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REC’S SOLAR MARKET INSIGHT
June 6, 2016
Q1 2016
Q1 2016 Regional Performance Highlights
Table of contents
1
2
3
4
REC Highlights Q1 2015
Q1 2016 Performance Highlights
REC Market Study: Climate Change - Closing the COP21 Gap
REC Highlights Q1 2015
1 2 3 4
Major REC Q1 2016 Highlights
• Significant increase in Q1 sales over Q1 2015 – module shipments +37%
• Almost 60% of module shipments in Q1 2016 were to the US – steady sales in all other regions
• REC scores best among PV manufacturers in regards to financial health and bankability according to third-party analysis
• REC moves from 3rd place to 2nd place amongst the leading residential solar PV module manufacturers the US market
• REC’s TwinPeak solar PV module is one of four named to “best of the best” list of high-efficiency solar PV modules
• Start of transition to 100% half-cut PERC cell production at REC’s Singapore facility
• Start of expansion of the award-winning REC TwinPeak Series
• Debut of REC panels under full warranty on floating PV installation in Central Florida
• REC joining Global Solar Council as a founding Corporate Member – leading corporations around the world joining forces to accelerate the deployment of clean, reliable, emissions-free solar energy
REC scores best in proven Altman-Z score
SAFETY ZONE (ABOVE 2.6)
GREY ZONE (1.1 – 2.6)
DISTRESS ZONE (BELOW 1.1)
Altman-Z scores of PV manufacturers (as of March 9 & 10, 2016)
What is the Altman-Z score? Developed by Edward Altman in 1968, the Altman-Z score is a measure used to predict the probability that a business will go into bankruptcy. It is a function of tangible assets, working capital, retained earnings, EBIT, market value of equity, total liabilities, and historical revenue. The score is widely accepted by auditors, accountants, courts, and database systems used to evaluate loans.
Source: Sinovoltaics "The Solar Energy Technology Hub in Asia" (www.sinovoltaics.com)
REC Expands its TwinPeak Module Success Story
Introduction Production Start
Intersolar Award
Twin Peak Black debut
Floating PV Ready
TwinPeak 72 launch
Up to 275 Wp targeted
Up to 280 Wp achieved
International recognition
Black frame introduced
for aesthetic options
Qualified for floating
installations
Up to 340 Wp targeted
September 2014
January 2015
April 2015 June 2015 May 2016 June 2016
Singapore Minister Event
• March 2016: At its manufacturing facility in Singapore and in the presence of Minister for Trade and Industry, S Iswaran, REC unveiled plans to invest S$200 million (approx. US$145 million) in the next 3 years to further increase its productivity and efficiency
• Furthermore, REC will invest S$50 million (approx. US$36 million) in R&D efforts to maintain REC panels at the leading edge over the next 5 years
Q1 2016 Performance Highlights
1 2 3 4
Increased module shipments in Q1 2016
• Increased quarterly module shipments of 314 MW in Q1 2016
• Q1 Module shipments represent a 37% increase over Q1 2015 shipments
Module Shipments MW
229 262
361
307 314
Q1 2016 Q4 2015 Q3 2015 Q2 2015 Q1 2015
+37%
Continued strong sales in the US
• Almost 60% of module shipments in Q1 2016 were to the US
• More than doubling module shipments into US compared to Q1 2015
• Steady sales in all other markets 1 excl. China
Module Shipments MW
90 129
207 190 185 89
53
81 74 78
32 33
29 28 29
46
44 15
Q1 2015 Q1 2016
314 22
Q4 2015
307
Q2 2015 Q3 2015
361
261 229
18
USA EMEA
Japan APAC1
Q1 2016 Regional Performance Highlights
1 2 3 4
Regional Highlights – USA
• Market Development Highlights o Extension of the Federal Investment Tax
Credit has led to a more sustainable demand growth in 2016 with many projects now able to run into 2017
o Supreme Court stay of the Clean Power Plan is not expected to affect solar PV demand over the short term
o City of Palo Alto negotiate a solar PV PPA at $37/MWh – though to be a record low for a solar PV PPA
• REC Performance Highlights o Continued strong sales into the utility
and residential markets o REC currently ranks as second largest
module supplier into the US residential market and #1 in CA
o Debut of REC panels on a floating solar PV installation in Central Florida
Q1 2016 Module Shipments1
MW
1 REC and US market segment splits are best estimates
23%
12% 66%
Residential Commerical Utility
38%
3% 59%
REC Q1 2016 Total US Market
Regional Highlights – Europe
• Market Development Highlights o Tariffs bid in the 4. German power
auction continue downward trajectory – between 6.94 and 7.68 Euro Cents per kWh
o Nevertheless and despite stable FiT since Sep 2015, with 193.5 MW installed capacity in Q1 2016, demand in Germany is still behind plan of annual installations of 2,400 - 2,600 MW
o French authorities green light proposal to triple solar PV capacity by 2023 to 20 GW
o UK solar PV installation in large scale segment show a slight peak in Q1. A number of projects on ROC grace period will be build later in 2016.
