Solar Sector Study TechBA AZ FV Jan 2010

Solar Energy Sector Study
Solar Energy Sector Study

TechBA Arizona
December 2009
Confidential Document
Table of Contents

Section 1 Executive Summary

Section 2 California and Arizona Solar Market
1 Energy Market Context ............................................................................................. 2‐1
2 Energy Market Framework ........................................................................................ 2‐1
3 Electricity ‐ Global Solar Market Size ........................................................................ 2‐4
4 Drivers for California/Arizona Solar Electric Market .................................................. 2‐5
5 California/Arizona – Best Solar Market to 2020 ........................................................ 2‐6
6 California/Arizona ‐ Solar Electric Market Demand Through .................................... 2‐7
7 Supply Side to the Solar Electric Market .................................................................. 2‐10
8 New Distributed Generation Electricity Markets .................................................... 2‐13
9 Solar Hot Water Market .......................................................................................... 2‐13
10 Summary of Solar Market Potential in Arizona and California ............................. 2‐14
11 Business Models .................................................................................................... 2‐13
12 Trends in Solar incentives ...................................................................................... 2‐17

Section 3 Solar Sector Market Opportunities
1 Introduction ............................................................................................................... 3‐1
2 Profiles of Mexican SMEs .......................................................................................... 3‐1
3 Supply Chain Demand for California and Arizona Solar Markets .............................. 3‐6
4 Climate Change Pressures on the Supply Chain Creates Opportunities ................. 3‐10
5 Export Sales of Solar Electricity to U.S . ................................................................... 3‐11
6 Global Thermal Energy Market ............................................................................... 3‐17
7 Industrial Process Heat ............................................................................................ 3‐18
8 Solar Cooling ............................................................................................................ 3‐20
9 Thermodynamic Converters for Solar Thermal ....................................................... 3‐22
10 PV‐Thermal for "Green Building" Markets ............................................................ 3‐24
11 "Low‐Carbon" Industrial Parks with Renewable Electric/Thermal Micro‐Grids .... 3‐25
12 Need for System Integrators and Multi‐Disciplined Engineering .......................... 3‐26
13 Export of Proprietary Solar Products .................................................................... 3‐27
14 Off‐Grid Solar Products ......................................................................................... 3‐28

Section 4 Overview of México's Solar Sector
1 México's Solar Markets ............................................................................................. 4‐1
2 Government Policies ................................................................................................. 4‐5
3 Government Support Programs for Solar ................................................................. 4‐9
4 Market Trends ......................................................................................................... 4‐11
5 Key Organizations, Research Institutions and R&D Focus ...................................... 4‐13
6 Foreign Direct Investments in Solar Industry .......................................................... 4‐15

Section 5 Financial Enables
1 Introduction ............................................................................................................... 5‐1
2 Approaches to Financing the Solar Sector ................................................................ 5‐1
3 Traditional Governmental Support Programs ........................................................... 5‐2
4 Solar Manufacturing Financial Support Programs .................................................... 5‐4
5 Solar Generation Financing Support Programs ......................................................... 5‐5
6 Private Investment/Tax Equity Financing .................................................................. 5‐6
7 International Development Financing ..................................................................... 5‐10
8 Carbon Finance ........................................................................................................ 5‐12
9 Foreign Direct Investment ....................................................................................... 5‐14

Section 6 Solar Sector Policy Recommendations
1 Supply Chain Development ....................................................................................... 6‐1
2 Alternative Energies and Sustainable Technologies .................................................. 6‐2
3 Leverage Recent Climate Change Agreements .......................................................... 6‐3
4 Leverage New R&D Relationships ............................................................................. 6‐5
5 Solar Thermal Demonstration Projects ..................................................................... 6‐6

Section 7 Company Screening Process and Company Profiles

Appendix 1 Solar Technology Value Chain
Appendix 2 Solar Policies and Incentives Overview
Appendix 3 Solar Sector Market Opportunities (Presentation)

