from industrial waste heat. industrial standards and product certifications with particular expertise in qualifying products for Federal and state incentive programs.1 Leverage Recent Climate Change Agreements US‐México Bilateral Framework on Clean Energy and Climate Change In April 2009. 3 3. o The explosive growth in national and international renewable energy programs has lead to the development of standards in product and system design. Conduct government‐to‐government and business‐to‐business trade missions to Germany and Spain in order to: educate European counterparts of the opportunities of “Asian cost structure” for market expansion to North American markets. system durability and installation practices. products and systems. 2 Alternative Energies and Sustainable Technologies Many of the market drivers for solar also apply to other well established renewable energy sectors in México.2 These massive amounts of recoverable energy and the associated temperatures are there are opportunities to further develop the potential of lower‐ temperature geothermal resources and turbines such as Organic Rankine Cycle (ORC) and Kalina Cycle turbines which can also be used for renewable application to generate electricity from medium‐temperature solar thermal. o To accelerate the export of national solar components.5 MW range for “self‐generation projects” and in the 500 W to 100 kW range for residential. Develop a specialized solar export trade assistance program that is knowledgeable of U.S. Develop sector initiatives in wind. with a mean of 111°C. Such assistance is needed for companies new to the export market and for experienced exporters bringing a new product class to the market. performance measurement. companies need assistance with certifications of their products for U. President Barrack Obama agreed to collaborate in a new association to promote renewable energy and low‐ carbon generation through the "US‐México Bilateral Framework on Clean Energy and Climate Change". Encourage Mexican independent test laboratories to include testing and certifications on relevant protocols and standards for solar components for export markets to provide industry with technical support during product design and to accelerate approval time requirements. geothermal and biomass to assist México’s SMEs expand into the numerous market niches of these growing national and global markets. The global wind industry will continue to expand with much of the industry focus on larger and larger turbines for off‐shore wind farms. medium and small‐sized solar‐ component companies to México and leverage Foreign Direct Investments in manufacturing. México’s is the world’s 3rd largest geothermal producer and has “massive amounts” of reservoir temperatures in the 60–180°C range. Leverage interest by European ORC and Kalina Cycle turbine manufacturers in México’s geothermal. and build business relationships by and between the SMEs of the countries. recruit large. There will be new opportunities to design. medium‐temperature solar and industrial heat markets.S. small commercial and off‐grid applications. México’s wind resources are excellent and are distributed throughout the country in Baja California. Veracruz and Oaxaca. develop and manufacture “Distributed wind” turbines. markets. This Bilateral Framework 6‐3 . towers. governments and citizens around the world. To foster Energy Service Company market development To highlight existing and proposed areas for cooperation on clean energy and energy efficiency under the North American Energy Working Group 3. México. It is expected that together the commitments made and mechanisms agreed upon will signal that the future will be driven by a low‐ carbon economy and that significant advantages go to those that invest in clean energy solutions. 6‐4 . effective global agreement that builds on the strengths of the Kyoto Protocol and takes it further.3 Copenhagen and Post‐2012 Negotiations have commenced on continuing the Kyoto Protocol from the “first commitment period” (2008‐2012) into the “second commitment period” (post‐2012). Canada and the United States signed a “Declaration on Climate Change and Clean Energy” which included the following objectives: Develop comparable approaches to measuring. energy efficiency and green jobs. and verifying greenhouse gas emissions reductions Cooperate in implementing facility‐level greenhouse gas reporting throughout the region Share climate‐friendly and low‐carbon technologies Take a regional approach to carbon capture and storage 3. the Copenhagen meeting of 192 member countries of the UN Framework Convention on Climate Change (UNFCCC) will send a clear signal to business and industry. and México to facilitate collaborative climate changes initiatives involving cross‐border trade of renewable energy.4 If successful.2 “Low‐Carbon North America” In August 2009.5 3. and to facilitate common efforts to develop clean energy economies. To strengthen the reliability of cross border electricity grids. the acceleration of strategic partnerships between U.S. The objectives of the collaboration are3: To promote the development of renewable energy. low‐carbon energy technology development and capacity building. Further negotiations will take place in Copenhagen in December 2009 which is expected to produce a mandate for a comprehensive negotiating agenda and timetable for a single. green jobs. technology transfer.4 Leveraging Climate Change Agreements Opportunities exist fro TechBA to leverage recent agreements between the U. reporting.S. forestry and land use. It will also complement and reinforce existing work between the two countries. To expand extensive bilateral collaboration on clean energy technologies To facilitate renewable power generation by addressing transmission and distribution obstacles between the two countries. demonstration and deployment of solar R&D between university and industry research institutions. market mechanisms.establishes a mechanism for political and technical cooperation and information exchange. and Mexican SMEs in solar sector development. etc. /México Bilateral Framework as basis for the development of renewable power plants and the export of renewable electricity to U.S. the National Renewable Energy Laboratory.S. evaluate and develop operating experience with all forms of promising solar technologies. Form industry partnerships with German. Expand existing. Spanish and U. life cycle carbon analysis. 4 Leverage New R&D Relationships Establish a solar test platform in México in cooperation with U. research partnerships between Mexican institutions and Sandia National Laboratory. identify access to capital and cost of capital needs. Justify renewable energy development in context with specific objectives of the Bilateral Framework which includes strengthening the reliability and flow of cross border electricity grids. project‐based financing which is administratively burdensome and rarely pay in a timely manner. carbon reduction and “greening” strategies. Conduct a financing needs assessment of México’s clean tech SMEs in order to understand the barriers to public and private investment capital. and facilitating renewable power generation including by addressing transmission and distribution obstacles between our countries. Leverage the new U. etc. facilitating the ability of neighboring border states to work together to strengthen energy trade.S. Current climate change financing mechanisms are almost universally‐focused on multi‐year.S.5 Focus on Financing Carbon SMEs The world is moving nearer to consensus on climate change actions. solar technology providers to demonstrate their equipment in México as a platform to launch deployment and market entry. etc. Track the agreements and mandates resulting from the Copenhagen meetings and keep TechBA’s portfolio of companies informed with competitive intelligence on opportunities. financial incentives. identify types of investments and financing required to accelerate business development in the emerging and diverse carbon market. Recruit demonstrations of the most promising solar technologies such as Distributed concentrating solar. border states by resolving transmission issues and building new transmission capacity. and desalination. cooling. Increase participation of Mexican research institutions and SMEs in European solar R&D initiatives such as: the European Union’s Seventh Framework Programme which strongly encourages participation of non‐European partners. The development needs of such SMEs merits increased attention by business development intermediaries to support this emerging class of “carbon market entrepreneurs Accelerate the expansion of the SMEs in order to enhance their potential to lead national and global climate change initiatives with targeted assistance. It will be the private sector which will implement the new climate change mandates. governmental mandates and massive international “low‐carbon” development programs. German’s DLR and Spain’s Platforma de Solar Almería. and