Photovoltaic Overview

Technologies, costs and potential

There is an obviously huge potential of solar energy which by far exceeds the global demand

Source: IEA (2011), BP Statistical Review of World Energy, June 2011

Global primary energy consumption 2010: 139,590 TWh

~ 510 million km² earth surface

Yearly incoming solar energy:

885 mio. TWh

1 / 6340

In less than 90 minutes, enough sunlight strikes the earth to provide the entire planet's energy needs for one year

Example: 1,368 W/m² (solar constant; direct solar irradiation per m² measured at right angles to the Sun's beam), the incoming energy received from the sun, averaged over the year and over the surface area of the globe, is one fourth of 1 368 W/m² = 342 W/m² (globe to diameter). Another ~ 77W/m² are reflected by clouds, aerosols and the atmosphere, ~66 W/m² are absorbed by the atmosphere -> remaining 198 W/m² hit earth’s surface on average: 139,590 TWh : (198W/m² x 510 Mio. km²) = 1.4 h

1,368 W/m² (solar constant)

In total, the sun offers a considerable amount of power reaching the earth’s surface in a year

The last years have seen impressive growth in the PV market around the world; especially in EU and Germany

Evolution of global installed capacity - 2000-2011, [MW]

Source: EPIA – Global Market Outlook (May 2012)

51.7 GW in 201174% of global capacity

24.7 GW in 201135% of global capacityRWE: 1.5 MW

1) According to Bundesnetzagentur 2,145 MW of solar PV was installed in Germany in the first four month of 2012, with 450MW in January, 200MW in February, 1,150MW in March and 345 MW in April; retrieved 31.05.2012

60,000

50,000

40,000

30,000

20,000

10,000

02011

69,684

24,6

7827

,038

2010

40,019

2009

23,210

2008

15,655

2007

9,492

2006

7,080

2005

70,000

2004

3,960

2003

2,8435,420

2,261

2000

1,460

2002

GermanyRest of EuropeJapan

North AmericaRest of the worldAsian PacificChina

The development of PV over the past years has been impressive

Material usage1 (Si) [g/W] PV system price2 [€/kWp] Av. Module efficiency3 [%]

4

5

6

7

8

9

10

11

2006 2012e

~7g silicon per Watt in 20115,000

4,000

6,000

2,000

1,000

3,000

2012e2006

Source:1EU PV Technology Platform (2011)2BSW-Solar PV Price Index 5/2011, Outlook: RWE Team analysis3Photon Profi 02/2012

11,0

11,5

12,0

12,5

13,0

13,5

14,0

14,5

15,0

15,5

16,0

2006 2011

polychrystalline module

monochrystalline module

Development of silicon PV characteristics [2006 – 2012]

Despite its early applications in 1954, Photovoltaic was a niche technology until the end of the last century

1839

1839 2012

1839 Discovery of the photoelectric effect by A.E. Becquerel in experiment while experimenting with an electrolytic cell made up of two metal electrodes

1876 Observation of the photovoltaic effect in solid selenium under light1883 Description of the first solar cells made from selenium wafers1923 Albert Einstein received the Nobel Prize for his theories explaining the photoelectric effect1940 First power production with silicon1948 Concept description of semiconductor photovoltaic1953 Crystalline silicon solar cell, 2 cm² wide1954 PV module by Bell Laboratories (4.5 % efficiency)1958 Extra-terrestrial application in satellites…1990 Governmental PV initiative in Germany: 1,000 roof-tops program2000 Introduction of EEG in Germany, copied by several European Member States2012 Ongoing global PV boom

The basic principle of a PV cell goes back to the photo-electric effect within an induced space-charge regional

Composition and function of a PV cell

Space-charge region

Siliconn-doped

Positive electrode

Silicon p-doped

Negative electrode

Both positive and negative charge carriers are produced by n- and

p-doped* silicon A space-charge region is induced by putting together the differently dot-ted layers of silicon

The resulting voltage difference can be used

for the operation of electric loads

Due to the photoelectric effect electrons and their associated holes are separated when hit by photons, their movement is determined by the electric field of the space-charge region

* n,p-doped: During manufacturing the silcon is beeing doped, which means that different chemical elements are put in