Section 1
Executive Summary

Context
Significant opportunities exist for Mexican companies to participate in all segments of the various solar
value chains and solar markets including the emerging Mexican market along with the enormous export
markets of the southwest U.S., the Americas and the world. As solar becomes increasingly part of
Mexico’s export trade and climate change initiatives, companies performing in this space will be
increasingly valued for their “triple‐bottom lines” of financial, social and environmental returns.
California and Arizona Solar Markets
California has the 8th largest economy in the world and Arizona is the 2nd fastest growing state in the
U.S. These states have exceptional solar resources, aggressive renewable energy requirements for
utilities, and unprecedented growth in peak load demand. Solar will play a larger role in the renewable
energy mix in these 2 states in the future than anywhere in the world. Nowhere else will there likely be
a greater investment and concentration of all forms of solar energy collectively contributing to
electricity production, greenhouse gas reductions and economic development. It is also expected that
solar in California and Arizona will be the first markets in the world to achieve “grid‐parity” where the
price of solar is at or below the price of grid electricity.

Utilities in California and Arizona are projected to require some 22.1 GW of in‐state renewable energy
capacity to meet state self‐imposed mandates for Renewable Energy Portfolio requirements by 2020.
Utility‐scale solar thermal electric and PV will account for more than 50% of this new renewable capacity
which represents a market over $90 billion. This market will require an extraordinary near‐term
expansion of a global a supply chain.

Grid‐parity is the point in time at which electricity generated from renewable energy is either equal in
cost or less expensive than grid power. The well respected Silicon Valley venture capital firm of Khosla
Ventures makes the following projections:

 Peak‐parity for Solar Thermal Electric in 2009 – utility‐scale solar thermal electric plants are
considered to be at parity with the electricity costs of California’s natural gas‐fired peaker power
plants at a peak price of $.175/kWh.

 Grid‐parity for Solar Thermal Electric in 2011‐2012 – By 2011, utility‐scale solar thermal electric
plants is expected to reach parity at $.15/kWh with conventional power plants.

 Grid‐parity for Distributed PV in 2015‐2018 – PV is expected to achieve parity with natural gas
peaker plants in 2015 at $.25/kWh and parity with conventional power plants at $.22/kWh in
2018

Declining incentives are directly related to “grid parity”. As the costs for PV decline, the costs of grid
power will be increasing each year. PV grid‐parity will likely be greatly influenced by geography and will
come sooner to California and Arizona than to other U.S. states because of superior solar resources,
lower installed PV costs, and rising electricity rates. Grid‐parity will be achieved from predictable
volume‐based cost reductions and the next‐level “big” market for solar is expected to take off after
unsubsidized solar is cheaper than grid electricity.
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Solar Market Opportunities
There are numerous and diverse niches in the various sectors and segments of the global solar market
which present a wide‐range of opportunities for Mexican companies to participate in the growth of
exports to the U.S. and especially in the southwest states of Arizona, California, Nevada and New
México. There is a fast growing domestic solar market in México along with Latin and South American.
México is well positioned to benefit from the continued growth of a domestic solar market and to be a
leader to the export of solar goods and services.

These opportunities range from the export sale of utility‐scale solar thermal electricity from northern
México to the global distribution of solar products such as photovoltaic panels, solar hot water systems
and solar street lights. Perhaps the largest market potential is positioning Mexican companies as
strategic players in the supply chain for the enormous capacity additions for utility‐scale solar power
plants near the border in southern California and Arizona where there are enormous opportunities to
supply mirrors, reflectors, solar receivers, structural supports and engineering services. There are
numerous business models and market entry strategies for Mexican companies expanding into U.S.
markets. These options include third‐party distributor/supply agreements, joint‐ventures and wholly‐
owned subsidiaries as system integrators, direct‐sale Power Purchase Agreements with U.S. utilities and
large commercial customers and large self‐generation/carbon projects using solar.

Global climate change initiatives will create increasing pressures to reduce the carbon footprint of all
aspects of the solar supply chain and to reduce the embodied energy content of materials used in solar
components and parts. These climate change initiatives will also create new opportunities in the solar
supply chain for existing, new and emerging Mexican companies which understand and anticipate these
trends by implementing carbon‐reducing policies and practices which go far beyond previous “Greening
the Supply Chain” initiatives. Additional opportunities will come from companies working to provide
materials with lower “embodied” energy.

