Large-Scale Solar Power Development in China

June 9, 2011 Beijing, Beijing China

Introduction Clinton Climate Initiative

CCI works under the leadership of government partners, and in collaboration with private sector stakeholders, to develop and implement pilot projects that directly reduce greenhouse gas emissions and serve as replicable and scalable models for others to follow CCIs three focus areas are: Cities energy efficiency, waste management, street lighting, transportation Clean energy solar, carbon capture and sequestration Forestry reforestation and avoided deforestation

CCI staff includes people with backgrounds in finance, consulting, industry, engineering and public policy CCI acts as an independent advisor and facilitator and has no financial ties to or interests in any company or project it is involved with

Three topics for todays presentation: Introduction to CCI and CSP Solar Park concept and forecast reductions in CSP costs CCI previous experience with large-scale CSP
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Where We Work

New Focus on China

Malaysia

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Comparison of PV and CSP

PV
Crystalline (Mono and Poly) Parabolic Trough Tower Dish Compact Linear Fresnel Reflector (CLFR) Mature technology with track record of Energy storage Hybridization with fossil fuel fired plants (base-load

CSP

Key Technologies

Thin Film (CdTe, CIGS) CPV

Benefits

operating projects Significantly reduced costs in last 3 y g y years More adaptable to conditions (hot, hazy weather; weak light; dust)
Crystalline and thin film technologies mature

p power, capacity p y , p y payments, load smoothing) , g) Economies of scale through solar park model

Early stages of commercialization More limited deployment to date: 1GW p y

Issues

and unlikely to experience dramatic cost reduction/technological advancements Low conversion efficiency (c. 15-20%) Highly fragmented industry Commodity price/availability exposure (polysillicon , Indium)
Optimum scale reached at ~30MW based on

installed vs c. 35GW PV installed Pipeline of 12GW installed by 2015 However, first utility-scale CSP plant deployed ~30 years ago; still operating

Installations less modular than PV; significant benefits

Other Key Considerations

maximum inverter size Utility-scale projects limited (~20% of total); expected to be the dominant driver of growth Leading sources of demand: Germany Germany, Japan, USA; driven by government incentives Increasing demands from developing countries (e.g India, PRC. etc)
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from economies of scale through Solar Park model Leading sources of demand: USA, Spain Increasing demands from developing countries, especially MENA region

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Global CSP Installation

There is an aggressive pipeline of CSP projects, led by Spain and the US
Global Installed CSP Capacity Through 2015, GW(1) p g
United States
8.0 0.5 Installed Pipeline

Spain
2.5

Global Total
12.3

0.4 Installed Pipeline

MENA
0.0 Installed 0.8 Pipeline 1.0
Installed Pipeline

Rest of World
0.0 Installed 0.5 Pipeline
0.0 Installed

Australia
0.5 05 Pipeline

1.

AT Kearney.

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Advantages of Developing CSP in PRC

Leading development of technology Capitalize on experience building a world-leading PV manufacturing industry Further development of domestic manufacturing in response to domestic demand Skilled-job creation and economic development Play Pla a role in meeting significant global demand gro th anticipated in near term growth near-term

Diversity of energy supply Strong solar resource (DNI radiation required for CSP) in western region Builds clean energy supply capacity Dispatchability

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Suggested Business Model: Solar Parks

A Solar Park is a concentrated zone of solar development that includes multiple gigawatts of solar energy generation capacity, pre-permitted for electricity generation and component manufacturing Main objectives to facilitate private sector investment, reduce required government subsidies, and potentially optimize financing Individual solar plants (CSP, CPV and PV), optimally-sized to achieve economies and efficiencies of scale, can be constructed in a clustered fashion and on a predictable timeline, sharing common transmission, water supply and other site infrastructure One or more blocks of land are designated as a concentrated zone for solar development Minimizes the environmental and social impacts of development Provides targeted economic development and employment opportunities and growth for specific locales or regions Manufacturers of components may find it attractive to build capacity to manufacture locally with large-scale demand and a supportive environment Solar Park can also serve as a technology hub

Generation CSP 1 CSP 2

Common CSP Infrastructure

Water Land Balance of Plant Pl t

Generation CSP 3
Other Generation

Power Block

Common Transmission
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Potential for LCOE Reduction Today

Using todays technology, LCOE can be reduced at least 30% through advantages to CSP such as the Solar Park model, hybridization and storage Other key drivers of LCOE reduction, such as optimized financing, reduced permitting costs and local component manufacturing are more difficult to quantify and will vary manufacturing, case-by-case, but should also be considered
INDICATIVE COST REDUCTION THROUGH CSP(1)
100%
4-6% Reduction Additional +20% Reduction(3) Additional 20-25% Reduction(2)

80%

LCO OE
1. 2. 3.

60% 40% 20% 0%

All calculations are based on CCI experience in other regions and may vary for China. Based on infrastructure cost of 15-20% of total capex. Length of transmission line a significant driver of cost saving. Range across various financing scenarios.

