“LCOE and Grid Parity revealed : What is the impact on the PV supply chain?”

1. “LCOE and Grid Parity revealed : What is the impact on the PV supply chain?” Concepts and implications for materials and equipment company executives competing in the global PV market. Joseph Berwind, Principal Linx-AEI Consulting

2. Linx-AEI Consulting At the intersection of electronic materials and photovoltaic power generation • Accomplishments: • Fabrication TCO simulation • Manufacturing database • IP Analysis • Module company valuation • PV project analysis • PV Materials (4rd. Ed.) • Technology competitive analysis • LCOE and grid-parity tracking • Services: • Proprietary reports • Multi-client reports • Retainer services • Advisory and due-diligence • Technology research • Business development and strategy • Market entry services • Private company valuation

3. Grid Parity, "The PV Demand Relationship” • Equity • Debt Power Sales / $kWhr System IRR %

4. Residential LCOE, “What is it and why does it matter to me?” • LCOE Basics • LCOE implies “LevellizedCost of Electricity.” This is simply the lifetime cost incurred producing solar electricity divided by lifetime electricity generated by the system discounted back to today using the present value of money. • LCOE is independent of subsidies. This is because the subsidies are the income generated by the system whereas LCOE implies the cost of generating electricity. • LOCE is mainly dependent on solar radiation and module prices.

5. LCOE, ”It matters at every step in the supply chain” • Consistent, High Purity Silicon Wafers • Improved paste formulations, most importantly for front side grids • Si recovery in sawing slurries • Potential key resource saving. Technical breakthrough required • Diamond wire • Cheaper wafering, less surface damage • Improved texturization etches • Higher cell efficiency • Cleaning technology • Improved line yield, better cell efficiency • Patterned emitters and MWE • Reduced cell shadowing, improved ease of moduling • Non-contact metal deposition or plating • Reduced breakage, reduced materials cost • Chamber cleaning gas • Environmental concerns, reduced GWP • Backsheet alternative • UV protection sheet supply • Improved factory automation and higher yields • Material and process improvements will struggle to deliver cost reduction needed

6. LCOE, “Materials & Processes Enable Markets” Cost per Wp LCOE Source: Linx-AEI Consulting Source: Linx-AEI Consulting success Evaluating or selling new materials and or new processes using TCO analysis that stops at cost per watt is incomplete without simulating LCOE effects. 5¢ kWhr 3¢ kWhr

7. LCOE, ”The least analyzed, yet the most important” Source: Linx-AEI Consulting 6

8. Residential Grid Parity, “What is it and why does it matter to me?” “The single most frustrating question inside the board-room related to a firm’s investment decision in PV for the C-level executives to answer: “When is grid-parity?” Tuvalu, formerly known as the Ellice Islands, is a Polynesian island nation located in the Pacific Ocean, midway between Hawaii and Australia. Grid Price kWhr LCOE kWhr

9. Grid Parity & LCOE, “Is this chart all we ever need?”

10. Grid Parity, “Until Then, Subsidies, subsidies, subsidies” c Subsidies are given based on different parameters in different geographies. Factors such as system size, installation type are considered in deciding the quantum of subsidy. Local subsidies, therefore, impact returns differently leading to different demand dynamics.

11. Grid Parity, “Until Then, LCOE, LCOE, LCOE” Net Benefit Source: Linx-AEI Consulting

12. Grid Parity, “Until Then, Subsidies, subsidies, subsidies” 38% to 42% subsidy cut slows robust demand 42% to 46% subsidy cut would tank the market MIRR. Always on the move! 20 Year Govt. Bond. Always on the move! 5.38%: Strong Demand 4.93%: Medium Demand 4.48%: Weak Demand +1% If subsidies are cut <=38%, demand remains "strong" Source: Linx-AEI Consulting - 52% “Quantifiable knowledge of the market based on LCOE calculus.”

13. 2009 ViewThe New Market Reality New Capacity High Quality Modules All available raw materials converted to modules for installation. Factory Capacity not used at 100% Easy access to capital allows high risk capacity to be constructed Financial Crisis Tight restrictions on project loans Finance worthy module capacity broadly in balance with demand New capacity financed if capital is available, if risks are low, or if new technology meets expectations

14. 2009 ViewPV Polysilicon Capacity vs. Demand Source: Linx-AEI Consulting Silicon Supply passed into balanced supply in 2008, and is likely to go into oversupply in 2009

15. 2009 ViewCritical Lesson Learned: Investors Look Ahead “Credit Crisis followed by global recession is exacerbating an existing situation. Oversupply throughout the supply chain is expected to last some years.” – Joe Berwind January 2009 German 20-Yr Yields December 4.10% January 3.90% February 3.78% March 3.72% April 3.58% May 3.24% June 3.10% July 3.25% August 2.60% September 2.83% October 3.02% November 3.16% December 3.46% Source: Linx-AEI Consulting German 20 year yields were under 4% for most of 3Q ‘09 Module prices had fallen from over $3/Wp to $2.25/Wp 4Q’09 FiT = € 0.4301 for rooftop systems 3Q’10 FiT = € 0.3405 for rooftop systems

16. Investors Look Ahead, cont.Lesson applied to the current situation Source: Linx-AEI Consulting German 20-Yr. YieldsForwards 3.4473 3 months 3.5823 1 year 3.7502 2 years 3.9007 3 years What lies ahead?

17. Investors Look Ahead, cont.What if they cut mid-year once again? Source: Linx-AEI Consulting

18. Conclusions

19. Thank You! Linx-AEI Consulting 25 DeForest Avenue Suite 207 Summit, NJ 07901 joe@aeiresearch.net Tel. +1 (917) 514-5246