Past, Present and Future of Solar Finance
Presented to:
Intersolar Solar Finance and Asset Symposium IV
July 7, 2014
San Francisco
Michael Eckhart
Managing Director
Global Head of Environmental Finance
Corporate & Investment Banking
Citigroup Capital Markets, Inc.
michael.eckhart@citi.com
PERSPECTIVE
1839-1959: Invention of PV
1839:
• Photovoltaic effect first observed in science by Edmond Becquerel, Paris
1888:
• Edward Weston receives first US patent for "solar cell"
1922:
• Nobel Prize awarded to Albert Einstein for his 1905 mathematical
explanation of the photovoltaic effect
1954:
• Bell Labs produced the first functioning solar cell
1959:
• NASA launched Vanguard 1, the first spacecraft using solar PV (still in
orbit!)
1973-1976: Oil Crisis and OECD Reply
1973:
• Ford Foundation Study: “solar and efficiency” by David Freeman
• “Solar Energy in the Service of Mankind”, Paris: Wolfgang Palz
• Solarex founded by Peter Varadi and Joe Lindmeyer
• Arab oil embargo
1974 -1976:
• International Energy Agency IEA)
• Federal Energy Administration (FEA)
• Energy Research & Development Administration (ERDA)
• Congressional Solar Coalition, Scott Sklar
• Oil industry begins investing in solar PV development:
– ARCO
-- Texaco
-- Chevron
– Exxon
-- Shell
-- Mobil
1977-1979: U.S. Government Action
1977:
• DOE founded by merger of agencies: FEA, ERDA, NASA Solar, Coal research
• Solar Energy Research Institute (SERI) established in Golden, CO
• DOE 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 & Parke
• BAH study for the White House: “Assessment of Solar PV Technology,
Industry and Policy”: Eckhart et al
1979:
• ARCO Solar produces 1 MW of PV in one year
1979-1989: The Lost Decade
1979:
• Iranian hostage crisis and oil price increase
1980:
• Ronald Reagan elected; beginning of major cutbacks in Federal funding
1983:
• Solarex acquired by Amoco, commercial applications for PV
1985:
• Solar tax credits allowed to lapse
1986
• Oil and gas prices collapse
1990-1996: Rebirth of Renewables
1990:
• SERI renamed NREL
1992:
• EPAct1992: EWGs and wind PTC
• Aachen Model, Germany – precursor to the FIT
• SELF founded by Neville Williams
1995:
• Founding of Nth Power, first VC in renewables, by Nancy Floyd
• Founding of E+Co, the Rockefeller-funded finance fund for SMEs
1996:
• World Bank-Rockefeller joint task force on Solar Financing
1997-1999: Kyoto and EU White Paper
1997:
• Kyoto Protocol
• European “White Paper on Renewable Energy” by Wolfgang Palz
• World Bank hosts “Village Power” conference
1998
• SolarBank Initiative in South Africa, Mike Eckhart, Reinhold Viljoen, Sake Kotse et al
• SolarBank Initiative in India: training 1,000 bankers by Mike Eckhart, Griff Thompson,
Harish Hande, KM Udupa, Rahul Arora, Aesha Grewal
• German 100,000 roofs program, Hermann Scheer
• California AB 32 solar subsidy
1999:
• First RPS in Texas for 2,000 MW of wind power
• Founding of the Shell-Eskom Solar Energy Co. in South Africa using pre-payment
• Siemens Solar achieves 100 MW produced – announces 25-year warranty
2000-2001: Stage-Setting
2000:
• German FIT for solar PV plus KfW solar loan program – Hermann Scheer
• EU Publishes “Take-Off for Renewable Energy”
• Net Metering
• PowerLight hires Greg Rosen, first full-time financier of solar
2001:
• ACORE founded, Mike Eckhart, Scott Sklar, Dan Reicher, Michael Ware, John
Mullen, Mark Riedy, Hank Habicht and many others.