European solar labs in order to test. 3. SMEs will be playing an expanded role in implementing climate change initiatives through intra‐company GHG reductions and through the provision of goods and services which will assist other companies achieve emission reductions. and form new. the European Commission’s Mediterranean 6‐5 . industry leaders. etc. Such demonstrations have great potential to accelerate industry acceptance by showing technical and economic performance. etc. 5 Increase Awareness of Solar Thermal Capabilities with High‐Profile Demonstrations In addition to R&D. Department of Energy PV inverters and standards. a recent demonstration of a 105 kW (30 Ton) commercial solar cooling project. o Institute for Energy and the Environment. New Mexico State University: The IEE is conducting much work that would be of interest to México such as: the use of solar energy to power desalination which operates the Brackish Groundwater National Desalination Research Facility located in the Tularosa Basin. and continue México’s work with the International Energy Agency in initiatives such as Concentrating PV. building‐integrated PV. Investments in high profile demonstration projects pay‐off in increased awareness of the role that renewable energies and sustainable technologies can play among policy‐makers. the investment community and SMEs. PV. NM. Recommended demonstrations include: Solar Cooling o Large industrial solar cooling “big‐box” demonstration with roof‐mounted. and provides technical support to the U. University of Arizona: AzRISE is conducting applied research in energy storage. PV‐thermal. medium‐ temperature parabolic trough collector driving a double effect absorption chiller o Small commercial demonstrations with flat‐plate collector with an absorption chiller and with evacuated tube collectors to drive a single‐effect adsorption chiller Industrial Process Water o Large‐scale bottle washing with solar hot water o Low‐ and medium‐temperature for chemical processes Industrial Process Heat o Pre‐heating natural gas boilers o Agricultural drying o Applications using different heat exchangers and temperatures 6‐6 . power electronics and power systems. o Arizona Research Institute for Solar Energy. advanced PV materials and devices. solar housing. solar industrial heat. and Concentrating Solar Desalination Project (MED‐CSD). government officials. there are numerous opportunities for high profile D&D (demonstration and deployment) of commercially‐available technology which can replace fossil fuel‐based electricity and industrial combustion processes. architects and engineers. optics and concentrators. etc. in Alamogordo. Establish new initiatives with border research institutions such as: o Global Institute of Sustainability. A common need for all sectors of renewable energy is to increase awareness of the role that existing and emerging renewable technologies can play in enhancing the competitiveness of SMEs through reduced energy costs and GHG emissions. “self‐generators”. Arizona State University: ASU is a leader in the PV industry with core capabilities in solar PV testing. smart‐grids. solar thermal cooling.S. carbon project developers. org/stories/2009/11/foundation‐low‐carbon‐future‐essential‐elements‐copenhagen‐agreement 6‐7 .R.de/home/photovoltaic‐market/german‐market.cana. (2003) “Low‐ to medium‐temperature geothermal reserves in Mexico: a first assessment”. April 16.net. Distributed Solar Thermal Electricity o Industrial “self‐generation” project using medium‐temperature parabolic trough collectors and an organic Rankine Cycle power block to generate electricity and usable heat from the waste heat Energy Storage o Incorporate low‐cost thermal storage solutions to low‐ and medium‐temperature applications by adding 1‐6 hours of useful heat * * * 1 2 http://en. R.J. August‐December 2003. International Business Times. Pages 711‐719.php?id=5 5 http://www.html Iglesias. and Torres. Calderon agree on US‐México framework on clean energy”. Issues 4‐6.solarwirtschaft. E. Volume 32. Selected Papers from the European Geothermal Conference 2003 3 “Obama. 2009 4 http://www. Geothermics.wri.au/kyoto/template. These companies were statistically analyzed by region and sub‐sector Company information and websites were reviewed and a “Filter 1” screen of companies was made. 7‐1 .Section 7 Company Screening Process and Company Profiles TechBA used the following methodology to develop a final screen of 24 Mexican companies as candidates for the “Solar Energy Sector” business acceleration program: A database was developed which identified 485 Mexican companies which focused on solar energy. the initial list of site visits to 10 companies was expanded to 24. A “Filter 2”‐level screen was then made with staff conducting phone interviews of “Filter 1” companies to confirm and gather additional information such as: o Annual revenue o Number of employees o Main products/services o Main clients o Competitors o Competitive advantage A “Filter 3”‐level screen was conducted with a second round of phone interviews with the company CEO or with senior decision‐making staff. Based upon company interest and export potential. The following tables provide details on the companies interviewed during site visits. Face‐to‐face interviews were then conducted with these companies by TechBA staff and the solar sector consultant during November 2009. These interviews were used to analyze the capacities of the company and the company’s interest in exporting. Comercializadora General Solar 1. Global Solare 12. Energisol 2. Calentadores 2 Calentadores Solares de México 7. Ecosistemas Tecnologías 17. ERdC 5. Merry Tech Internacional I t i l 3. Alesco Energía y Agua 40 30 20 10 13. Mexión 21. SEI Automation 10. ERDM 20. Generadores Mexicanos 18. Newen Energías Alternas g 16. RespaSolar 15. Thermosol 19. Ecoturismo y Nuevas 6. CAPTASOL 4. EFISOL 11. Grupo Desmex 22. Cryplant Energias Renovables 7-2 Confidential Business Information . Enerthi 9.Value Chain Map of TechBA Solar Companies >250 50 2008 Sales (M Millions MXP) 14. Sunway de México 8. Calentadores Solares de México.000 $10.Company Details Company Details Company City State Sales 2008 (MXP) Sales 2009 (P) (MXP) Employees Value Chain Primary Sector Secondary Sector Technology T T h l Type Solar System Operation & Management Power Project Engineering Project Development of Large Self-Generation Projects Various V i 1.800.000 25 Solar System Components Assembly Components Manufacturing Solar Hot Water Systems S l H tW t S t 2.000. SA de CV Zapopan Jalisco $5.000.000 10 7-3 Confidential Business Information . Alesco Energía y Agua México DF México DF $40.000 $20.750. 000 100 Proprietary Equipment Solar System Manufacturing and Distribution System Integration Solar Hot Water Systems 7-4 Confidential Business Information .Company City State Sales 2008 (MXP) Sales 2009 (P) (MXP) Employees Value Chain Primary Sector Secondary Sector Technology Type 3.000 50 Proprietary Equipment Solar System Manufacturing and Distribution System Integration Solar Hot Water Systems 4.000.000. CAPTASOL (Solex) (Solex) Celaya Guanajuato $9.000.000 $9 000 000 $20. Comercializadora General Solar (Módulo Solar) Cuernavaca Morelos $50.000 $50 000 000 $100.000. Company City State Sales 2008 (MXP) Sales 2009 (P) (MXP) Employees Value Chain Primary Sector Pi S t Secondary Sector 5. Cryplant Energias Renovables Cuernavaca Morelos $5.000 5 Solar System Integration Installation C I t ll ti / Construction t ti Maintenance 6.000.000 $28.000 $8.000 40 Proprietary Equipment Component M C t Manufacturing f t i Installation Technology Type Various Photovoltaic (PV) 7-5 Confidential Business Information .000.000.000. Ecosistemas México DF México DF $8. 000 $2 300 000 $20.250.300. EFISOL / Intelux Monterrey Nuevo Leon $2.700. De México $2.070. Ecoturismo y Nuevas Tecnologías Zaragoza Edo.000 10 y p Solar System Operation & Management System Integration and Engineering 8.Company City State Sales 2008 (MXP) Sales 2009 (P) (MXP) Employees Value Chain Primary Sector Secondary Sector Technology Type 7.000 10 Equipment q p Component Manufacturing Various Other 7-6 Confidential Business Information .000 $2 070 000 $2. Company City State Sales 2008 (MXP) Sales S l 2009 (P) (MXP) Employees Value Chain Primary Sector Secondary Sector 9.000 $33.000 $27.000 $33 750 000 18 Solar System Integration Import and Distribution of Solar Thermal Equipment Component Manufacturing Technology Type Photovoltaic (PV) Solar Hot Water Systems 7-7 Confidential Business Information .000.700.000 $27 000 000 15 Solar System Integration Installation / Construction 10. Newen Energías Alternas Mexicali Baja California $20.000.750. Energisol México DF México DF $23. 000.000. Enerthi México Miguel Hidalgo $0 $67.000 $20.500.Company City State Sales 2008 (MXP) Sales 2009 (P) (MXP) Employees Value Chain Primary Sector Secondary Sector Technology Type 11. ERdC Energía Renovable de Ce t o del Centro El Marques Queretaro $10.000 12 Project Development of Large Renewable Projects System Integration / Carbon Finance Installation / Construction Various 12.000 15 Solar Cell Manufacturing Installation / Construction Components Manufacturing Various 7-8 Confidential Business Information . 