Single c-Silicon Multi-c-SiCIGS3 CdTe4 Silicon-TF

BJC1 HIT2 Standard Standard

Several material combinations are suitable for PV; silicon has the highest commercially available efficiency

PV Module and cell efficiencies, [%]

theoretical bandgap limit

1 BJC: back junction cell; 2 HIT:Heterojunction with Intrinsic Thin Layer - hybrid solar technologies combine different types of photovoltaic materials to increase the spectrum of the sunlight received by panels being converted to electricity; 3 CIGS:Copper indium gallium selenide (thin film technology); 4 CdTe:Cadmium telluride (thin film technology)

0

5

10

15

20

25

30

module efficiency (market)module efficiency (Lab.)cell efficiency (Lab.)

Source: Reiner Lemoine Institut, 11/2011

A PV module typically consists of different layers, frame and a junction box

Source: polycrystalline solar panel, BP solar

1

2

43

5

6

Robust frame> Gives mounting option > Provides cell protection due to a robust frame made of

durable materials, such as aluminium

Anti-reflective coated glass

> High-transmission tempered glass offers excellent transmission of sunlight to cells and the strength to withstand harsh environments

EVA foil> The EVA (ethylene-vinyl-acetat) film, a cross-linked

elastomer, is used for encapsulation the solar cells in standard modules

Solar cells > The core layer of the module absorbs the light and produces electric power

Back side cover

> Polymer multi-laminates (backfoil/backsheet) cover is commonly made of tedlar-basis or glass. Researchers are currently looking for cheaper alternatives (e.g. PET)

Junction box

> The cells/strings are electrically terminated into a junction box usually glued to the back of the module. It contains also the bypass diode and enables the electrical connection of the module

1

2

3

4

5

6

Composition of a PV module using the example of a crystalline-Silicon (c-Si) module

Besides the modules a PV system consists of further components

PV System

Energy Management System (EMS)

Battery Storage

Mounting Systems 1)

Cable and Plugs

Inverterconverts DC to AC

PV Module

PV system components, overview

Bild

Bild

Bild

PV

System

1) w./ w.o. tracking ability

Source: Cable and Plugs: Multi Contact AG, Mounting System: Mounting Systems GmbH, Batteries: www.longwaybattery.en.made-in-china.com, EMS: www.mdex.de

BildEMS

optional

One percent higher efficiency of a module reduces the area required for installation from 5 to 11%

8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19%

[m²/kWp] 13

12

11

10

9

7

6

0-5%-6%-6%

-7%-7%

-8%

-8%

8

-9%

-11%

-6%

-10%

Module area demand over module efficiency

Remark: Commercially available modules require free area between 11.5 and 5.5 m²/kWp

Source: RWE team analysis

commercially available

area

dem

and

efficiency

The energy conversion efficiency of modules is always lower than the one of cells

Efficiency losses due to modules processing

Source: Fraunhofer ISE (2011), photovoltaik 11/2011, RWE analysis

8

9

10

11

12

13

14

15

16[%]

-14%-11%

System efficiency

13.8

Cell spacing / gaps

0.5

Enframe

1.2

Cell efficiency

16.0

0.2

Optical coupling1

0.2

Back-side reflection

Glas

1.00.5

Encapsulation Cell connectors

14.2

Module efficiency

0.4

CablingInverterFouling

Cell-Temperature

Meter

0.6

Example: Cell eff. 16%

1 Selecting and combining materials (absorbtion coefficient, refractive indices) in a way that there is a gain in efficiency

PV module efficiency in general is typically declining for low irradiance levels and for high temperatures

Efficiency, a non-linear function of irradiance and temperature

1 STC Standard Test Conditions1,000 W/m²; AM=1.5; 25°C

> The module temperature itself depends on ambient air temperature, the solar irradiation, the type of mounting and cooling by wind.

> Other effects/influences are the fraction of sunlight reflected away by module surface and the spectral sensitivity of the technology.

> The meteorological conditions may vary strongly with geographical location. Thus it can be expected that the same module will perform differently if moved.

> Different technologies are affected to a varying degree, depending on materiel system and system design.

> c-Si is generally more sensitive to temperature than TF-technologies.

