Presentation on theme: "Past, Present and Future of Solar Finance"— Presentation transcript:
1Past, Present and Future of Solar Finance Presented to:Intersolar Solar Finance and Asset Symposium IVJuly 7, 2014San FranciscoMichael EckhartManaging DirectorGlobal Head of Environmental FinanceCorporate & Investment BankingCitigroup Capital Markets, Inc.
3: Invention of PV1839:Photovoltaic effect first observed in science by Edmond Becquerel, Paris1888:Edward Weston receives first US patent for "solar cell"1922:Nobel Prize awarded to Albert Einstein for his 1905 mathematical explanation of the photovoltaic effect1954:Bell Labs produced the first functioning solar cell1959:NASA launched Vanguard 1, the first spacecraft using solar PV (still in orbit!)
41973-1976: Oil Crisis and OECD Reply 1973:Ford Foundation Study: “solar and efficiency” by David Freeman“Solar Energy in the Service of Mankind”, Paris: Wolfgang PalzSolarex founded by Peter Varadi and Joe LindmeyerArab oil embargo:International Energy Agency IEA)Federal Energy Administration (FEA)Energy Research & Development Administration (ERDA)Congressional Solar Coalition, Scott SklarOil industry begins investing in solar PV development:ARCO -- Texaco -- ChevronExxon -- Shell -- Mobil
51977-1979: U.S. Government Action 1977:DOE founded by merger of agencies: FEA, ERDA, NASA Solar, Coal researchSolar Energy Research Institute (SERI) established in Golden, CODOE sets PV cost goal = 50¢/Wp ($1976)1978:PURPA enacted: creating Qualifying Facilities (QFs)Energy Tax Act created the first business tax incentives for solar, leading to first leasing structures –Keith Martin, Chadbourne & ParkeBAH study for the White House: “Assessment of Solar PV Technology, Industry and Policy”: Eckhart et al1979:ARCO Solar produces 1 MW of PV in one year
6: The Lost Decade1979:Iranian hostage crisis and oil price increase1980:Ronald Reagan elected; beginning of major cutbacks in Federal funding1983:Solarex acquired by Amoco, commercial applications for PV1985:Solar tax credits allowed to lapse1986Oil and gas prices collapse
71990-1996: Rebirth of Renewables 1990:SERI renamed NREL1992:EPAct1992: EWGs and wind PTCAachen Model, Germany – precursor to the FITSELF founded by Neville Williams1995:Founding of Nth Power, first VC in renewables, by Nancy FloydFounding of E+Co, the Rockefeller-funded finance fund for SMEs1996:World Bank-Rockefeller joint task force on Solar Financing
81997-1999: Kyoto and EU White Paper 1997:Kyoto ProtocolEuropean “White Paper on Renewable Energy” by Wolfgang PalzWorld Bank hosts “Village Power” conference1998SolarBank Initiative in South Africa, Mike Eckhart, Reinhold Viljoen, Sake Kotse et alSolarBank Initiative in India: training 1,000 bankers by Mike Eckhart, Griff Thompson, Harish Hande, KM Udupa, Rahul Arora, Aesha GrewalGerman 100,000 roofs program, Hermann ScheerCalifornia AB 32 solar subsidy1999:First RPS in Texas for 2,000 MW of wind powerFounding of the Shell-Eskom Solar Energy Co. in South Africa using pre-paymentSiemens Solar achieves 100 MW produced – announces 25-year warranty
9: Stage-Setting2000:German FIT for solar PV plus KfW solar loan program – Hermann ScheerEU Publishes “Take-Off for Renewable Energy”Net MeteringPowerLight hires Greg Rosen, first full-time financier of solar2001:ACORE founded, Mike Eckhart, Scott Sklar, Dan Reicher, Michael Ware, John Mullen, Mark Riedy, Hank Habicht and many others.9/11Enron bankruptcy - ending of utility restructuring2002:Solar leasing offered by Stella Group – Scott SklarRio+10 meeting in Johannesburg: renewables blocked
102003-2005: Policy for Financing 2003:First REFF-Wall Street – repeated annually since then by Mike Eckhart, Ken Locklin, Dan Reicher, Michael Ware et alNew Energy Finance founded, Michael LiebreichSunEdison founded – PPA model for rooftop solar, Jigar Shah:German 20-year FIT for all renewables, Hans Josef Fell et al2004:Bonn Renewables 2004 – Gerhard Schroeder, Jurgen Trittin, Hermann ScheerIncreasing RPS in the US2005:Increased VC investment: John Doerr at KPCB, Stephan Dolezalek at VPCP, Raj Atluru at DFJ, Erik Strasser at Mohr Davidow, Nancy Floyd at Nth Power, plus NEA, others