500.000 300 Solar System Components Components M C t Manufacturing f t i Technology Type Generators for Utilty-Scale Solar Power Blocks 7-9 Confidential Business Information . Generadores Mexicanos (Genermex) Genermex) Monterrey Nuevo Leon $287. mc-Si) and Monocrystaline (c-Si) 14. ERDM Solar San Andres Tuxtla Veracruz $34.000 $405.000 $67.Company City State Sales 2008 (MXP) Sales 2009 (P) (MXP) Employees Value Chain Primary Sector Pi S t Secondary Sector 13.000.500.500.000 35 Solar Panel Manufacturing Solar S t S l System M Manufacturing f t i Rural Electrification System Integrator Photovoltaic (PV) Polycrystaline (poly-Si. 200.000 $135. Grupo Desmex Leon Guanajuato $17.000 8 Solar System Integration Installation / Construction Consulting & Other Services Solar Hot Water 16.500. Global Solare Guadalajara Jalisco $9.000.Company City State Sales 2008 (MXP) Sales 2009 (P) (MXP) Employees Value Chain Primary Sector Secondary Sector Technology Type 15.250.000 $13.000 15 Solar System Integration Installation / Construction Consulting & Other Services Photovoltaic (PV) 7-10 Confidential Business Information . Merry Tech Internacional. Tijuana Baja California $628.000 $16.000 15 Project Development System I t S t Integrator / C b t Carbon Finance Installation.245.407. de C.754 417 Solar System Components Product d Component P d t and C t Manufacturing Technology Type 7-11 Confidential Business Information .Company City State Sales 2008 (MXP) Sales 2009 (P) (MXP) Employees Value Chain Primary Sector Pi S t Secondary Sector 17.A. Mexión México DF México DF $7.427.200.209 $653. Construction and operation of Large SelfGeneration Renewable Projects Various 18.V. S. de C.950.750.500.V. SEI Automation S. Guaycura Baja California $28.000 $13 500 000 18 Solar System Integration Retail Installation / Construction 20.A.Company City State Sales 2008 (MXP) Sales S l 2009 (P) (MXP) Employees Value Chain Primary Sector Secondary Sector 19. RespaSolar Merida Yucatan $14.000.000 $13.000 $27 000 000 30 Equipment Components Manufacturing Technology Type gy yp Various PV Manufacturing Equipment g q p 7-12 Confidential Business Information .000 $27. 000 4 Proprietary Equipment Solar System Manufacturing and Distribution System Integration Solar Hot Water Systems y 22.000.625.000 13 Equipment Import and Distribution of Solar Thermal Equipment Solar Hot Water Systems y *** 7-13 Confidential Business Information .500.000 $24.000. Sunway de México México DF México DF $8.Company City State Sales 2008 (MXP) Sales 2009 (P) (MXP) Employees Value Chain Primary Sector Secondary Sector gy yp Technology Type 21.000 $13. Thermosol Guadalajara Jalisco $18. Appendix 1 Solar Technology Value Chain Appendix 1‐1 . 1 Photovoltaic Value Chain Appendix 1‐2 . Appendix 1‐3 . Appendix 1‐4 . Appendix 1‐5 Appendix 1‐6 Appendix 1‐7 Appendix 1‐8 . Appendix 1‐9 . 2 Concentrating Solar Thermal Value Chain Appendix 1‐10 . Appendix 1‐11 . Appendix 1‐12 . Appendix 1‐13 . Appendix 1‐14 . Appendix 1‐15 . Appendix 1‐16 . Appendix 1‐17 . Appendix 1‐18 * * * Appendix 2 Solar Policies and Incentives Overview 1 Study Overview 1.1 Purpose The following study presents an overview of how policy can be used as a driver for promoting renewable energy development, investment and market penetration. The purpose of the study is to provide information that will help answer two fundamental questions. First, where do international business opportunities exist for small and medium‐size Mexican businesses SMEs. Secondly, what can Mexico learn from the policy strategies of global leaders in order to promote internal development and investment in renewable energy technology? 1.2 Scope and Methodology The scope of this study includes two sections. The first presents an overview of the Policy including the rationale behind policy, relevant stakeholders, policy drivers and policy approaches. The second section analyzes the policy strategies of three countries and one state specifically highlighting policies that uniquely address photovoltaic (PV) solar energy, concentrated solar power (CSP) and biodiesel. The study began by taking a broad survey of various policy strategies across several different countries and regions—similarly highlighting policies that specifically addressed PV solar, CSP and biodiesel. Subsequently, the scope of the study was narrowed to focus on the following regions. Germany: Due to its global leadership in renewable energy technologies Spain: Due to its recent global leadership in PV and CSP technology and its cultural and language similarities with Mexico US: Due to its diverse renewable energy opportunities, its proximity to Mexico and its significant business potential for Mexican companies. California: Due to its renewable energy technology leadership, its proximity to Mexico and its significant business potential for Mexican companies. 2 Policy and Renewable Energy Technologies 2.1 Rationale for Policy Drivers Even though Renewable Energy has experienced worldwide interest, impressive technological developments and some impressive market penetration successes, Renewable Energy has continued to penetrate the energy market Although there is general consensus that renewable energy technologies should make up a greater portion of the world’s overall energy production, actual market penetration has been difficult and slow. Both the legitimacy of market barriers and the limited strength of natural market drivers can result in Appendix 2‐1 limited investment and implementation of renewable energy technologies. In order to alter this situation, public policy has proven to be one mechanism by which countries can promote and foster renewable energy growth. In fact, there are a variety of factors that help illustrate the need for policy as a driver of renewable energy. Due to market‐entry barriers, the current level of renewable energy implementation and production is less than what would be efficient at today’s market prices. Many analysts believe that fossil fuel prices are not adequately adjusted to reflect the true resource scarcity of fossil fuels. If price levels were more commensurate with the long‐term scarcity of fossil fuels, renewable energies would become more competitive. One inherent risk involved with fossil fuels is their notorious price fluctuations and volatility. As such renewable energies are a means of diversifying a countries energy portfolio this reducing risk and creating a greater level of security and energy independence. Widespread use of fossil fuels has a damaging effect on both human health and the environment. Properly accounting for these costs and including them into the overall cost of fossil fuels helps demonstrate the relative cost effectiveness of renewable energies. Renewable energy technology is still a young and growing industry. Consequently, countries that promote internal development and investment in renewable energy technology will likely experience economic and employment growth as this sector expands. In rural areas, renewable energy technologies allow communities to leverage local natural (and labor) resources in order to generate energy. 2.2 Stakeholders1 Successfully chartering renewable energy policies involves the cooperation (or, at least, the consideration) of several groups of stakeholders. In general, national governments are the primary entities that create renewable energy initiatives and policies. In some cases (such as the United States) states and/or local governments also have considerable freedom to develop their own renewable energy policies as well. However, local governments are typically the ones that implement and enforce renewable energy policies that have been previously defined and established at a national level. Additionally, national governments may opt to participate in multinational renewable energy initiatives such as those established by the European Union. These agreements allow countries to make a united effort towards the promotion of renewable energy technology. In the commercial sector, energy supply and service companies are naturally significant stakeholders in matters concerning renewable energy policy. Historically, energy companies have approached renewable energy technology defensively; however, many are now adopting a much more favorable disposition. That said, governments need to ensure that the energy sector is a level playing field for established providers and market entrants to compete fairly. Further up the value chain, equipment suppliers and financial service entities are industry players that have commercial and financial interests in the renewable energies market. Ensuring that these players are considered in policy decisions is important. Appendix 2‐2 they actively strive to minimize the challenges and obstacles involved with introducing renewable energy. investment tax credits. these organizations are often the main supporters of renewable energies. The purpose of these policies is to give the renewable energy industries a large enough foothold in the energy market. There are several different types of financial incentives including (but not limited to).3 Policy Drivers2 Over the past several years. production tax credits. Lastly. conversely.3 Public Investment This policy involves giving preference to renewable energy in government procurement. The purpose of financial incentives is to decrease the costs of renewable energy and in turn increase their competitiveness relative to established non‐renewable energies.3. 