> CdTe behaves differently from other technologies – it has higher conversion efficiencies at moderate irradiances (low-light conditions) than at STC1

Comments

Source: Thomas Huld et al. (solar energy 84 (2010))

0

2

4

6

8

10

12

14

16

18

20

22

24

0 100 200 300 400 500 600 700 800 900 1000

Irradiance [W/m²]

Effic

ienc

y [%

]

high temperaturemid temperaturelow temperature

Illustrative

Module efficiency decreases with operating temperature; wind may help

Impact of operating temperature on module efficiency

4

6

8

10

12

14

16

18

20

25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

[%]

Source: RWE analysis, Photon (2/2010)

Large spread of temperature coefficients for each type of modules leads to weighted average values: sc-Si -0.45 %/°C, mc-Si -0.44 %/°C, CdTe -0.21 %/°C; CIGS/CIS -0.36 %/°C; a-Si/μc-Si -0.36 %/°C

> PV modules are rated at Standard Test Conditions (STC) but their operating temperatures are usually significantly higher

> C-Si based modules’ efficiency depends much more on operating temperature than thin film’s (especially CdTe)

> C-Si based modules loose their efficiency advantage with increasing temperature

> Wind increases performance due to cooling effects

Comments

operating temperature [°C](STC)

sc-Si

mc-Si

CdTe

CIGS

a-Si / mc-Si

a-Si

Winter noonNorthern EU

Summer noonSouthern EU

In Europe the specific power yield is especially attractive in southern sunny countries

Global irradiation, [kWh/m²] and Solar electricity, [kWh/kWp]

> Specific energy yield in Spain or Italy are 1.5-fold highercompared to Germany

> With more than 1,600 kWh/kWpspecific energy yield in MENA region is even twice as high as is in Germany

Comments

Source: European Commission Joint Research Centre (JCR) (2009)

450

600

750

900

1050

1200

1350

1500

1650

600

800

1000

1200

1400

1600

1800

2000

2200

[kWh/m²] [kWh/kWp1)]

1) Yearly sum of solar electricity generated by 1kW system with optimally-inclined modules and a performance ratio of 0.75 (~FLH full load hours)

For middle Europe conditions the best orientation of a solar generator is facing south with a tilt angle of 30° to 35°

Influence of inclination and orientation on annual irradiance

> Solar panels should always face true south in the Northern and North in the Southern Hemisphere, tilted from the horizontal at a degree equal to your latitude plus 15° in winter, or minus 15° in summer1.

> The best orientation for a fixed solar panel in middle Europe (Germany) is facing south with an inclination- or tilt angle of 30° to 35°.

> If the solar panel is not facing south directly, lower tilt angles are better in terms of annual irradiation

> Example: tilt angle: 30°oriented: 45° southwest 95% of opt. irradiation

Comments

Inclination-angle

Source: Viessmann Fachreihe Photovoltaik 04/2010 1An additional 3-5% could be gained by evaluating this more carefully

A PV module on an south/east or south/west facing roof can still yield~ 95% of max. electricity

A PV module on an east or

west facing roof can still yield

~ 80% of max. electricity

Annualirradiation [%]

Four basic cell technologies can be distinguished, whereof only c-Si and thin-film PV have a significant market share

Crystalline Si

Thin-film

Concentrated

Mar

ket l

evel

Lab

leve

l

31%

57%

<1%

3%

6%

2%

<1%

<1%

market share

Organic

Source: RWE Team analysis, market shares 2011: Photon 04/2012

Crystalline silicon PV cells are the most common PV cells today and also the earliest successful PV devices

Thin film (TF) technologies have lower efficiencies but cost advantages; currently relative low market shares

Concentrated photovoltaics (CPV) promise very high efficiencies, but are very sensible to operate

Organic photovoltaics (OPV) are still under development; key technical challenge is long-term stability

sc-Si

mc-Si

Ribbon

a-Si

CdTe

CIGS

LCPV

HCPV

sc = single crystallinemc = multi crystallinea-Si = amorphous siliconCdTe = Cadmium telluride CIGS = Copper indium gallium

selenideLCPV = Low concentration PV HCPV = High concentration PV

PV technologies at different market levels

PV modules have experienced significant and continuous price reductions – ca. 20% per doubling of capacity

Cumulative capacity [MW]

PV

Mod

ule

Pric

e [$

2010

/Wp]