Perhaps the largest near‐term solar opportunity for Mexican companies is to initiate the development
and construction of utility‐scale solar power plants in México for the export sale of electricity to the
United States. Specifically there is a new and emerging market for the export of renewable electricity
from northern México to California by Mexican Independent Power Producers (IPPs). The export of
renewable electricity to California has already begun with recent sales of geothermal and wind by
Federal de Electricidad (CFE) and by IPPs to California utilities. For California to meet its Renewable
Portfolio Standards of 33% by 2020, the California Public Utility Commission expects that 17% of its
renewable electricity will come from out‐of‐state which equates to 4.1 GW of renewable capacity
additions which will provide more than 12,000 GWhs of electricity.

The market potential for utility‐scale solar thermal electricity, solar hot water and PV is well known. The
use of direct solar thermal energy for process and for conversion applications is the least known and
least developed sector of the solar industry. There may even greater opportunities to use low‐ and
moderate‐temperature solar thermal heat in direct applications to displace fossil‐fuel electricity
generation and to replace the direct combustion of fossil‐fuels for heat. Most of the world’s energy is
used to generate heat which consumes more than 2 times the energy that is used for electricity and 50%
more than is used for transportation. Thermal energy represents 54% of the global final energy demand
with electricity accounting for just 17%. Significant opportunities exist for Mexican companies in all
aspects of the emerging commercial/industrial solar thermal market. These opportunities apply to
system integrators, engineering services and manufacturers of the solar thermal generation systems
along with the thermal conversion equipment and systems used to transform heat into productive
“work”. Key products of direct solar thermal which present great opportunities for México are industrial
process heat and process hot water, cooling, heating, desalinated water and “distributed‐scale” thermal
power blocks for electricity and heat.

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Several Mexican SMEs have developed and are now manufacturing proprietary solar products for the
domestic market and are starting to export to Europe and to Latin and South America. These are low‐
cost, high‐quality products which are strong candidates for export to the California and Arizona markets.

México’s Solar Sector
Mexico’s solar resources are among the best in the world and far superior to Germany and Spain which
are the recognized world leaders in installed photovoltaic systems. México’s average solar resources for
PV are more than 60% higher than the best solar in Germany which has 5.4 GW of installed PV. Spain
and Germany are the global PV leaders with a total of 8.7 GW which is 67% of the world’s PV installed
capacity. The “energy return factor” (ERF) for PV installed in most of México is very favorable and
produces 17 times the electricity that is required to manufacture the PV system. This figure is 1.5 times
higher than the ERF for Germany and is equal to most of Spain.

México’s extraordinary solar resources have largely gone untapped with just 135 MW of installed solar
capacity in 2008. Currently, there are no solar thermal electricity plants in México. Some 80% of PV
installations in México are for off‐grid/rural electrification and 78% of all solar hot water installations are
for swimming pool heating. Mexico’s solar resources have largely gone untapped but the potential is
huge with a photovoltaic and solar thermal market potential estimated to be as large as 45 GW which is
approximately 75% of México’s 2008 electricity generation capacity.

Photovoltaic electricity is “unsubsidized” in México and competes against “subsidized” residential
electricity rates. Residential electricity rates in México are subsidized by the government and were
described by a recent World Bank report as among the largest electricity subsidies in world. In 2006
residential electricity subsidies accounted USD 9 Billion which represented more than 33% of total
electricity sector revenues and equated to 1% of the gross domestic product. Over 66% of electricity
subsidies go to residential consumers and the volume of subsidies to residential customers increased by
46% between 2002 and 2006 in real terms.

Photovoltaics module prices are dropping faster than all predictions and are driving unprecedented PV
growth in México during 2009; PV prices are now approaching the GTZ Report’s “optimistic pricing”
scenario (2009‐2014) already in 2009. In the past 2 years México has seen dramatic reductions in the
installed costs for PV ranging from 30% to 60% with the variation depending under system integrator
and whether the module uses silicon or thin‐film cells. In 2009, the general payback periods for solar hot
water systems are 1.5 to 3 years and for photovoltaics 5‐9 years depending upon regional solar
resources, energy consumption, equipment selection and installer pricing.