2. Another common example of a mandated policy is a Feed‐in Tariff. states and/or energy producers to meet renewable energy quotas (percentages and/or specific quantities). 2. In fact. Due to their unique interests in renewable energy.3. Non‐Government Organizations (NGOs) play a unique role in the promotion of renewable energy in comparison with other players in the stakeholder network. NGOs continue to present renewable energy as a benign energy technology that can legitimately benefit society as a whole. sales tax rebates and excise tax exemptions. This allows renewable energy producers (and their investors) to recover their invested capital. Providing citizens with the opportunity to participate and support policy decisions will greatly increase political support. renewable energy targets requirements. which essentially establishes above market energy prices for an extended period of time (20‐25 years). Because of differences in political ideologies.3. Appendix 2‐3 . government structure and resource capabilities there are a broad range of renewable energy policies being implemented. capital grants. property tax credits. However. third‐party financing. while simultaneously internalizing some of the external costs involved with fossil fuels (environmental damage and energy security). Citizens are stakeholders that can become a source political support (or. countries across the world have begun implementing various policies in order to promote renewable energies. but one of the most common types include Renewable Portfolio Standards (RPS). policies such as competitive bidding concessions and tradable renewable energy certificates also are forms of mandated market policies. Acting as early promoters and global advocates. 2. 2. These mandates require countries. these categories can be categorized into half a dozen categories. infrastructure projects and the use of public benefit funds. so that they can become well established and self‐sustaining. opposition) in matters of renewable energy policy.1 Mandated Market Policies This is the most direct and forceful approach to promote the adoption of renewable energy technology. These policies can also be combined with development programs. Additionally.2 Financial Incentives Financial Incentives are another policy strategy for promoting renewable energies. taxes on fossil fuels also help increase the competitiveness of renewable energy. Mandated market policies take several different forms. 2.3.4 Integration and Standards Another fundamentally important category of policies are the policies that further the establishment of industry standards, permits, building codes and environmental guidelines. This is especially important because most renewable energy technologies are relatively new technologies. 2.3.5 Awareness and Education Another important driver of renewable energy is public and industry information. Thus policies that disseminate information, generate awareness, provide educational resources and facilitate capacity expansion make up a distinct policy category. 2.3.6 Research and Development Because renewable energy technology is generally newer technology it depends heavily on research and development funding. Policy that provides direct funding or incentives for research and development make up the final policy category. 3 Policy Approaches3 Over the past several years, there are a handful of general policy approaches that have been observed. These general approaches will be highlighted below: In general, all countries have renewable energy policies at some level. Countries that do not have polices that specifically address renewable energy often include renewable energy technology in policies relating to rural energy, electricity sector expansion, etc. However, based on experience, countries with scattered, non‐aligned and non‐coherent renewable energy programs have not proven successful in promoting renewable energy—even with international cooperation. Another common approach that has been adopted by several countries including Egypt, Pakistan and Uganda is to embed several policy measures into a single renewable energy project. For example, countries have focused on generating awareness, building capacity and promoting research and development around a single renewable energy development project. Often these projects are publicly funded, although private partnerships are becoming increasingly common. In general, these projects are seen as a promising first step towards a large, fully‐scoped renewable energy policy program. In the past, industrialized nations have adopted commonly adopted a technology development perspective where the country develops policy drivers that support research and development, generate awareness, disseminate information and build capacity. These policy drivers in turn promote research and development in renewable energy technologies with the expectation that developers would bring the technology to appropriate markets for commercialization. However, this has proved largely unsuccessful and has highlighted the significant barriers involved with commercialization. In order to address these commercialization barriers countries have generally adopted two different approaches. Appendix 2‐4 The first strategy aims to improve the competitiveness of renewable energy technologies relative to fossil fuels. This is achieved by using a variety of financial incentives, which reduce the costs of renewable energy. Taxes are also sometimes placed on fossil fuels in order to better adjust for environmental damages and energy security costs. This approach has proven most successful in countries where market barriers have already been significantly reduced. The second strategy is a more forceful approach and focuses on market transformation. As such, policies help provide renewable energy technologies with both access to energy markets as well as support in order to ensure that the renewable energy achieves a significant market share. Specific policy strategies include mandated market policies such as price guarantees, feed‐in tariffs, public bidding, renewable energy certificates and quotas in Renewable Portfolio Standards (RPS). In general, the strategies that have achieved the most success are those that utilize a demand‐pull approach for driving renewable energy development and investment. Interestingly, adopting a demand‐ pull approach both increases market share while simultaneously laying the foundation for long‐term competitiveness. In fact, this generally initiates private investment in research and development, which allows the renewable energy to reach economies of scale. 4 4.1 Policy Analysis & Benchmark Overview Targets and Renewables Portfolio Standard Indicative Renewable Electricity Region Target by 2010 Germany Spain USA California 12.50% 30.30% None 20% 4.1.1 Mandatory Renewable Electricity Target by 2020 18% 20% None 33% 4.1.2 Feed‐in Tariff Rates Feed‐in Tariff Rates (eurocents/kWh) Germany Spain USA Solar PV 35‐49 18‐44 * Solar Thermal N/A 22‐27 * Biomass 8‐17 5‐16 * Geothermal 7‐15 7‐8 * Wind 4‐9 6‐7 * Hydro 4‐10 7+ * * The US has no Federal‐level feed‐in tariffs Appendix 2‐5 California ** ** ** ** ** ** ** Variable feed‐in tariff based on time of day and contract dated. 4.2 Germany As a global leader in renewable energy, Germany has arguably established the most effective blend of policies directed at promoting renewable energy technology. Germany’s chief renewable energy policy—the Renewable Energy Source Act (EEG)—essentially utilizes feed‐in tariffs in order to guarantee pricing and grid connection to renewable energy producers. The EEG supports several different renewable technologies including wind, water, solar, biomass, sewage gas combustion and geothermal energy. Because of Germany’s success in promoting renewable energy, feed‐in laws have been adopted in several European countries and proposed all across the world. 