Source: Q-Cells Research, PHOTON, EPIA, NREL, Solarbuzz

PV Learning Curve at 80%

Doubling of cumulated volume

produced

20% cost reduction

Silicon shortage in

2008

PV module experience (or "Learning") curve

At system level further cost reductions of around 50% can be expected until 2020

Source: RWE Team analysis, EuPD

PV system prices outlook, [€/kWp]

roof top Ground mounted systems (GMS)

2,200

2012

1,3391,013

1,675

1,921

2020e0

-49%

2,500

1,800

2015e

1,5711,800

2012 2020e

1,371

1,300

2,500

-53%

2015e

732967

0

Low (20% learning rate)High (10% learning rate)

Prices 2015 / 2020 are derived from 2012 real German project prices range at assumed learning rates of 10% to 20%. As actual module market prices are below production cost, it can be expected that prices will decrease at a slower pace untill 2015. After market consolidation price reduction will accelerate again. Roof top: < 10 kWp, ground mounted system: > 1 MW

Operational lifetime of PV systems is rather 35 years than 20 years

Guaranteed and expected life of c-Si modules

50

60

70

80

90

100

0 5 10 15 20 25 30 35 40

[%]

Source: RWE analysis, Photon (2/2010), EPIA – Solar generation 6

calculation base

current guarantee

expected 2015

expected 2020

op. lifetime

The focus of this presentation is on grid connected power supply

Classification of PV systems

Grid connected systems Off grid systems

Source: EuPD Research, EU PV Platform

Private rooftopTypical size < 10 kWpRoof top, BIPV

Commercial rooftopTypical size 30 - 200 kWpRoof top, BIPV

AgricultureTypical size 10 - 100 kWpRoof top, BIPV, open space

Public rooftopTypical size 10 - 50 kWpRoof top, BIPV

Utility scale open areaTypical size >100 kWpOpen areas

Bui

ldin

g ap

plie

d / i

nteg

rate

dO

pen

area

Mobile applicationsTypical size < 200 WpSmall portable devices, outdoor, etc

Power supply remote systemsTypical size < 20 kWpE.g. telecom towers, irrigation

Single offside Typical size 10 - 50 kWpRemote off-grid buildings, holiday prop.

Remote sensingTypical size 10 - 50 kWpspace, traffic control, remote lightning

Island gridsTypical size >100 kWpHybrid solutions

Com

mer

cial

Con

sum

eR

ural

dev

elop

men

t

The vast majority of global PV-installation are grid connected; off grid systems account for less than 3%

Dominant market share of grid connected systems

off gridgrid

connected

only 980 MW off grid

global, 2010

1. Off-grid commercial systems are used in remote areas to power repeater stations for mobile telephones (enabling communications), traffic signals, marine navigational aids, remote lighting, highway signs and water treatment plants among others. Both full PV and hybrid systems are used.

2. Off-grid installations for rural electrificationbring electricity to remote areas or developing countries in order to provide enough power for local demand

3. PV cells for consumer goods are now found in many everyday electrical appliances such as watches, calculators, toys, battery chargers (as for instance embedded in clothes and bags) and professional sun roofs for automobiles

Most off-grid PV systems fall into one of three main groups

Source: EPIA, IEA PVPS

> 97%

Grid-connected PV systems can be divided into building applied / integrated and ground mounted categories

Classification of PV systems

Grid connected systems

Private Typical size < 10 kWpRoof top, BIPV

Commercial Typical size 30 - 200 kWpRoof top, BIPV

AgricultureTypical size 10 - 100 kWpRoof top, BIPV, open space

PublicTypical size 10 - 50 kWpRoof top, BIPV

Utility scale ground mountedTypical size >100 kWpOpen areas

Bui

ldin

g ap

plie

d / i

nteg

rate

dG

roun

d m

ount

ed fixed mounted tracking systems

roof top roof integrated

fix tilted flat

facade integratedfacade

Building

applied / integratedG

roundm

ounted

Source: EuPD Research, EU PV Platform, IHS - Euro Solar PV (2011)

Roof top:7.5 GW(57%)

Building integrated:

1.3 GW(9%)

Ground mounted:4.6 GW(34%)

13.4 GW

2010

Market development has been impressive in recent years; especially in EU and Germany

Evolution of global installed capacity - 2000-2011, [MW]