The Federal government’s new “Renewable Energy Development and Financing for Energy Transition
Law” (LAERFTE) became effective in November 2008 and mandated SENER to produce a National
Strategy for Energy Transition and Sustainable Energy Use and a Special Program for Renewable Energy.
The main objective of the Law is to regulate the use of renewable energy resources and clean
technology and to establish a national strategy and financing instruments to allow México to scale‐up
electricity generation based on renewable resources.

As a global leader in climate change, México is one of the first developing countries to commit to a
specific reduction of emissions through the use of clean and efficient energies. In near future, solar is
expected to play a major role in the country’s ambitious climate change initiatives during the Kyoto
Post‐2012 period.

Government programs, often in conjunction with international development entities, are most often the
sponsors of large‐scale solar development. Often solar is a key component to programs focused upon
providing affordable housing and promoting rural development. Key entities promoting solar in Mexico
are the Instituto de Investigaciones Eléctricas (IIE), Centro de Investigación en Energía, Universidad
1‐3

Nacional Autónama de México (CIE‐UNAM), La Asociación Nacional de Energía Solar (ANES), and GTZ,
the Germany sustainable development organization.

Financing Enablers
The general types of support programs, solar incentives and financial tools used by “enablers” to
leverage investment in the various value chains of the solar industry which include:

 Economic Development – traditionally consists of targeting individual companies with
conventional grants, loans, and tax incentives to solar companies locating and/or expanding in
certain regions or locations; some efforts are marketed at promoting new “solar cluster
development” along with “green jobs”.

 Export Trade Development – existing initiatives which use direct loans and credit enhancements
to assist foreign customers buying solar products, goods and components produced
domestically; some countries are targeting the renewable energy sector for export trade
initiatives.

 Targeted Financing for Solar Manufacturers – consists of national and state tax credits targeted
to assist the financing of solar manufacturers along with utilities receiving “Renewable Energy
Credits” for payments to solar manufacturers for sales leading to in‐state solar generation.

 Renewable Energy Generation Incentives and Portfolio Requirements – the “market drivers” for
the explosive growth of solar in the US is due to a mix of voluntary incentives and mandatory
requirements for generating solar energy in California and Arizona which makes large and small
solar projects “bankable” which leverages equity and debt investments in solar manufacturing
and in the solar supply chain.

 Private Investment/Tax Equity Financing – comprised largely of institutional and tax equity
investors, private syndicated investments and private bond placements offering equity, debt
and leveraged investments with tax‐offsets and pass‐through net operating losses.

 Carbon Funds, Kyoto Protocols and Post‐2012 Funds – consists of international players buying
“certified emission reduction” credits from renewable energy projects which assists in financing
projects and assists countries meet their carbon reduction commitments under the Kyoto.

 International “Donor Trust Funds” – established to buy the environmental attributes of solar
energy projects in long‐term contracts which are used to secure conventional financing.

 Foreign Direct Investment and Strategic Alliances/Partnerships – usually consists of equity and
debt financing to build manufacturing capacity in low‐cost countries with local strategic partners
in order to guarantee a supply of solar products for fast growing markets.

Policy Recommendations
Several policy recommendations are presented for consideration as tools to accelerate the development
of a solar industry in México. To a great extent the solar sector plays a part of a larger, fast‐changing
global “carbon market” in which the dominate drivers will be greenhouse gas (GHG) reductions and
reduced “carbon footprints”. Many steps can be taken to further build the capacity of México’s
emerging solar sector to compete in a dynamic global and national marketplace while also meeting goals
to reduce greenhouse gas emissions. Recommendations include:

 Enhance competitiveness of the SME “Gazelles" in the new carbon market
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 Focus on financing SMEs which can lead in the implementation of all aspects of climate change
initiatives

 Leverage recent climate change agreements to accelerate formation of strategic partnerships
between U.S. and Mexican SMEs in the solar sector

 Form new linkages for SMEs with the European solar industry

 Export renewable electricity to U.S.