4.2.1 Feed‐in Tariffs Under Germany’s Renewable Energy Source Act, feed‐in tariffs provide renewable energy providers (and their investors) with both guaranteed energy prices and grid connections. Without feed‐in tariffs, renewable energy projects are simply too high risk to be worth investing in. However, the combination of guaranteed grid‐connection and above‐market energy prices for 20‐years have allowed several renewable energy projects to secure investment financing. Additionally, in order to promote a rapid market response feed‐in rates decrease each year thus allowing projects that begin earlier to lock in higher rates. Germany’s 2008 Feed‐in Tariff Rates (Eurocents/kWh) Photovoltaic solar 35.48 ‐ 48.98 Biomass energy 7.91 ‐ 16.83 Geothermal 7.16 – 15.00 Sewage gas 6.16 – 7.22 Offshore wind energy 8.92 Onshore wind energy Water energy 5.07 – 8.03 3.54 – 9.67 Source: “Renewable Policy Report: Germany” EREC 4.2.2 Renewable Energy Targets Additionally, Germany also has a variety of renewable energy targets. Some of these targets are voluntary while others are mandated by law. Mandatory targets set by the (EU) Directive on the Promotion of the use of energy from renewable sources 18% renewable share of final energy consumption by 2020 At least 10% renewable share of total transport fuel usage by 2020 Indicative Target set under the RES‐ Electricity European Directive from 2003 12.5% renewable share of gross electricity consumption by 2010 Appendix 2‐6 000 euros (in new federal states) for a duration of 10 years with 2 years free of redemption (in old federal states) and 15 years with 5 years free of redemption (in new federal states) at nominal interest rates between 4‐7%.72%.000 euros per installation.000 euros of investment (in old federal states) and 1.5‐ 27.000. the act provides market incentives in the form of subsidies for solar thermal and small‐ scale biomass heat generation.3 Tax and Credit Incentives for PV Solar Germany also has some additional tax and credit incentives for investments in PV solar.50% 18% .2.5% of the investment cost can be claimed as a tax credit Commercial Solar systems are VAT exempt (VAT is 19% in Germany) The KfW Program “Solarstrom Ergeugen” is a credit incentive for private investors (100% of investment. 3 years free of redemption and nominal interest rates between 4‐ 7. There are also some regional investment grants for PV 4. Investment costs for commercial systems (including planning and installation) can be depreciated over 20 years In exceptional cases when a commercial system is installed near a manufacturing facility. 96% net payment.2. “KFW Umweltprogramm” is a program for commercial investors that offers credit incentives for 75% of invested funds up to a maximum of 1. The KfW “ERP‐Umwelt‐ und Energiesparprogramm” is a credit incentive for commercial investors (50% for Small and Medium Enterprises and 35% for other companies of investment is eligible) up to 500. durations of up to 20 years. Appendix 2‐7 12.000. It is expected that the program will provide 500 million euro worth of support between 2009 and 2012 to support renewable energy in existing buildings.National Renewable Energy Targets 25% to 30% renewable share of the electricity sector by 2020 14% renewable share in the heat sector by 2020 Germany’s Renewable Energy Targets Indicative Renewable Electricity Target by 2010 Mandatory Renewable Electricity Target by 2020 Source: “Renewable Policy Report: Germany” EREC 4. max of 50.15‐ 4.4 Support for Renewable Energy Heating In January 2009 the Renewable Energies Heat Act was enacted.000 euros) which offers them financing for up to 10 years with 1‐2 years free of redemption or up to 20 years with up to 3 years at nominal interest rates between 4.45% depending on duration. 12. The act makes the following provisions: First. 2.000 euro per community Heating systems heating system Source: “Renewable Policy Report: Germany” EREC 4. Homeowners can use any type or combination of multiple renewable energy sources. Max 550.2.5 Investment Subsidies Technology Solar Collectors < 40 m2 Solar Collectors > 40 m2 Start Year 2007 2007 Resource Solar Thermal Support Level Investment Subsidies (Primary private households and SMEs) Solar Thermal Repayment bonuses of up to 30% of investment cost Geothermal Max 1 Million euro per drilling. Second. the act mandates that new homes must fulfill a portion of their heating needs by utilizing renewable energies. The share of renewable energy portion must comply with the following standards: o At least 15% for solar radiation o At least 30% for biogas o At least 50% for all other renewable energy technologies 4.6 Financial Subsidies Support Level Low‐interest loans with partial debt waiver (commercial and public sector applicants) Reduced interest KWF loans Start Year 2007 Resource Solar Thermal Solid Biomass Source: “Renewable Policy Report: Germany” EREC Appendix 2‐8 .000 euro per community heating system RES‐Community Max 550. 3811 0‐25 26. Spain has also implemented a feed‐in policy strategy in order to promote renewable energy development.4000 0‐25 22. ocean > 20 6.5498 20.1 > 25 35.3 Spain 4.20*[(50 ‐ 0‐25 2.9291 8.0000 0‐20 6.60 +1.0381 < 0. Spain’s Feed‐in Tariff Rates Feed in Tariff Feed‐in Premium (eurocents/kWh) (eurocents/kWh) Capacity Life Feed in Tariff Reference Upper limit Lower (MW) (y) feed‐in limit premium 0‐25 44. Available research data did not specify whether changes to feed‐in premiums would affect operating renewable energy plants. changes to feed‐in tariffs rates do not affect plants that are already in production.398 25.8000 2. however.5100 3.3.9800 3.0600 0‐25 7.3228 2.1275 Wind Onshore > 20 6.404 > 25 21.1‐10 > 25 33. This allows renewable energy generators to receive above market prices up to a pre‐established limit.3444 capacity)/40] Biomass* *Spain has over 19 different Biomass classifications and corresponding rate structures.9375 25. which varies based on the state of the market.08*[(50‐ > 25 1.0200 1.8444 Geothermal.1200 5. Source: “Renewable Policy Report: Spain” EREC Appendix 2‐9 .4000 Solar Thermal 34.94+1. The first is a standard fixed feed‐in tariff for producers that supply energy through the transport or distribution grid.4.3444 6.4944 7.1 Tariffs and Market Premiums Like Germany.1044 Hydro capacity)/40] 10‐50 8. Feed‐in premiums are reevaluated every year and fixed feed‐in tariffs every four years.9764 > 10 > 25 18. However.5044 < 10 > 25 7. tide. producers may alternatively choose to sell their energy on the wholesale electricity market at the current market price plus a feed‐in premium.2305 0‐25 41.3200 0‐20 7.000 6. However unlike Germany.7500 Solar PV 0.1200 0. Spain has two separate feed‐in options for renewable energy producers. 1% share of RE in Primary Energy Consumption by 2010 Spain’s Renewable Energy Targets Indicative Renewable Electricity 30. This mandate applies to all new and remodeled buildings.3% share of RE on gross electricity consumption by 2010 National Targets 12. companies and organizations investing in solar thermal energy systems.000 Euros and begin accruing interest after the completion of the project at an interest rate of 7%. Spain has established a few different programs that help provide financing for renewable energy projects.3% Target by 2010 Mandatory Renewable Electricity 20% Target by 2020 Source: “Renewable Policy Report: Spain” EREC 4.5 Support for Renewable Energy Heating and Cooling Like other countries in the EU. These loans can range from 10.000‐300. The subsidy pays for 37% of the total costs of the project. Spain also offers investment subsidies to all individuals.4. which mandates that all buildings must derive 30‐70% of their water heating energy from solar thermal energy. Spain has a series of policies and incentives that specifically promote the use of renewable energy for heating buildings. One program aims at providing 100% financing for projects involving: Solar thermal systems with capacity greater than or equal to 20kW Co‐generation systems with capacity up to 20MW Biomass thermal energy systems up to 3MW power capacity A second program provides loans to individuals and small and medium size enterprises (SMEs) for solar thermal projects. Additionally.4 Renewable Energy Targets Mandatory Targets set by the (EU) Directive on the Promotion of the use of energy from renewable sources 20% of final energy consumption by 2020 At least 10% of total transport fuel usage by 2020 Indicative Target set under the RES‐ Electricity European Directive from 2001 30. Appendix 2‐10 . The most direct and forceful policy addressing renewable energy heating is the CTE (Codigo tecnico de la edification) policy. In order to support the CTE mandate. Interest is paid in Bonds (CREBs) the form of tax credits to the bondholder.1¢/kWh Renewable Energy Grant Grant Grant equal to 10‐30% of investment in renewable energy systems Rural Renewable Energy Grant Grant of up to 25% of total project cost for rural Grant small business and agricultural producers Tribal Energy Grant Grant Provides financial assistance. solar energy systems) are nontaxable Exclusion (proposed) Residential Renewable Personal Tax Tax credit equal to 30% of investment in renewable Energy Tax Credit Credit energy system up to $2000 Modified Accelerated Cost‐ Corporate Renewable energy systems receive additional 50% Recovery System plus Depreciation bonus depreciation above standard depreciation Bonus Incentive Renewable Energy Corporate Tax Rebates from utilities for