• 9/11
• Enron bankruptcy - ending of utility restructuring
2002:
• Solar leasing offered by Stella Group – Scott Sklar
• Rio+10 meeting in Johannesburg: renewables blocked
2003-2005: Policy for Financing
2003:
• First REFF-Wall Street – repeated annually since then by Mike Eckhart, Ken Locklin,
Dan Reicher, Michael Ware et al
• New Energy Finance founded, Michael Liebreich
• SunEdison founded – PPA model for rooftop solar, Jigar Shah
2003-2004:
• German 20-year FIT for all renewables, Hans Josef Fell et al
2004:
• Bonn Renewables 2004 – Gerhard Schroeder, Jurgen Trittin, Hermann Scheer
• Increasing RPS in the US
2005:
• 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
2006-2007: China and California
2006:
• China enacts Renewable Energy Law: Li junfeng
• California Solar initiative: $3 billion over 10 years
2007:
• SolarCity, SunRun, Sungevity founded
• Sale-leaseback financing of a utility-scale PV project for SunEdison, Keith
Martin, Chadbourne & Parke
• Inverted Lease for resi-rooftop created by US Bank and Morgan Stanley:
Marshal Salant and Jason Cavaliere
• First solar set-aside established in the Colorado RPS
2008-2009: Financial Crisis/Incentives
2008:
• WIREC 2008 world meeting by ACORE, Mike Eckhart, Jim Connaughton,
Reno Harnish, many others
• Partnership flip financing by SunEdison
• Financial crisis: Lehman Bros bankruptcy
• ERRA: 30% ITC for 8 years, Rhone Resch; beginning of the new era of tax
equity for solar
2009:
• IRENA founded
• $*9 Billion ARRA with cash grant, loan guarantees and R&D funding
• EU enacts 20/20/20 by 2020
• CPF Founded: Nat Kreamer
2010-2011: Loan Guarantees
2010:
• China has 523 companies manufacturing solar PV, begins
dropping prices
• RBF convenes off-site to advance FITs to the US: Michael
Northrop, Craig Lewis
2011:
• Fukushima nuclear power accident in Japan
• ARRA loan guarantees awarded for CSP to BrightSource,
SolarReserve and Abengoa
• ARRA 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
2012-2014: Capital Markets
2012:
• Japanese FIT enacted
• China PV installation program enacted
• SolarCity IPO: Lyndon Rive, Bob Kelly, Ben Cook et al
• Solar Mosaic founded creating first crowd funding: Daniel Rosen and Billy Parish
• SAPC founded by NREL: Michael Mendelsohn
• Birth of Community Solar – cooperative financing
2013:
• First REIT: Hannon Armstrong Sustainable Investment IPO: Jeff Eckel
• First solar securitization by SolarCity: Credit Suisse
• First Yieldco by NRG, David Crane working with Citi
• TruSolar 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.
Summary: Phases of Innovation
1970 - 2020
Environmental Policy Innovation
Clean Air Act
Kyoto
EPA
Technology Innovation
ERDA / USDOE
ARRA RD&D Funding
Market Structure Innovation
PURPA
EPAct 1992
RE Policy Innovation
FIT, Net Metering, RPS, tax credits
Financial Innovation
LG, CG, ITC, Interest Rates
1970
1980
1990
2000
2010
2020
Global Solar PV Global Installations
2007-2015
(GW/Year) 46.3
ROW
India
36.3
30
30.5
China
US
18.2
6.6
Japan
7.7
2.8
2007
EU
2008
Western Europe
2009
2010
2011
Eastern Europe
Japan
Source; BNEF 2013
2012
US
2013
China
India
2014
2015
Rest of World
U.S. Solar PV Installations 2006-2013
(S Millions)
Utility-Scale
Small-Scale
Future of Solar Finance:
Near-Term Drivers
Drivers trending towards solar:
• Global markets driving down hardware costs
• Interconnection and permitting
• Grid and distribution system upgrades
• Storage
• Continued PV technology advancement and cost reduction
Drivers trending away from solar:
• ITC and other direct supports
• Net metering and resolution of utility rates
• Interest rates
Future of Solar Financing:
Long-Term Drivers
Drivers trending towards solar:
• Global market pull on PV success
• Power economics with environmental and climate costs
• Public attitudes on climate and environment
• Public acceptance of solar
• Infusion of climate policy in utility decision making
Drivers trending away from solar:
• None
Future of Solar Finance
Continued innovation:
• Easy credit for residential rooftop
• Credit backstop mechanisms for C&I financing
• Portfolio financings for substation-level projects
• Risk mitigation and credit enhancement
M&A and consolidation:
• Solar installation companies
• Solar financing companies
Scale-up of issuances to the capital markets:
• Solar securitizations
• Yieldcos – Carve-outs, Newcos, REITs, and maybe MLPs
• Green bonds and the return of balance sheets
Thank You
Michael Eckhart
Managing Director
Global Head of Environmental Finance
Corporate & Investment Banking
Citigroup Capital Markets, Inc.
michael.eckhart@citi.com
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