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Forecast Reduction in LCOE of CSP

CSP is expected to undergo similar reductions in LCOE as PV experienced in the last few years By 2025, the LCOE could be approximately half of what it is today 2025
100%

10-20% Reduction 25-40% Reduction

80%
Economies of Scale and Deployment of p y New Technology

LCO OE

35-45% Reduction Economies of Scale and Tech Improvements

60%

40%

Cost and Efficiency Improvements

20%

0%

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CCI Experience India

CCI, in partnership with The Energy and Resources Institute (TERI), submitted a prefeasibility study on the deployment of utility-scale solar power to the Government of India in 2009. CCI and TERI subsequently entered into MoUs with the States of Gujarat and Rajasthan in September 2009 and January 2010, respectively, to analyze j j p y , p y, y the feasibility of planning and developing Solar Parks in each state CCI and TERI introduced the concept of Solar Parks to Rajasthan and Gujarat; both States are in the process of implementing such Solar Parks for the deployment of large-scale generation projects as well as manufacturing and research and l l ti j t ll f t i d h d development Partnered with the ADB to begin knowledge transfer on solar to Indian public sector and commercial banks Developed financing framework in collaboration with the ADB that could help to bring significant capital at more attractive terms to India Currently working with the rating agency CRISIL the Standard & Poors Indian affiliate, CRISIL, Poor s affiliate to examine the potential for a debt capital markets product

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CCI Experience Australia, Morocco and South Africa

Australia
CCI is advising the Federal Government on its AUS$1.5 billion Solar Flagships program and how the program can be used to create a viable solar generation sector. CCI also undertook a y y , Feasibility Study with the Queensland Government, which confirmed that a Solar Park could assist economic viability of projects through shared infrastructure costs and streamlined approvals processes

Morocco
CCI is working with the Moroccan Agency for Solar Energy (MASEN) to prepare a roadmap for the export of solar power to Europe. CCI is also assisting MASEN with the preparation of a financing framework for its 500 MW Ouarzazate project, which aims to be operational by 2015

South Africa
CCI partnered with the South African Department of Energy to prepare a pre-feasibility study for the development of a Solar Park in the Northern Cape Province. The study concluded that solar power can be deployed in the Northern Cape in large quantities over the next decade at costs that become competitive with new coal-fired power The South African Cabinet approved the undertaking of a full-scale feasibility analysis, which is currently underway, as well as the organization of a Solar Park Conference, which took place in underway Conference October 2010, to introduce the project to relevant stakeholders It is expected that the South African government will launch a Solar Park towards the end of 2011
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Things to Consider in Planning Commercial Deployment of CSP

Solar Resource Assessment (Mitigating uncertainty) Definition and Design of Contracts (e.g. EPC, O&M and PPA) Operator Model
Public Private Partnership (PPP) BOT / BOOT / BOO/ BTO Models Impact on Financial Return and LCOE

Funding Options Risk Assessment

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Things to Consider in Planning Commercial Deployment of CSP

Project Bankability

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Key Financial Structuring Drivers for Optimal Development

Financing cost/availability will be in direct proportion to perceived risk Increased finance costs will be reflected in cost of power produced
Traditional Procurement Availability Payment Power Purchase Agreement
Dependant on

Dependant on

Dependant on

Capital Overruns

Technology/EPC guarantees

Technology/EPC guarantees

Technology/EPC guarantees

Technology/EPC

Technology/EPC performance

Technology/EPC

Operating Performance p g

p performance g guarantees direct with Government

n/a

g guarantees with lead developer/operator

Related to plants ability to

p performance g guarantees with lead developer/operator

Based on plant output

Revenue Certainty

meet claimed operating performance at specified ambient conditions

(MWh). Dependent on actual solar radiation as well as technical performance

Increasing cost of finance

Impact on Finance
No impact capex funded by Potential gearing up to ~80% Gearing typically 60-75%

Government

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Key Technical Drivers for Optimal Development

Description
Co firing CSP with fossil fuel plants Co-firing CSP plants utilize steam turbines,

Advantages
Counteracts impact of temporary

Deliverability
Hybrid plants being built

Hybridization H b idi ti

much like traditional fossil fuel power stations Type 1: Use fossil fuel as ( alternative heat source (10-15% fossil fuel) Type 2: Solar-heated fluids boost fossil fuel plant output (Integrated Solar Combined Cycle )

hazy/cloudy conditions that impact CSP more than PV Possible base-load due to reliability Partially offsets cost of storage y g Capital cost savings through shared infrastructure, larger turbines Can be added to existing plants Preserves fossil fuels during periods of strong sun

at several sites SEGS plants in Spain (Type 1) Three commercial Type 2 p plants ( (Australia, Italy, , y, Iran)

Heat from CSP can be stored in

Potential for 24 hour power Load-smoothing Capacity payments y y

Storage demonstrated on

Storage

molten salts or other solutions, offering several hours of energy storage Currently, projects being built with up to 12 hours of storage

several trough plants (Andasol 1) Large-scale tower plants being developed with +14 hours of storage Expected near-term improvements in ope a g u ds operating fluids will increase storage potential

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