energy conservation Conservation Subsidy Exemption measures (i. ($2. technical assistance and education to tribes for the development of renewable energy Clean Renewable Energy Loan Essentially an interest free loan. the U. The following is a list of Federal financial incentives: Policy Type of Support Incentive Renewable Energy Personal Tax Rebates from utilities for energy conservation Conservation Subsidy Exemption measures (i. Instead of a few Federal‐level policies. On the federal level.e. the U. ($3.3B) Renewable electricity Production Tax Renewable energy production tax credit of 1.S. Interest is paid in Conservation Bonds the form of tax credits to the bondholder. solar energy systems) are nontaxable Exclusion (proposed) Business Energy Corporate Tax Tax credit equal to 10‐30% of investment in Investment tax Credit (ITC) Credit renewable energy systems Qualifying Advanced Corporate Tax Tax credit equal to 30% of investment toward an Energy Manufacturing Credit advanced renewable energy project in the Investment Tax Credit renewable energy manufacturing sector ($2. policy landscape is marked by several Federal tax incentives.6 United States of America The landscape of US renewable energy policy is much more complex than many of the European policy strategies. grants and loans that to support renewable energy.4B) Energy‐Efficient Mortgages Loan Provides energy‐efficiency mortgages for energy improvements including investments in renewable energy systems Qualified Energy Loan Essentially an interest free loan.S.e.2B) (QECBs) Loan Guarantee Program Loan Provides Loan guarantees that support the commercial use of renewable energy technologies ($750M) Appendix 2‐11 .1‐ Production Tax Credit (PCT) Credit 2¢/kWh Renewable Energy Production Renewable energy production incentive payments Production Incentive (REPI) Incentive of 2. primarily provides tax incentives.4. The following maps illustrate the current policy strategies of each state. rebate programs.dsireusa. Policy Type of Details Regulation Interconnection Interconnection Federal interconnections standards for Standards for Small small generators up to 20 MW Generators Energy Goals and Construction Sets renewable energy targets for new and Standards for Federal Targets renovated federal buildings Construction At the state level there are a variety of different strategies that are being employed including Renewable Portfolio Standards (RPS). interconnection standards. Additional maps illustrating state policy frameworks are included in the Appendices section. grant programs. there are a few Federal regulatory policies that exist as indicated in the table below. loan programs. renewable energy specific targets. tax incentives. Source: www. Additionally. net metering and public benefit funds.org Appendix 2‐12 . dsireusa.org Appendix 2‐13 .Source: www.dsireusa.org Source: www. 7 California 4. All types of renewable energy technologies are eligible to receive feed‐in tariffs. however.” which allows them to receive government financing in order to fund renewable energy projects.7.4 4. a different program allows property owners to receive “property tax financing. Based on California’s current standards. an investment in a solar system does not result in increased property taxes. above‐market prices.Source: www. since then the state has increased its commitment to renewable energy by setting increasingly aggressive targets. Contract periods range from 10‐20 years with adjustable rates based on time of contract initiation and time of day. California has enacted a law in 1999 that excludes solar systems from being included in property tax assessments. In return. solar technologies are eligible for higher rates.5 4.org 4. California established a new feed‐in tariff system allowing small renewable energy generators (<3MW) to sell energy at established. however.3 Property Tax Incentives Although most renewable energy systems increase a property’s market value. the money used to fund the project is repaid through increased property taxes over a period of years.7.2 Renewable Portfolio Standards In 2002 California established its first legislated Renewable Portfolio Standard. the state must achieve a 20% renewable energy share by 2010 and a 33% share by 2020.6 Alternatively. Thus.dsireusa.7.1 Feed‐in Tariffs In 2009.7 Appendix 2‐14 . 4.25/W‐AC one time rebate* $0.75‐7.5 California Solar Initiative (For solar PV systems.50/W* $2.50/W‐AC one time rebate or opt for PBI* $3.39/kWh for 5 years* $0.500 Up to $75.dsireusa.00/W‐AC $1.30/W‐AC one time rebate* $4.50/kWh for 5 years* $3.4 Solar Rebate Programs In order to specifically promote solar energy production.7.000 <50kW Government & Nonprofit Taxable Entities >50kW Government & Nonprofit ‐ ‐ 1‐1. Source: http://www. select housing developments Select housing developments Affordable Housing Projects Incentive $2. A summary of the various programs is provided in the tables below.4.50/W* Common Areas of Affordable Housing $3.org/incentives/ CEC – New Solar Homes Partnership (For Solar PV Systems) Incentive Type Base Incentive Solar as a Standard Feature Incentive Residential Areas of Affordable Housing Projects Common Areas of Affordable Housing Projects Target Custom homes.00/W‐AC one time rebate* Fully Subsidized System $4.60/W* $3.2kW ‐ ‐ Common Area Loads Systems that offset tenant loads Households <50% of Area median Income Households 50% ‐ 80% of area median Income Residential/Small Commercial Performance‐Based Incentive (PBI) Low‐Income Multi‐ Family Affordable Solar Housing Program Low‐Income Single‐ Family Affordable Solar Housing Program Pilot Solar Water Heating Program ‐ Larger Commercial * Initial rates. Rates decrease as system capacity increases. unless otherwise noted) Incentive Type System Size Target Expected Performance‐Based Buydown Residential & Commercial Incentive $2. California has developed several different rebate programs.7.30/W* Projects Appendix 2‐15 . 50/W $1.50/W Advanced Energy Storage ‐ $2.dsireusa.org/incentives/ Self‐Generation Incentive Program* Energy Technology System Capacity Incentive Incentive $2.dsireusa. Once the energy generating system is approved by the local utility. Emerging Renewables Program* Energy Technology Wind System Capacity First 7.00/W Wind Turbines 30kW ‐ 3MW $1. In 1996. Although the differences between feed‐in tariffs and net metering are largely theoretical.00/W *Program also includes provisions for non‐renewable energy sources Source: http://www. the generator is connected to the grid and can begin selling energy under a standard tariff schedule.6 Interconnection and Net Metering California’s “Rule 21” addresses the specific elements of interconnection including the operating and metering requirements for energy generating systems up to 10MW.5 kW 7.5 – 30 kW Fuel Cells <30 kW * Additional Incentives for systems installed in Affordable Housing projects Source: http://www. 4.7 Local Government and Utility Programs In addition to the state‐level programs and incentives. These programs include incentives such as: Fee Waivers Expedited Permitting Leasing Incentives Production Incentives Rebates Loans Grants Financing Appendix 2‐16 .7.7.50/W Fuel Cells 30kW ‐ 3MW $4. they are definitely distinct from a policy perspective. California has a variety of incentives at the local government level as well.org/incentives/ 4.50/W $3. California created a policy that mandates utilities to guarantee net metering for up to 1MW for renewable energy (solar and wind) systems. lbl.html http://www.asp.boell.cmslegal.pdf Appendix 2‐17 .pdf http://www.pdf http://www.pdf http://www.wind‐works. Germany 2004 Available online at: http://www.org/fileadmin/erec_docs/Projcet_Documents/RES2020/GERMANY_RES_Policy_Review _09_Final.de/en/cd/default.pdf http://eetd.erec.org Stimulus Package http://www.org/FeedLaws/USA/Feed‐in_Tariffs_and_Renewable_Energy_in_the_USA_‐ _a_Policy_Update. Policy Recommendations for Renewable Energies (Conference Outcome) International Conference for Renewable Energies. Bonn.iea.info/fileadmin/media/documents/national/2009/e_r__national_usa_lr‐ Final.erec.energy.renewables2004.de/downloads/ecology/FIT_in_America_web.ey.aspx?PublicationG uid=5d8f51c6‐8c00‐4df5‐b579‐05cb29814fe6 http://eetd.gov/2008publications/CEC‐100‐2008‐008/CEC‐100‐2008‐008‐CMF.org/policy‐actions/national‐policies.energy.renewables2004. August 2009 http://www.lbl.com/newsmedia/publications/publicationdetail/pages/default.gov/ea/ems/reports/lbnl‐154e‐revised. Germany 2004 Available online at: http://www.pdf http://www.de/en/2004/outcome_recommendations.htm http://www.asp Global Renewable Energy and Measures (online) Database http://renewables.PDF http://www.com/Publication/vwLUAssets/Renewable_energy_country_attractiveness_indices_Augu st_2009/$FILE/Renewable_energy_country_attractiveness_indices_August%202009.5 Recommended Resources Thematic Background Papers (12) International Conference for Renewable Energies.erec.html Database of State Incentives for Renewables and Efficiency http://www.de/downloads/ecology/FIT_in_America_web.pdf