Q1 2016 Module Shipments1
MW
1 REC and EMEA market segment splits are best estimates
21%
39%
39% 23%
21% 56%
Commerical Residential
Utility
REC Q1 2016 Total EMEA Market
Regional Highlights – EMEA: The UK and German markets continue to account for the bulk of sales
• REC Performance Highlights o Steady sales in the
UK
o Slight decline in sales into Germany offset by increased sales into France
o Strong increase in sales into other EMEA markets
59
15
42 44 40
15
26
23 22 17
8
5
9
6
5
2 10 4
Q2 2015
51
2 2
Q1 2015
86
1
3
78
Q1 2016 Q4 2015
72
3 1
Q3 2015
79
3
Source: REC
REC Sale Volumes
MW UK Germany Netherlands
France Rest of EMEA
Regional Highlights – Africa: Focus on Ghana
• Market Development Highlights o Electricity tariff hikes of 59% in Ghana
result in highest net tariff in the country approaching US$0.54/ kWh for a non-residential consumer with an annual demand of 600 kWh or more
o Development makes home or commercial installation of solar PV systems for self-consumption an increasingly attractive proposition
• REC Performance Highlights o REC panels to provide solar power to 4
villages across Ghana o The four systems total 189 kW and
provide clean electricity to 573 households as well as street lighting
o Designed as micro grids for rural areas with no traditional grid connection
o A World Bank project, realized with REC’s partner Trama Tecno Ambiental in Spain
Population 26 m GDP US$ 48 bn Electricity Capacity 2.1 GW Access to Electricity 72% Annual TWh 14
Regional Highlights – APAC
• Market Development Highlights o Indonesia expected to launch FiT
imminently with a current quota of 1.5 GW in place
o Weighted average FiT expected to be approx. US$0.10/kWh but certain regions will enjoy higher tariffs
o Indonesia’s transmission network needs significant upgrades for new connections
1 REC and APAC market segment splits are best estimates
14%
44%
42%
Residential Commerical Utility
27%
54%
19%
REC Q1 2016 Total APAC Market
Q1 2016 Module Shipments1
MW
Regional Highlights – APAC: India was top sales region in Q1
• REC Performance Highlights o REC announces a S$50
million R&D agreement with the Solar Energy Research Institute of Singapore
o Increasing sales into India including securing REC’s largest order to date in that market – a 7 MW supply agreement
o As an emerging region, APAC is dominated by high growth rates but also strong fluctuations
Source: REC
REC Sale Volumes
MW
35 33
10
3 4
7 6
4
4
3
13
4
2 3
1
1
17
Q1 2015
2 45
Q2 2015
2 2
45
Q3 2015
2
0
15
Q4 2015 Q1 2016
1
0
2 22
1
All Others India Singapore Australia
Thailand
Regional Highlights – Japan
• Market Development Highlights o Japan’s Ministry of Economy, Trade
and Industry targets that by 2030, solar PV will account for 7% of total power production under their draft plan
o The support mechanism for utility-scale solar expected to switch from FiT to an auction system likely starting in April 2017
o Solar PV installations are expected to peak in 2016 – new FiT applications have already peaked
• REC Performance Highlights o Solid sales to Commercial and Utility
segments o Good exposure to residential
customers at PV Expo 2016.
Module Shipments1
MW
1 REC market segment module shipment volume splits are best estimates
31%
66%
3%
Commerical Residential
Utility
REC Q1 2016 Total Japan Market
12%
78%
9%
REC Market Study: Climate Change - Closing the COP21 Gap
1 2 3 4
30
40
50
60
2016 2018 2020 2022 2024 2026
• To limit temperature increases to 1.5ºC and to prevent sharply increased emission requirements in later years, emissions need to be reduced by an additional 144 Gt of CO2eq by 2025.
• If solar PV is to meet 25% of the required emissions, the cumulative solar PV installed capacity needs to increase by 4,800 GW by 2025
• Individual country contributions to the global target can be calculated based on country level contributions to CO2 emissions as well as existing policy actions in place to mitigate emissions
• The 4,800 GW of new solar PV required can be dis-aggregated to the country-level contributions required to help develop effective solar PV policy for every country
The COP 21 Challenge: Time for Action
REC has presented estimates of global solar PV deployment required to meet COP 21 goals
And REC has also started to do this work at the country-level as well
Cumulative gap of 144 Gt
of CO2eq
Year 80
182
586 USA
Germany
Japan
Required for 1.5C rise Current Policies
Source: Climate Action Tracker; REC analysis
Global CO2eq emissions, Gt New Solar PV Additions required, GW
REC Market Study – What does it mean for the US?