 Export proprietary solar products and integrated systems

 Leverage new R&D Relationships

 Increase awareness of solar thermal capabilities with high‐profile demonstrations

* * *
1‐5

Section 2
California and Arizona Solar Markets
1 Energy Market Context
California has the 8th largest economy in the world and Arizona is the 2nd fastest growing state in the U.S.
These states have exceptional solar resources, aggressive renewable energy requirements for utilities,
and unprecedented growth in peak load demand. Solar will play a larger role in the renewable energy
mix in these 2 states in the future than anywhere in the world. Nowhere else will there likely be a
greater investment and concentration of all forms of solar energy collectively contributing to electricity
production, greenhouse gas reductions and economic development. It is also expected that solar in
California and Arizona will be the first markets in the world to achieve “grid‐parity” where the price of
solar is at or below the price of grid electricity.

Utilities in California and Arizona are projected to require some 24 GW of renewable energy capacity to
meet state self‐imposed mandates for Renewable Energy Portfolio requirements by 2020. Utility‐scale
solar thermal electric and PV will account for more than 50% of this new renewable capacity which
represents a market over $90 billion. This market will require an extraordinary near‐term expansion of a
global supply chain. This section describes the California and Arizona solar market through 2020 in order
to provide an overview of the size, diversity and scale of the market demand along with a review of
current developments in market supply. All costs in this section are in US Dollars.
2 Energy Market Framework
2.1 Electricity Markets
2.1.1 Utility‐Scale Electricity
Utility markets are characterized by companies generating electricity in central plants and acquiring
additional electricity which is delivered through a transmission network to distribution centers which
step‐down the electricity which is then delivered through local distribution loops to end‐users. Electric
utilities obtain electricity in several ways:

 Generation from their own power plants

 Acquisition of electricity through competitive long‐term supply contracts (Power Purchase
Agreements ‐ PPAs) from third‐parties such as Independent Power Producers (IPPs)

 Purchases on the spot market

Utilities classify electricity by product values which correlate to how and when electricity is generated:

 Baseload power plants operate nearly continuously

 Intermediate‐load power plants operate to supply daily periods of increased power demand

 Peak‐load plants operate for limited hours as needed to meet peak power needs

 “Non‐firm” /Intermittent power is generated only when renewable resources are available such
solar and wind. An advantage of solar is that production is highly correlated to the load profile
of utilities in the southwest US and northern México
2‐1

2.1.2 Distributed Generation ‐ Electricity
Distributed Generation (DG) is sometimes called “distributed power” or “distribution energy” and refers
to the production of electricity at, or close to, the point of consumption. DG can be grid‐connected or
off‐grid. Distributed generation can support a single‐family residence, a commercial/industrial facility, a
group of facilities or a micro‐grid. DG is generally referred to generation occurring on the customer side
of the electrical meter. DG is also used by utilities to site distributed generation at or near a load center
which can off‐set expense for expanding a central power plant and for additional transmission capacity.
DG is connected to the grid at distribution voltages. More particularly the DG market is segmented as
follows:

 Residential – Includes single‐family residences and multi‐family housing; energy‐generated is
used on‐site

 Commercial/Industrial – Includes government, schools, hospitals, ect.; energy‐generated is used
on‐site

 Utility DG – Generation facilities usually with capacities under 20 MW which are grid‐connected
in the distribution loop

 Off‐Grid – Generation that is isolated from the distribution grid; often called “remote” power,
“village” power, micro‐grids, etc.; energy generated is used within a local loop or for a specific
home or building
2.2 Distributed Thermal Energy Markets
The direct use of thermal energy is inherently Distributed Generation with the place of heat generation
at or near the thermal point‐of‐use. Thermal energy can be generated though combustion processes
(coal, natural gas and biomass) and the conversion of geothermal and solar radiation through heat
exchange systems. Thermal energy is usually segmented by temperature ranges and defined as low‐,
medium‐ or high‐temperature markets.