60,000

50,000

40,000

30,000

20,000

10,000

02011

69,684

24,6

7827

,038

2010

40,019

2009

23,210

2008

15,655

2007

9,492

2006

7,080

2005

70,000

2004

3,960

2003

2,8435,420

2,261

2000

1,460

2002

GermanyRest of EuropeJapan

North AmericaRest of the worldAsian PacificChina

51.7 GW in 201174% of global capacity

24.7 GW in 201135% of global capacity

1) According to Bundesnetzagentur 2,145 MW of solar PV was installed in Germany in the first four month of 2012, with 450MW in January, 200MW in February, 1,150MW in March and 345 MW in April; retrieved 31.05.2012

Source: EPIA – Global Market Outlook (May 2012)

Germany has been “paving the way”, but installations in other regions are accelerating

Outlook of global annual growth, [GW]

Source: Goldman Sachs Investment Research (2012), Bank Sarasin (2011), EPIA (2012), RWE Team analysis

0

10

20

30

40

50

2015e2014e2013e2012e2011

27.8

Goldman SachsBank Sarasin

EPIA Policy DrivenEPIA Moderate

0%

20%

40%

60%

80%

100%

Germany

Rest of Europe

North America

Asia Pacific

Rest of word

2015e

11.4%

2014e

13.6%

2013e

15.9%

2012e

21.6%

2011

26.9%

Remark: Strongest growth is expected in North America (USA: CAGR 61%, Canada: 36%) and Asia (i.e. India: CAGR 101% and China: 58%)

Share of global market, [%]

For the first time in history, PV in 2011 was the number one electricity source in Europe in terms of added capacity

Source: EPIA - Global Market Outlook for Photovoltaics until 2016 (May 2012)

Power generation capacities added in 2011 in EU 27, [MW]

-6.253

-1.147-60-22-840-934-216

3317002344726062.147

9.7189.616

21.642

4.000

Bio-mass

20.000

NuclearFueloil

0

CSPLarge hydro

GasWindPV Coal

16.000

8.000

-4.000

24.000

12.000

> With > 21 GW connected to the grid, PV outsourced gas and wind, both slightly below the 10 GW mark

> If decommissioning is considered 1), wind comes slightly ahead gas. All other production sources are far behind.

> Gas reached a peak in 2010 with more than 20 GW newly connected to the grid, before falling to less than 10 GW in 2011

Comments

1) In the PV sector decommissioning remains marginal: Less than 10 MW were fully replaced by new capacities according tom the PV CYCLE association

Installed Decom

missioned

Total installed capacity of PV in Germany is already higher than the capacity of nuclear, coal or lignite

[GW]

PV24.8

7.5

Wind29.1

1.9

Biomass5.5

0.5

Pump storage7.3

Nuclear20.4

Lignite19.5

Hard coal24.2

Gas16.7 totalnew

Source: BMU (2011), AGEE-Stat

Total installed capacity in Germany, 2011, [GW]

German Investments in PV is close to the sum of total investment of the “big four” utilities

Source: gtai, Company reports, Vattenfall Europe AG: 40.07 bn. SEK with 1 SEK = 0,11 Euro (31.12.2010)

Investments in Germany, 2010, [bn. €]

0

5

10

15

20

bn. €

Investments in fixed & intangible assets

20.4

1.6

4.5

7.9

6.4

Investments in PV

19.5

The average size of a PV-installation today is 15 kW –the largest installation is 100 MW

Share of PV system size in Germany, 20111)

13%

59%

3%

35%

avg. size15kWp

> 1,000 kWp101 to 1,000 kWp

11 to 100 kWpup to 10 kWp roof top

Germany15 kWp(avg.)~ 100 m²

ground mountedPerovo, Ukraine100 MWp(largest PV plant)

The Perovo plant consists of 440,000 crystalline solar panels from four different suppliers and spans 200 ha (2 mio. m²)

Typical roof top systems are smaller:~5 kW -> 35-40 m²

Source: EuPD Research

1) Systems installed in 2011 Avg. size of PV systems in Italy: 16 kWp

It is expected that PV will continue to grow exponentially and contribute 2 to 5% of global power in 2020

Outlook of global market, [GW]

Source: Goldman Sachs Investment Research (2012), Bank Sarasin (2011), EPIA (2012), WEO 2010, RWE Team analysis

