Vito Gamberale: Photovoltaics like PCs and mobile phones

Photovoltaics like PCs and mobile phones?

HFV ConventionRome, November, 28, 2013

Mr. Vito Gamberale

Evolution of the photovoltaic sector page 3

Photovoltaics like PCs and mobile phones page 13

Conclusions page 18

2

Index

3

Evolution of the photovoltaic sector


4

Photovoltaics has exceeded 100 GW of installed power worldwide and it is expected to reach between 300 and 430 by 2017.

Evolution of the installed power worldwide in 2007-2012 in GW

9

16

23

41

71

102

0

20

40

60

80

100

120

2007 2008 2009 2010 2011 2012

In the last 5/6 years, the installation of photovoltaic plants has exponentially grown, both at the global level…


5

In October 2013 the overall power reached 17.500 MW.

Evolution of the installed power in Italy in 2007-2012 (MW)

… and at the national level:

MW


6

In 5 years solar passed from 2% to 35% of RES.

In Italy photovoltaics has represented the main growth driver of the installed power from renewable energy sources…

Evolution of installed power from RES (GW)

0

10

20

30

40

50

2008 2009 2010 2011 2012

Idraulica Eolica Solare Geotermica Bioenergie

CAGR%

+25%+2%

+148%

+23%

+1%

hydraulic wind solar geothermal bionergy

2008 2009 2010 2011 20120.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

16.5%

20.8%22.4%

24.0%

27.1%


7

… and electricity deriving from RES has covered more than one quarter of the national consumption, exceeding the target set by the EU (26% by 2020) 8 years ahead of time:

Incidence of electricity produced from RES on the national electricity consumption

European goal for Italy by 2020: 26%


8

This has allowed to considerably limit the use of traditional sources:

2008 2009 2010 2011 20120.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%72.2%

65.7% 64.7% 62.8%60.2%

− In 2012 the overall electric power installed (traditional sources + renewable sources) reached 125 GW, against a peak of about 55 GW in demand

− The large generation availability, partly sharpened by the fall in consumption (-1,7% in 2012), is eventually limiting the import of fossil sources from abroad (stretching, -13 Gm3 of gas per year are forecasted, with savings up to €4bn/year – source: OIR) and the energy price (in 2013 the national single price was slightly higher than €62/MWh on average).

Incidence of electricity produced from traditional sources on the national electricity consumption


9

− The positive consequences of the RES growth on the national system can be measured not only in environmental and economic terms, but also industrial.

− Despite the general thinking, the contribution of the national industry to the lifecycle of RES plants, as also highlighted by the Government, is much higher than the one provided to plants powered by traditional sources:

National contribution against the overall cost of plants lifecycle (investments + operational and fuel costs)

Source: Minister of Economic Development

Nowadays in Italy there is a chain able to produce and export inverters, control panels, cables, carpentry, wind towers, mechanical and electrical components, mini-wind turbines, hydroelectric turbines, accumulation systems, heat pumps, etc. Once fully operational, a + €3bn/year impact on exports is forecasted (source: OIR).

The sector is already employing about 120.000 people, expected to become 250.000 by 2020.

Growing from ~ 25% in 2008

Gas (combined cycle

Solar Wind Hydro Biomasses Geothermal


10

Such results have been achieved despite the erratic and uncertain measures (or announcements of measures) that, in few years, have come in succession, among which the fall in tariffs was just the most patent element:

Tariff trend for large photovoltaic plants from the 1st to the 5th Feed-in scheme

I II III IV V0

100

200

300

400

500

600

Note – The chart considers the incentive + average EE price total. For the 3rd and 4th Feed-in schemes an average incentive was considered. For the 5th Feed-in scheme the comprehensive tariff is considered.

€/MWh

− Restrictive tariff measures have been and still are accompanied by other burdens, such as the Robin Tax, the unbalancing charges, the IMU increase, etc.

− The costs cumulated due to incentives to renewables (€220bn by 2032- source: Assoelettrica) are largely balanced by the advantages (€300bn by 2030 – Source: APER on studies by Althesis and Agici). Such advantages are: the national energy independence, the wider employment generated (7:1 against turbo gas power stations), the savings on the costs of carbon emission rights, the GNP growth.

2007 2008 2009 2010 2011 20120

1

2

3

4

5

6

7


11

The development of RES, in general, and of photovoltaics, in particular, has been however favoured by a constant reduction in investment costs:

Trend of investment costs for large photovoltaic plants

M€/MW

In 2013 investment costs further decreased, down to less than 1M€/MW.