Thermal Energy Market Segments by Temperature and Applications

High‐Temperature Industrial Process Heat > 250°C > 480°F
Utility‐Scale Solar Thermal Electric 400°C‐1000°C 750°F‐1800°F
Medium‐Temperature Heat 80°C‐250°C 176°F to 480°F
Industrial Process Heat
Industrial Process Hot Water
Thermal‐Based Cooling
Electricity Generation
Desalination
Low‐Temperature Heat < 80°C < 176°F
Industrial Process Heat
Domestic Hot Water
Space Heating
Thermal‐Based Cooling
Desalination

2‐2

2.2.1 Low‐ and Medium‐Temperature Applications
 Process Heat – washing, pasteurizing, boiling, sterilizing, heat treatment, drying, dehydration

 Cooling – absorption cooling, adsorption cooling, desiccant cooling, dehumidification,
refrigeration

 Space Heating – boiler pre‐heating, industrial facilities, district heating, residential homes,
commercial buildings

 Conversion Processes –
o Electricity from heat‐driven thermodynamic turbines and converters
o Kinetic energy for mechanical applications (water pumping, grinding, belt‐drives, etc.)

 Water – industrial process hot water, domestic hot water, commercial laundries, water
purification, multi‐stage flash desalination (MSF), multiple effect desalination (MED), swimming
pool heating, kinetic water pumping
2.3 The Value Proposition of Solar Conversion
The value proposition for solar energy in the various segments of the energy market is directly
correlated to the manner and efficiency by which the solar technology converts sunlight into useful
energy. The primary products from the direct conversion of solar energy are DC electricity and thermal
energy. Solar energy can be understood in 4 conversion processes each of which presents its own
unique value proposition in the solar and energy markets:

 Solar‐to‐Electricity. Photovoltaics (PV) use Global Horizontal Radiation (GHI) which includes
direct and diffuse radiation and which means that PV performs on a cloudy day. PV modules use
semiconductor materials to convert approximately 10‐15% of solar energy directly into DC
electricity which is converted to AC power or used directly for off‐grid DC applications. PV panels
become thermal absorbers during mid‐day and 85‐90% of this thermal energy received is
dissipated and lost as waste heat. There is an annual drop‐off in performance of PV .5 to 1% due
to degradation which is factored into PV output. The high ambient temperatures of the
southwest U.S. can further reduce the performance of PV.

 Solar‐to‐Thermal‐to‐Electricity. All solar thermal systems use Direct Normal Irradiance (DNI)
which is direct beam sunlight which means that solar thermal does not perform on a cloudy day.
Solar thermal systems use reflectors and mirrors to concentrate direct beam irradiation which is
collected and used in a thermodynamic conversion process to generate electricity.
Concentrating solar thermal systems generally have solar‐to‐thermal conversion efficiencies of
50‐70% with technologies consisting of parabolic trough, power tower, parabolic dish, and linear
Fresnel. Thermodynamic conversion is accomplished by using the thermal energy power blocks
such as: conventional steam Rankine cycles to drive a turbine; Stirling engines powered by
external heat to create mechanical energy to drive a generator; and Organic Rankine Cycle
(ORC) and Kalina Cycle turbines which use low‐temperature heat to generate electricity. Net
solar‐to‐electricity efficiencies range from 9‐25%.

 Solar‐to‐Thermal ‐to‐Electricity and Thermal Energy. Combined Heat and Power (CHP) solar
concurrently generates electricity and thermal energy. The exhaust heat from an ORC turbine
can be used to generate hot water, space heating or process heat. New PV‐Thermal
technologies convert photons directly into electricity and collects thermal energy off of the PV
cells for useful purposes. These solar CHP systems offer net solar‐to‐energy conversion rations
of more than 60%.