EU Renewable Policy Reviews (Including Germany & Spain) EREC | European Renewable Energy Council http://www. Bonn.boell.energyblueprint.ca.gov/ea/ems/reports/lbnl‐154e‐revised.dsireusa.org Renewable Energy Country Attractiveness Index Ernst & Young.org/policy‐actions/national‐policies.pdf http://www.gov/additionaltaxbreaks. Attachment 1: Additional Tables and Figures Ernst & Young Renewable Energy Country Attractiveness Index All Wind Wind Wind Biomass/ Regulatory Rank Country Renewables Index Onshore Offshore Solar Other Geothermal Infrastructure 1 US 70 71 75 59 73 64 67 68 2 Germany 66 67 66 71 65 64 60 64 3 China 66 69 73 59 54 56 60 69 4 India 62 63 70 42 61 56 43 60 5 Spain 60 61 66 46 66 53 35 63 6 Italy 59 59 64 46 64 55 65 64 7 UK 57 61 59 66 37 55 34 60 8 France 57 59 60 54 53 57 28 58 9 Canada 55 60 64 46 33 48 31 59 10 Portugal 54 56 61 43 51 45 33 58 11 Ireland 52 57 58 57 28 47 27 60 12 Greece 51 53 57 42 56 42 33 55 13 Australia 50 51 54 42 54 46 59 53 14 Sweden 50 52 52 51 35 55 34 52 46 49 50 49 37 40 21 42 15 Netherlands 16 Poland 46 49 53 39 34 41 22 46 17 Denmark 45 48 45 54 32 45 32 50 18 Belgium 45 50 48 55 28 35 26 47 19 Norway 45 48 49 45 24 44 30 49 20 Brazil 44 44 48 34 40 46 20 41 21 New Zealand 42 46 50 36 25 33 43 41 22 Japan 42 44 46 38 43 33 38 45 23 Turkey 42 43 46 36 40 36 42 44 24 Austria 34 31 41 0 43 47 35 48 25 Finland 33 33 32 35 20 47 22 33 Source: Renewable Energy County Attractiveness Index.ey. Appendix 2‐18 . Ernst & Young.com/Publication/vwLUAssets/Renewable_energy_country_attractiveness_indices_August_2009/$ FILE/Renewable_energy_country_attractiveness_indices_August%202009.pdf See original source for index ranking methodology and analysis. August 2009 http://www. Appendix 2‐19 . Source: www.org Source: www.org Appendix 2‐20 . dsireusa. dsireusa. org Source: www. dsireusa.Source: www.org Appendix 2‐21 . dsireusa. org Source: www. dsireusa. dsireusa.Source: www.org Appendix 2‐22 . dsireusa.energy.ren21.dsireusa. 2 "Instruments of Renewable Energy Policies.net/REPolicies/policy/actors. http://www.org/incentives/incentive.net/REPolicies/policy/instruments.cfm?Incentive_Code=CA167F&re=1&ee=0 5 Senate bill 107.cfm?Incentive_Code=CA25F&re=1&ee=0 7 http://www." http://www. 3 "Concepts of Renewable Energy Policies.asp (accessed 10/7/09)." http://www.asp (accessed 10/7/09). * * * 1 "Renewable Energy Actors and Stakeholders.gov/renewables/index.net/REPolicies/policy/concepts.org/incentives/incentive.ca. Schwarzenegger 2008 Executive Order.cfm?Incentive_Code=CA198F&re=1&ee=0 Appendix 2‐23 .ren21.org/incentives/incentive.ren21." http://www.asp (accessed 10/7/09).html 6 http://www.dsireusa. 4 http://www. Appendix 3 Solar Sector Market Opportunities Presentation . Solar Sector Study Overview of Market Opportunities pp December 2009 1 . S.S. Recruit European solar technology companies to manufacture solar products and systems in México for export and national markets p 3. Develop and export to U. by Mexican Independent Power Producers 5 E t l l t i it t U S b M i I d d tP P d 6. Develop and export proprietary Mexican solar systems. Export lower‐cost energy engineering services to support the design and development of solar projects in southwest U. Develop and export to the world the expertise of Mexican system integrators gained in international development projects for the design and installation of rural electrification and p p j g off‐grid projects using solar and other renewables 2 .Summary of export opportunities for U. Provide the Supply Chain base for key “high‐value” components required for utility‐scale solar in California and Arizona 4.S. solar market 1. Export solar electricity to U. the expertise of Mexican system integrators with multi‐disciplined engineering and installation experience gained in “distributed” solar thermal applications such as space cooling and industrial process heat 7. 5.S. equipment and products 2. S.000 new solar hot water systems installed by 2017 i 200 000 l h t t t i t ll d b 2017 3 . Nevada and New Mexico – CA and AZ have 70% of the U. PV market share and are new global PV “hot‐spot” – N CA New CA program requires 200. Arizona.6 Billion in Project Costs • Another 60 GW of utility‐scale solar projects are in the “pipeline” and have applied for permits to build on public lands in California. Arizona (AZ) and Southwest U.S.3 billion of utility‐scale solar energy capacity needed by 2020 – CA will remain the global leader in utility‐scale solar thermal electric (388 MW of parabolic trough was installed in 1989) • October 2009 ‐ 10 GW in near‐term solar power plants are now being permitting in CA with October 2009 10 GW in near term solar power plants are now being permitting in CA with $40. – CA needs 24 GW of renewables to meet 33% renewable energy requirements in 2020 • This is almost half of México’s installed capacity in 2007 • Solar is expected to provide more than 50% of CA and AZ’s renewable generation • Demand‐side calls for $60.California and Arizona: Market Demand for Solar – Target Market is California (CA). 088 $92.000 $6.500 $2.000 $12.000 systems New "Renewable" Transmission Total RPS Utility‐Scale Solar Thermal RPS Distributed PV Total Total Projected Demand Side Market Total Projected Demand‐Side Market MW 7.003.000 $1.000 $83.000.088 $92.500.377.000.720.Size of CA and AZ solar market to 2020 – A diversified Size of CA and AZ solar market to 2020 – market worth ~USD 92 Billion Demand‐Side to Solar Market: Estimated Market Value of Needed Solar Capacity for Existing Programs and Policies to 2020 for California and Arizona $=USD CA CA CA CA CA CA CA AZ AZ AZ CA+AZ RPS Utility‐Scale Solar Thermal RPS Utility‐PV California Solar Initiative ‐ Distributed PV 750 MW Utility Distributed Generation Solar Hot Water + 200.740.235 3.588 $9.003.000.000 $25 740 000 000 $4.529 340 1.000.300 3 300 750 520 ‐‐ 15.638.103 1.000.380.282.880.261.000 ‐‐ ‐‐ Market Value of Solar a et a ue o So a Projects Leveraged by Incentives $29.298 3.000 $25.800 $7 800 $6.000.500 ‐‐ ‐‐ $4.192.645.500 $7.003.972 Installed sta ed Costs $/MW $4.869 16.638.088 RPS = Renewable Portfolio Requirements bl f l 4 .000 $7.000.000 $7.000.000 $22.000 $6.300. batte y c a ge s. Solar systems. and accessories to meet off‐grid requirements for costs. PCs. ect o cs a d e ect ca equ p e t suc as s. battery chargers. ad os. – Cooling equipment such as fans. develop. durability and basic features – Appliances such as refrigerators and freezers – Interior and exterior lighting systems – Electronics and electrical equipment such as TVs. etc. equipment and products • Design. 5 . radios. etc. and evaporative coolers – Tools and equipment. air conditioners. appliances. manufacture and export proprietary solar products – – – – – Solar Hot Water Systems Solar Street Lights g PV Panels PV Manufacturing Equipment PV balance‐of‐system components y p • Re‐design and manufacture solar‐powered DC equipment. Cs.1. Solar Products – Proprietary to Mexican SMEs 1. Solar Products – FlatFlat-Plate Collectors for Solar Hot at Walmart Solar Street Lighting Evacuated Tube Collector for Solar Hot Water 70–90°C 70–90° 6 .1. 000 Btu DC Air Conditioner 70W Solar refrigerator/freezer 12” 2-speed 212v DC fan 42” “Vari-Fan” “Vari12v or 24v DC 60W 13.3” LED TV/DVD Player 7 .1. Solar Products ‐ Types of DC products 1. Solar Products ‐ Fluorescent T-8 fixture Twith high-efficiency DC highballast powered by roofrooftop PV 800W/18. "small steam". Stirling Engines. y q p . Kalina Cycle Turbines. mounting systems. • PV balance‐of‐system equipment such as inverters. g .2. Leverage solar product manufacturing to México • Leverage European solar technology and product providers to manufacture in México for export sales/distribution and for the emerging national solar sector – Product Lines • Medium‐temperature parabolic trough collectors • Solar cooling equipment such as adsorption chillers and absorption chillers (single‐ effect and double‐effect) ff d d bl ff ) • “Distributed” thermal power blocks such as Organic Rankine Cycle Turbines. . charge controllers. etc. etc. • PV‐powered DC equipment for grid‐connected “low carbon” applications – – Lighting for energy‐efficient commercial/industrial "green buildings“ – DC appliances equipment accessories and tools DC appliances. accessories and tools – Approaches • Develop partnerships between Mexican and European SMEs • Recruit Foreign Direct Investment g 8 . equipment. trackers. Solar Products ‐ Medium‐ Solarlite (Germany) Solitem (Germany) Abengoa (Spain) 9 . Solar Products ‐ Medium‐Temperature Collectors 2.2. Solar Products - Medium‐Temperature Collectors Medium‐ Solera Sunpower (Germany) PolyTrough (Australia) Abengoa (Spain) Ab (S i ) 10 .2. Solar Products ‐ “Distributed” Thermal Power Blocks for 2. Solar Products ‐ Medium‐Temperature Solar Medium‐ Kalina Cycle Power Plant Thermal Input ~100°C Thermal Input ~100° h l 200 kW Turboden Organic Rankine Cycle Turbine Thermal Input ~100‐310°C Thermal Input ~100‐310° 10kW sbp 10kW sbp EuroDish with SOLO Stirling Engine E i 11 .2. Heating and Hot Water from and Hot Water Climatewell (Sweden) Climatewell (Sweden) Input at 70‐100° Input at 70‐100°C 9kW Absorption 9kW Absorption Cooling from SolarNext (Germany) SolarNext (Germany) Input at 65‐95° Input at 65‐95°C 12 . Solar Products ‐ Small Solar Chillers from Europe 2. 