12

In photovoltaics, the reduction in investment and management costs is leading the sector towards the grid parity, which in Italy has already been achieved in the sunniest Regions:

Combined cycle gas

PV PV cost range

LCOE – Levelised Cost of Electricity, €/kWh

HFV LCOE for ground plant in Sicily

The cost of the most competitive plants (industrial scale and location in Southern Italy) is already comparable to that of combined cycle gas plants.

13

Photovoltaics like PCs and mobile phones


14

The exponential evolution of the photovoltaic sector recalls other significant phenomena, which have developed with similar vigour in the last decades: the penetration of mobile telephony and of personal computers:

The diffusion of mobile phones and PCs has revolutionised the corresponding target markets, changing people’s habits.

Such tools have also allowed the transition from a centralized and unidirectional information model (from media to users) to a decentralized information model, being it also user-generated (e.g. social networks, YouTube, etc.).

Mobile telephony penetration in Europe People using a PC at home in Italy ('000)

Sweden Norway Finland Denmark

Italy Germany France Spain


15

For TLCs, for instance, the widespread diffusion of terminals and lines has led to a considerable reduction in tariffs:

To date, that of TLCs is the only infrastructural sector where diffusion and competition have determined an actual, probably even excessive (especially in Italy), reduction in tariffs.

TLCs price trend in Europe (1998=100)

Euro Zone

France

Germany

Italy

Spain

UK

Source: elaborations by the MEF/Eurostat Data Authority


16

Photovoltaics, too, like mobile phones and much more than the other RES, is hugely changing the dynamics of its own target market, the energy one, making it evolve from a centralized energy generation to a decentralized one:

− nowadays only photovoltaics allows a truly decentralized generation: in Italy there are as many as 550.000 plants, having an average power of about 30 kW. As many as 490.000 plants have a power of less than 20 kW (domestic plants or similar);

− the achievement of the grid parity, which according to many sources has already taken place in the Italian residential market, will sharpen this phenomenon;

− decentralized generation allows the installation and the use of production plants on the consumption site, cutting down transmission and dispatch costs. Such generation is thus environmentally sustainable and, for this reason, also one of the “pillars” on which the implementation of the so-called “smart city” is based.

Source Installed powerkW

PlantsNo.

Average power kW/plant

Geothermal 680.000 21 32.381

Biomasses 3.437.600 121 28.410

Wind 8.165.900 617 13.235

Hydro 7.240.900 1.077 6.723

Photovoltaics 17.492.938 549.576 32

Note – The table refers to plants included in incentive programmes


17

In photovoltaics (next) future, the achievement of the grid parity and the decentralised generation will also affect the investors’ profile.

o “Domestic” investors or small businesses, that will install plants for self-production (on their own roofs or land plots), sharpening the phenomenon of decentralized generation;

− On mature markets (such as Italy), two investors typologies are likely to be reinforced, each with opposite features:

Small plants

Large plants

o Industrial investors:

• despite the achievement of the grid parity, the lack of incentives will determine a markup contraction for investors, leading the mere speculative ones to disappear;

• the critical development factors, namely, to date, authorization processes and equity availability, will progressively align to those typical of “traditional” production and will be represented by: technological evolution, economic competitiveness in management, integration in the electricity network, availability/cost of bank loans;

• the markup contraction and the typically industrial critical factors will, in turn, determine the convenience of managing increasingly larger portfolios (over 100MW), aiming for scale economies;

• this will determine the stabilization of the large plants market (currently atomistic), with the development of large operators to exploit scale economies.

The new “national champions” in the electricity sector, contrarily to traditional ones, will have to deal with the management of plant portfolios scattered on the territory.

18

Conclusions

Conclusions

19

− Renewables, in general, and photovoltaics, in particular, have registered an exponential development, with positive effects on the environment, on the trade balance, on employment and, contrarily to the general thinking, on the national industry;

− Renewables have actually been one (probably the only) growth driver for our economy in these years of crisis;

− The evolution and the diffusion of RES plants recalls a lot the development trend of other technological goods – mobile phones and PCs – that have changed people’s habits;

− Photovoltaics, in particular, is already, and will increasingly be, determining the transition from a centralized electric generation system to a decentralized one, functional to the development of “smart cities”, technological and environmentally sustainable;

− The grid parity, now basically achieved in photovoltaics, will sharpen this phenomenon that, however, will require increasingly larger operators to benefit of scale economies;

− With the end of governmental incentives, the market will progressively witness the exit of speculative investors and the concentration around few large industrial investors.

F2i, through HFV (already a major player in Italy, to date) aims at becoming a catalysing hub for this process of market stabilization, in order to give birth to a large “national champion” in the renewables sector, as well.

Technology

Vito Gamberale: Photovoltaics like PCs and mobile phones