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 Solar‐to‐Thermal –to‐Thermal‐Based Applications and Processes. Direct beam radiation is
collected and converted to thermal energy which is directly used in thermal‐based processes
with working temperatures of ≤ 82°C to 400°C (170°F to 750°F). Solar thermal collector
technologies consist of flat plate collectors, evacuated tube collectors, and a new generation of
“distributed”/micro parabolic troughs. Thermal applications include space heating, residential
and industrial hot water, industrial heat and hot water, drying, cooling, dehumidification,
refrigeration, water purification and desalination, etc.
3 Electricity ‐ Global Solar Market Size
3.1 Current Market Share by Country
Germany and Spain have dominated the global solar markets for years and held 55% of the market in
2008 driven by PV installations with California and Arizona accounting for 7.2% of the global market. For
more than 20‐years, California has been the global leader in utility‐scale solar thermal electric. In the
near future, it is clear that California and Arizona will dominate the global market place as “the” location
for utility‐scale solar thermal electric projects and for the sale of solar electricity.

Global Installed Capacity PV + Solar Thermal Electric
2008
Market Solar Thermal
Share Total MW PV MW Electric MW
95% 5%
World ‐‐‐ 13,679
13,000 679
Germany 39% 5,400 5,400 0
Spain 26% 3,517 3,300 217
US 9% 1,217 789 428
California 7% 914 526 388
Arizona 0.19% 26 25 1
México 0.16% 22 21.8 0

3.2 Off‐Grid is 14% of U.S. PV Capacity
Grid‐connected PV accounts for 86% of all installed capacity. There were more than 30,000 PV
installations in 2008. Grid‐connections accounted for 62% of these sites and 86% of the installed
capacity.

US PV Grid Installations 2008
Installations Capacity
Grid‐Connected 18,600 62% 86%
Off‐Grid 11,400 38% 14%
Total 30,000

3.3 California and Arizona have 70% of the PV market share in U.S.
The cumulative installed capacity for grid‐conned PV in the U.S. was 789 MW at the end of 2008.
California accounted for 67% of installed capacity with 526 MW and Arizona was ranked 5 in state
capacity at 25 MW installed. 1
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US ‐ Grid‐Connected PV Ranked by
Cumulative Installed Capacity through
2008
Market
MWDC Share
1. California 526 67%
2. New Jersey 70 9%
3. Colorado 36 5%
4. Nevada 34 4%
5. Arizona 25 3%
6. New York 22 3%
7. Hawaii 14 2%
8. Connecticut 9 1%
9. Oregon 8 1%
10. Massachusetts 8 1%
4 Drivers for California/Arizona Solar Electric Market
4.1 Convergence of Market Drivers
There has been extraordinary demand for utility‐scale and distributed solar in the southwest U.S. over
the past 2 years due to the convergence of numerous market drivers:

 Procurement by utilities for utility‐scale solar projects driven by State‐mandated Renewable
Portfolio Standards (RPS) in California, Arizona, Nevada, New México and Texas

 General acceptance that there will some form of National RPS

 A new U.S. President who has reversed long‐term policy and now puts renewable energy at the
lead in economic recovery and global warming policies

 New Federal incentives for solar such as the 30% Investment Tax Credit, accelerated
depreciation, loan guarantees

 A growing recognition that emission reduction of greenhouse gases (GHG) through a “carbon
tax” is inevitable and that the U.S. will become a major global player in “carbon markets”

 Market entry in utility‐scale solar by Spanish, German and Israeli solar developers with extensive
project portfolios in Spain’s highly favorable but small solar thermal market

 Significant Foreign Direct Investment is being made in North America for PV manufacturing to
supply the U.S. markets

 Independent of GHG and RPS mandates, the world’s electricity load growth demand is far
behind supply and that 65% of power plants needed around the world in 2030 are yet to be
built.2

 Explosive load growth in the southwest U.S. –
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o California’s electricity load was 52 GW in 2005; the 2020 load is projected to be 69 GW.3
o Peak loads in the California, Arizona, Southern Nevada and New México are forecasted
to grow by nearly 2,000 MW per year for the next 15 years.4
4.2 Pending Federal Government Actions – New Drivers
 EPA to Regulate Power Plant Greenhouse Gases – In September 2009, the U.S. Environmental
Protection Agency (EPA) adopted new rules to regulate greenhouse gases from power plants
and large industrial facilities. EPA will be assuming authority for the greenhouse gas emissions
of 14,000 coal‐burning power plants, refineries and big industrial complexes that produce most
of the nation’s greenhouse gas pollution. The net effect of such regulation is expected to
increase the cost of fossil fuel generation for environmental compliance with greenhouse gas
emissions and thereby make the use solar thermal energy for power generation and industrial
process heat more financially viable.