10kW Absorption Cooling.2. Solar Products ‐ 8kW + 15kW Adsorption 8kW + 15kW Adsorption Chillers from SorTech AG (Germany) AG (Germany) Input at 55‐95° Input at 55‐95°C 10kW Absorption Cooling. Solar Products ‐ PV‐Thermal Systems 2. Solar Products ‐ PV‐ Net solar-to-energy conversion efficiencies solar-to>50% with 2-4 kWh thermal generated for 2every 1 kW produced y p Absolicon Solar Concentrator AB Power‐Spar/Menova Power‐Spar/Menova HD Solar/HelioDynamics HD Solar/ HD Solar/HelioDynamics Solar/HelioDynamics 13 .2. Scale of Supply Chain Needed for Utility‐ Announced Utility Scale Solar Projects in California and Arizona October 2009 Utility‐Scale Solar Projects in California and Arizona ‐ October 2009 Capital Costs per kW $4.500.725.406 km Unit Basis per MW of Trough 5. 2.200.140 m² 30.000 $7 641 000 000 $3.153 440 10.080.536 2. Arizona. Trough Projects Projected Volume of Parabolic Trough Mirrors.000 $3.762.000 $7.000.607.547 2 547 1.000 $3 000 $2.915 mT 7.825 $5.603 539.000 $2.800 m² Mirror surface area .000 ‐‐ Total MW 4.000.400 Hectares 12.969.753 73.3. Nevada and New Mexico to 2015 Number Number Space Frame MW Collector Area Collector Area Mirrors Receivers Metal Trough 12.453 NearNear-Term CA and AZ Projects with Announced Power Purchase Agreements CSP CSP CSP CSP PV PV Parabolic Trough Power Tower Power Tower Dish‐Stirling Compact Linear Fresnel Thin‐Film 1‐Axis Tracking Silicon Totals Projects 12 14 2 1 5 2 36 Capital Investment $18.000 $38. Receivers and Structural Supports for Concentrating Solar Thermal Electric Projects in California.S.000.101.920 3.000 $7.3 Aluminum ‐ metric Tons 14 .025.025.000 $500.000 Supply Chain Needed for N d df Southwest U. Scale of Supply Chain Needed for Utility‐Scale Solar 3.000 $5.400 Mirrors ‐ number 243 Receivers ‐ number 4 m Receiver ‐ length 122 Spaces frames 42.641.000 $3.200.208.600 177 1. Major Components for Utility‐Scale Solar Parabolic Trough Structural Supports Solargenix/Acciona LUZ Solar Millennium SENER 15 .3. Major Components for Utility‐Scale Solar Power T P Tower Heliostats Brightsource Abengoa 16 .3. Major Components for Utility‐Scale Solar Parabolic Trough Receivers Schott PTR 70 Receiver 17 .3. 000 x 25kW units 18 . El Centro. California Stirling Energy Systems – 30.Reflectors Stirling Energy Systems – 750 MW Project. Major Components for Utility‐Scale Solar DishDish-Stirling .3. Major Components for Utility‐Scale Solar Parabolic Trough – Steam Power Blocks Nevada Solar One 64 MW Parabolic Trough Plant Solargenix/Acciona 19 .3. 3.Power Block Solana 280 MW Parabolic Trough Plant Gila Bend. Arizona Abengoa 20 . Major Components for Utility‐Scale Solar Parabolic Trough . Iberdrola) on wind projects in México. solar project developers outsourcing energy engineering services to Mexican companies • Several Mexican full‐service energy engineering companies have extensive experience in project development. solar project developers to achieve considerable cost savings by outsourcing engineering services to Mexican companies in the fields of mechanical.S. in project qualification for “certified emission reductions” and in structuring and leveraging carbon finance 21 • • • . project engineering and transmission interconnections for large renewable “self‐generation”/carbon projects in México Many of these companies have worked with large Spanish system integrators (i.S. U. these are the same companies who are now developing many of the utility‐scale solar thermal p p g y y projects in the U.4. There are great opportunities for U.S. in project qualification for certified emission reductions and in development. Acciona.e.S. electrical. power plant and civil engineering As the U. structural. Abengoa. begins to adopt mandatory greenhouse gas emission reductions. opportunities also exist for Mexican SMEs to export expertise in “carbon” project development. • CA anticipates renewable electricity imports from México – Upgrades to transmission in Southern California expect wind. Export of Solar Electricity to U.S. geothermal and solar electricity from Baja California • – First large Power Purchase Agreement for sale of wind energy to CA utility has been completed (1250 MW at La Rumorosa) 5 GW of solar thermal potential in northern México 5 GW of solar thermal potential in northern México – More solar potential than wind – No known solar Independent Power Producer (IPP) projects being planned • Great opportunities for Mexican IPP to sell solar electricity to CA and AZ Great opportunities for Mexican IPP to sell solar electricity to CA and AZ utilities and to large industrial customers – Short cross‐border interconnections to California utility sub‐stations – Complex permitting and public land acquisition processes creates Complex permitting and public land acquisition processes creates uncertainties and delays – Staging utility‐scale solar plants along northern border offers large German and Spanish system integrators low‐cost alternatives to CA and AZ 22 .5. Southwest U.5.S. Export of Solar Electricity to U. Transmission Lines and Key Load Centers Load Centers Solar Resources Baja California 23 .S. project developers and multi‐disciplined energy engineers who can package turn‐ key solar industrial process heat.6. solar cooling. The key technical challenge is the integration of the solar collector field and the closed‐loop hydraulics of the heat transfer fluid (usually water) with a conversion process or equipment heat exchanger • • 24 . solar desalination and small thermal electric projects Such commercial/industrial projects require extensive site‐specific engineering and integrated technical design at a level far beyond that required for PV or solar hot water. Export technical know‐ 6. Export technical know‐how of System Integrators experienced in solar thermal applications • Low‐ and medium‐temperature solar thermal (< 250°C) energy has perhaps greater potential than PV and utility‐scale solar electricity to off‐set greenhouse gas emissions and to reduce energy costs Greatest gap in “Distributed” solar thermal value chain is shortage of experienced system integrators. Some of these companies have also used solar collectors for low‐temperature solar cooling The lack of technical expertise in CA and AZ in solar thermal applications presents great opportunities for Mexican system integrators to enter this market with a subsidiary or in partnership with U. analysis and environmental civil and structural as well as competencies in energy efficiency analysis and management There are significant opportunities for energy project developers. environmental. hydraulic/plumbing. energy services companies. civil and structural as well as competencies in energy efficiency.S. engineers and turn‐key energy or industrial equipment installation companies to enter this space by scaling‐up existing capabilities Several Mexican solar companies have been involved with the use of flat‐plate and evacuated p p tube solar collectors for industrial applications such as pre‐heating natural gas fired boilers for process heat and for hot water for bottle washing. companies • • • 25 . Export technical know‐how of System Integrators experienced in “Distributed’ solar thermal applications • This new field of system integrators requires competencies in a wide‐range of engineering disciplines such as electrical. industrial processes. Export technical know‐ 6.6. mechanical. cooling.7. design. solar hot water. Export technical know‐ 7. biomass. battery charging. installation and system training skills There is a growing number of Mexican system integrators working in international development projects involving installations of PV.5 Million people in México live "off‐grid – 38% f U S PV i t ll ti 38% of U.6 Billion people world‐wide are without electricity – 6. PV installations are "off‐grid“ " ff id“ – 7 GWp of new “off‐grid” global PV capacity predicted by 2020 • System integration for remote off grid requires unique multi disciplined project System integration for remote off‐grid requires unique multi‐disciplined project development. etc. There are significant opportunities for México’s small and medium‐sized system integrators to leverage their national experience and expertise to become major players in the emerging global off‐grid market. small wind. Secondary opportunities also exist to develop and redesign existing renewable products for the unique requirements of remote off‐grid applications • • 26 . d l t j t i l i i t ll ti f PV l h t t ll i d bi micro‐hydro energy generators and equipment such as lighting.S. Export technical know‐how of System Integrators experienced in rural electrification and off‐grid projects experienced in rural electrification and off‐ • Global “Off‐grid” Market: – 1.