13.50 10.40 12.60 15.60 17.78 20.27 23.11 26.35 30.04 34.24 2.57 2.97 4.80 11.88
27.08 46.30
70.38
100.29
137.20
182.47
0
50
100
150
200
250
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
GW Current forecast annual solar PV additions in US
Proposed solar rampup above current forecast in US (practical solution)
Source: IHS 2015 (incl. PV outlook until 2020); REC internal analysis
Cumulative solar PV installations of 790 GW required by 2025 – 4 times the current forecast
REC Market Study – What does it mean for Germany?
• Substituted coal and nuclear power generation capacities will be replaced ~30% by solar and ~70% by wind
• This ramp up will require each year, on average 8.31 GW of solar capacity in addition to the current forecast cumulated total capacities by 2025 represent a 4.6-times ramp up of the current forecast
• Furthermore, this ramp up will require each year, on average 9.71 GW of wind capacity in addition to the current forecast cumulated total capacities by 2025 represent a 5.5-times ramp up of the current forecast
1.17 1.51 1.83 2.03 2.11 2.28 2.48 2.69 2.92 3.17 0.89 1.92
2.54 4.55
6.69 8.03
9.37 10.70 10.70 10.70
0.30 0.43
0.33
0.30
0.91
1.83
4.11
5.48
0.00 0.00
0
2
4
6
8
10
12
14
16
18
20
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
GW
Proposed Rampup Solar to Substitute Coal and Nuclear
Solar annual additions current forecast
Required annual solar additions above current forecast to substitute coal Required annual solar additions above current forecast to substitute nuclear
1.27 1.27 1.27 1.27 1.27 2.85 2.85 2.85 2.85 2.85 0.00 0.60 2.07
8.88 7.81
9.37 10.93
12.49 12.49 12.49
0.00 0.24 0.75
0.61 1.06
2.13
4.79
6.39
0.00 0.00
0
5
10
15
20
25
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
GW
Proposed Rampup Wind to Substitute Coal and Nuclear
Wind annual additions current forecast GW Required annual wind additions above current forecast to substitute coal Required annual wind additions above current forecast to substitute nuclear
Source: IHS 2015 (incl. PV outlook until 2020); REC internal analysis Source: EWEA Wind Energy Scenarios 2030; REC internal analysis
22
REC Market Study – What does it mean for Germany?
• The proposed ramp ups will bring solar and wind alone (without biomass and hydro electricity) to a total share of ~75% in the German electricity consumption mix
• The set target for renewable energy to represent 40-45% in the German electricity consumption mix by 2025 is far too low to close the cumulated emissions gap by 2025 and fully exit nuclear power generation by the end of 2022
Source: BMWi, AGEB (Energiedaten Jan 2016); REC internal analysis * Assuming constant electricity consumption
-8.34% -0.87% -2.91%
37.09%
11.26% 0.43%
9.49%
8.61%
6.58%
15.23%
0.00%
0.00%
17.47%
17.47%
17.47%
14.64%
42.53%
52.15%
6.40% 20.12% 23.37%
-20%
0%
20%
40%
60%
80%
100%
2015 2025 Theoretical Rampup 2025 Proposed Rampup
Electricity Generation Mix*
Solar
Wind
Other
Nuclear
NG
Coal
Net Exports
Con
sum
ptio
n N
et E
xpor
ts
(Coal) (Coal) (NG+Coal)
23
Proposed Solar Ramp up in The Netherlands
0.65 0.64 0.63 0.59 0.66 0.73 0.81 0.89
0.99 1.10
0.30
0.59 0.59 0.59 0.59
0.73 0.73
0.73 0.74
0.74
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
GW
Solar annual additions current forecast
Solar annual additions proposed rampup above current forecast (2016-2025)
Cumulative additional solar capacity of 14 GW required by 2025 – less than double of the current forecast
24
REC Market Study – What does it mean for Japan?
9.40 8.70 7.80 7.20 7.20 7.20 7.20 7.20 7.20 7.20
11.31 11.36 10.98 13.06 18.93
24.79 30.66
36.52 42.38
48.25
0
10
20
30
40
50
60
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
GW
Current forecast annual solar PV additions in Japan
Proposed solar ramp up above current forecast for Japan (practical solution)
Cumulative additional solar capacity of 250 GW required by 2025 – more than 3 times the current forecast
Source: IHS 2015 (incl. PV outlook until 2020); REC internal analysis
25
The content of this presentation is strictly confidential. REC is the exclusive owner or licensee of the content, material, and information in this presentation. Any reproduction, publication or reprint, in whole or in part, is strictly prohibited. The information in this presentation may not be accurate, complete or up to date, and is provided without warranties or representations of any kind, either express or implied. REC, as well as its directors, officers and employees, shall not be responsible for and disclaims any liability for any loss or damages, including without limitation, direct, indirect, incidental, consequential and special damages, alleged to have been caused by or in connection with using and/or relying on the information contained in this presentation.