0

100

200

300

400

500

600

700

2020e2019e2018e2017e2016e2015e2014e2013e2012e2011

67.4

Goldman SachsBank Sarasin

EPIA Policy DrivenEPIA Moderate

BSWEPIA: Baseline

Assumptions: Average global irradiation 1,600 kWh/m²/a, system performance ratio 0.8, global PV capacity in 2020: 380 MW (BSW) or 700 MW (EPIA base)

Global power generation [TWh],2020

WEO 2010: 27,400

: 19,440

PV share:1.8 - 4.6 % of global

power generation in 2020

The LCOE of PV are expected to decrease below those of most other renewable technologies

LCOE of PV applications, 2011 - 2020, [€/kWh]

Source: RWE Team analysis, Dii

Assumptions: PV Lifetime 20 yrs; discount rate 8.0% nominal; inflation 1.75%; performance degradation 0.5%/a; OPEX: 2% (2.25% in MENA); OPEX increase 0.5%/a, continuous improvement of PR from 0.75 in 2011 to 0.82 in 2020, thus improving FLHs, w/o tracking

2011 2012 2013 2014 2015 2016 2017 2018 2019 20200.02

0.10

0.20

0.18

0.16

0.14

0.12

0.08

0.06

0.04

Ranges at learning rates of 10-20% at each case

Ground mounted PV, Germany 1,300 kWh/m²/aGround mounted PV, South Europe 1,800 kWh/m²/a

Offshore Wind (3,200h)Onshore Wind (2,000h)BiomassGround mounted PV, MENA 2,200 kWh/m²/a

Competitiveness will emerge in different market places according to the development of PV cost vs. power prices

RetailSubsidies Wholesale

illustrative

Time, yrs

ener

gy c

osts

/ pr

ices

Source: RWE Team analysis

retail electricity price

whole sale power price

PV LCOE

Possible development if wholesale price is influenced by PV

Competitiveness of PV for private households in

residential market

Competitiveness. of PV for energy

producers

Competitiveness. due to funding

only

„System parity“

Most EU-countries have adopted FiT schemes, many with volume different caps though

Source: IHS emerging energy research (2011)

Feed-in Tariff

Green Certificate Mechanism

Combination of GC/Premium and FiT

Premium (fixed or relative to power price)

PV incentive models

Cap based on incentive spending,

€300 Mio. in H2 2011

Incentives capped at 400 MW annually, with 2/3 reserved for

rooftop systems

Cap determined annually based on

grid capacity

Incentives for projects smaller than 30 kW, only

Annual payment ends when the system has

reached 8,000 hrs

Not exhaustive

5

10

15

20

25

30

35

40

45

1/1/09

-55%

7/1/111/1/117/1/101/1/107/1/09

Feed-in tariff in ct/kWh

1/1/147/1/131/1/137/1/121/1/12

The Feed-in Tariff (FiT) in Germany has been lowered drastically in recent years

large open area (from 1 MW)large rooftopsmall rooftop

Development of German feed-in tariff, [ct/kWh]

Source: BMU, RWE Team analysis

- 0.15 ct per month

small rooftop < 10 kW: 19.50 ct/kWhlarge rooftop < 1 MW: 16.50 ct/kWh

open area: 13.50 ct/kWh

From April 1st 2012

1/4/12

Remark: Till 2012 small rooftop systems are < 30 kW, since 2012 < 10 kW

The break-even point for Grid parity depends on the grid power purchase price and on the share of own consumption

Today 2020 [Time]

illustrative

"Wholesale Parity"

only, if wholesale priceis not influenced by PV

28 - 45%(current self-consumption)

"Grid Parity"(attractive, if 100% self-consumption)

Attractive due to grid parity (w/odirect subsidies)

Attractive onlywith directsubsidies

€/MWh

Retail price

Wholesale price

PV power generation costs

De facto attractive for households

Grid parity concept

Source: RWE Team analysis

Today in Germany roof-top PV to supply a household reaches system parity with LCOE of about 14 ct/kWh

0,06

0,08

0,10

0,12

0,14

0,16

0,18

0,20

0,22

20 25 30 35

[€/kWh]

Higher level of own consumption(e.g. multi family house)

ct/kWh

Lower level of own consumption(e.g. single family house)