112006-2007: China and California 2006:China enacts Renewable Energy Law: Li junfengCalifornia Solar initiative: $3 billion over 10 years2007: SolarCity, SunRun, Sungevity foundedSale-leaseback financing of a utility-scale PV project for SunEdison, Keith Martin, Chadbourne & ParkeInverted Lease for resi-rooftop created by US Bank and Morgan Stanley: Marshal Salant and Jason CavaliereFirst solar set-aside established in the Colorado RPS
122008-2009: Financial Crisis/Incentives 2008:WIREC 2008 world meeting by ACORE, Mike Eckhart, Jim Connaughton, Reno Harnish, many othersPartnership flip financing by SunEdisonFinancial crisis: Lehman Bros bankruptcyERRA: 30% ITC for 8 years, Rhone Resch; beginning of the new era of tax equity for solar2009:IRENA founded$*9 Billion ARRA with cash grant, loan guarantees and R&D fundingEU enacts 20/20/20 by 2020CPF Founded: Nat Kreamer
13: Loan Guarantees2010:China has 523 companies manufacturing solar PV, begins dropping pricesRBF convenes off-site to advance FITs to the US: Michael Northrop, Craig Lewis2011:Fukushima nuclear power accident in JapanARRA loan guarantees awarded for CSP to BrightSource, SolarReserve and AbengoaARRA loan guarantees awarded for PV to First Solar, SunPower, Cogentrix$2.3 billion Desert Sunlight financing with first solar project bonds by Citi, Stuart Murray et al
142012-2014: Capital Markets 2012: Japanese FIT enacted China PV installation program enactedSolarCity IPO: Lyndon Rive, Bob Kelly, Ben Cook et alSolar Mosaic founded creating first crowd funding: Daniel Rosen and Billy ParishSAPC founded by NREL: Michael MendelsohnBirth of Community Solar – cooperative financing2013:First REIT: Hannon Armstrong Sustainable Investment IPO: Jeff EckelFirst solar securitization by SolarCity: Credit SuisseFirst Yieldco by NRG, David Crane working with CitiTruSolar founded by Distributed Sun: Chase Weir, Jeff Weiss, Doug Payne“Banking on Solar” founded 2014:Green Bond Principles developed by Citi and BAML and adopted by over 50 banks, investors and issuers: $20.5 Billion issued YTD.
15Summary: Phases of Innovation 1970 - 2020 Environmental Policy InnovationClean Air Act Kyoto EPATechnology InnovationERDA / USDOE ARRA RD&D FundingMarket Structure InnovationPURPA EPAct 1992RE Policy InnovationFIT, Net Metering, RPS, tax creditsFinancial InnovationLG, CG, ITC, Interest Rates
16Global Solar PV Global Installations 2007-2015 (GW/Year) ROWIndiaChinaUSJapanEUSource; BNEF 2013
17U.S. Solar PV Installations 2006-2013 (S Millions) Utility-ScaleSmall-Scale
18Future of Solar Finance: Near-Term Drivers Drivers trending towards solar:Global markets driving down hardware costsInterconnection and permittingGrid and distribution system upgradesStorageContinued PV technology advancement and cost reductionDrivers trending away from solar:ITC and other direct supportsNet metering and resolution of utility ratesInterest rates
19Future of Solar Financing: Long-Term Drivers Drivers trending towards solar:Global market pull on PV successPower economics with environmental and climate costsPublic attitudes on climate and environmentPublic acceptance of solarInfusion of climate policy in utility decision makingDrivers trending away from solar:None
20Future of Solar Finance Continued innovation:Easy credit for residential rooftopCredit backstop mechanisms for C&I financingPortfolio financings for substation-level projectsRisk mitigation and credit enhancementM&A and consolidation:Solar installation companiesSolar financing companiesScale-up of issuances to the capital markets:Solar securitizationsYieldcos – Carve-outs, Newcos, REITs, and maybe MLPsGreen bonds and the return of balance sheets
21Thank You Michael Eckhart Managing Director Global Head of Environmental FinanceCorporate & Investment BankingCitigroup Capital Markets, Inc.