System parity at different own-consumption levels

retail price

Leve

lized

cos

ts o

f PV-

elec

tric

ity

Source: BSW, RWE Team analysis

Assumptions: Avg. retail price in 2012 is 24,5 ct/kWh; own-consumption rates: single family house 28%, multi family house 45%, feed-in revenues are considered at wholesale price 6 ct/kWh, no EEG Feed-in-Tariff; shown band width correspond to variation of own consumption 20 – 30% and 40 – 50%

today’s LCOEGap, that needs

to be closed

0

100

200

300

400

500

600

700

800

900

2000 2005 2010 2015 2020 2025 2030

€/kWh

Batteries represent a way of increasing the share of own consumption, however prices are elevated

2423222120191817161514131211109876543210

2 Study: “An evaluation of current and future costs for lithium-ion batteries for use in electrified vehicle powertrains”, Duke university; 1,3 USD = 1 €

Energy consumption householdPV production

By means of batteries the share of own consumption can be increased

Battery charging

Battery discharging

Time of day

A PV unit for an average household generates around 8.5 kWh/d, excess energy oscillates between 1 and 6

kWh1) – resulting costs are 3.100 € consequently2)

1 numbers apply to Northern Europe; fluctuation is due to seasons

In 2010: A 6 kWh unit amounts to ca. 3,100 €

Expected price curve for Li-ion battery

kW

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

3 kWp 5 kWp 7 kWp

+18%

1 kWp 9 kWp

Additional installation of batteries may increase the share of own consumption

Source: Frontier Economics

Share of own consumption for different PV battery combinations,

shar

e of

ow

n co

num

tion

Peak power of PV System

Typical plant size, 5kW

5 kWh4 kWh3 kWh2 kWh

w/o battery1 kWh

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

15 kWp 25 kWp20 kWp5 kWp

+12%

10 kWp

w/o battery5 kWh

10 kWh7 kWh

13 kWh15 kWh

single family house multi family house

Typical plant size, 15kW

Peak power of PV System

Today pay-back times for batteries are still long – even if considerable cost reduction is assumed

20

25

31

679

1113

254308

385

462

577

0

5

10

15

20

25

30

35

050100150200250300350400450500550600

€/kWhPay-back time in a

2030

13

2025

16

202020152010100%60%Specific cost of battery

AssumptionsSurplus revenue due to battery at 60/100 % own consumption: 113/263 €

Capacity of battery unit: 6 kWhPower price: 25 ct/kWhIRR: 0%

In future times batteries may pay off after 6 years – given favourable circumstances

Share of own consumption

DRAFT

4,000

3,000

2,000

1,000

0

6,000

5,000

Roof-top PV will soon be competitive without direct subsidies in many countries, including Germany

2007 2008 2009 2015 20202011

PV system prices, roof mounted, [€/kWp]

Source: BSW-Solar PV Price Index 5/2011

Expected range for grid parity

Grid parity still builds on market distortions, which will be difficult to avoid and lead to a redistribution from poor to rich

> Feed-in tariff (EEG)> Favourably priced financing conditions (KfW)

> Tax exemption - Electricity tax (2,05 ct/kWh) (0,55 ct/kWh), VAT(19%)

> Grid cost - Decentral power producer feed into the grid without being charged for the cost of grid provision and grid utilization according to the costs' actual origin and reason. PV feed in is free of grid charge

> No burden sharing - PV power producer use less power from the grid and, thus, they bear less expenses from “EEG-Umlage”

dire

ctin

dire

ct

Source: RWE Team analysis, Frontier Economics

Market distortions

Picture source: Photon

In the shadow of PV

> Profiteers of a state guaranteed Feed-in-Tariff (FiT) are operator of PV systems

> House owners> Financial investors> Farmers

> Advantages for current profiteers increase even more by allocating a higher share of grid costs to those electricity consumers without own PV generation

Wholesale parity will be hard to reach, since high shares of PV-generation could bring down wholesale prices

Market design for future RES-dominated market still to be developed

Impact of Renewables on market prices

Source: Energy Brainpool

capacity

€/MWh

price 1

price 2

demand: fluctuating, hourly

Nuclear Lignite Hard coal CCGT Gas turbineRES must run

More RES PV and Wind feed in