 “Cap‐and‐Trade”/”Carbon Tax” Legislation –The U.S. Congress is considering legislation which
will establish a mechanism that sets pollution reduction targets and then uses market incentives
to find the most affordable paths to achieve the targets with limits being set on the amount of
Greenhouse Gases (GHG) that companies could legally emit. The “cap” would set the upper limit
of GHG that could be emitted into the atmosphere while the “trade” would allow for companies
to invest in pollution‐reducing technologies or buy and sell credits to reach the cap. Once
adopted, “cap‐and‐trade” will provide another market to drive the U.S. solar industry.

 25% National Renewable Portfolio Standard Legislation – Numerous efforts are before the U.S.
Congress to establish a federal RPS that would require electric utilities to produce 25% of their
electricity from wind, solar and other renewable energy sources by 2025. A National 25% RPS is
considered an essential component to any greenhouse gas emission reductions.
5 California/Arizona – Best Solar Market to 2020
No place in the world has both the best quantity of solar resources and the most aggressive Renewable
Energy Portfolio Standards than California and Arizona. Together there is a supply and demand dynamic
which is unparalleled.
5.1 Superior Solar Resources in California/Arizona
The quantity and quality of the solar resources in California and Arizona are among the best in the world
and are 30% to 47% higher than solar resources in Germany and Spain which continue to be the
recognized leaders in the solar global market.
5.1.1 GHI Resources
The Global Horizontal Insolation (GHI) available for photovoltaics in California and Arizona is more than
47% higher than the GHI available in Germany. For Los Angeles the GHI is 5.0 kWh/m² a day compared
to Berlin at 2.7 kWh/m².5 In 2008 the installed capacity of PV Germany grew to 5 GW in 2008.6 In
comparison, 2.5 GW of PV in southern California and Arizona would produce about the same amount of
electricity as 5 GW of PV in Germany.

GHI By Locations
GHI kWh/m²
Day Year
Los Angeles, CA 5.0 1,816
Madrid, Spain 4.5 1,660
Berlin, Germany 2.7 999
2‐6

5.1.2 DNI Resources
The Direct Normal Insolation available for solar thermal energy in southern California and southern
Arizona is well above 7.5 kWh/m² per day which is about 30% higher than the best solar conditions in
Europe. The German solar developer Solar Millennium, who built the 150 MW Andasol trough project in
southern Spain, reports that a new 726 MW trough project site in Blythe, California, has a Direct Normal
Irradiation of almost 7.67 kWh/m² which is more than 30% higher than southern Spain.7

DNI by Locations
DNI kWh/m²
Day Year
Blythe, CA 7.67 2,800
Southern CA + AZ 7.50 2,738
Andasol Project, Spain 5.37 1,960
Almería, Southern Spain 5.21 1,900
5.2 California Governmental Actions to Accelerate Demand in the State’s Solar Market
 New 33% California RPS and 20% GHG Reduction Targets – On November 17, 2008 Governor
Schwarzenegger signed Executive Order S‐14‐08 which created the highest Renewable Portfolio
Standards in the U.S. and established an aggressive target for greenhouse gas reduction. The
California’s Renewable Portfolio Standard was raised from 20% to 33% by 2020. Under the
order, California must also reduce greenhouse gas emissions by 25% by 2020 which is leading to
the adoption state‐wide carbon cap‐and‐trade program.

 $12.9 Billion in 3 GW Distributed PV Market Leveraged by California Solar Initiative – Continuing
program which provides cash incentives for residential and commercial/industrial projects.
Target is 3 GW of new Distributed PV by 2017. 8 Every $1 in incentives leverages another $6 in
private investment.9

 $4.5 Billion in 750 MW Utility Distributed Generation Market Leveraged by Feed‐in‐Tariffs –
New legislation in October 2009 requires California utilities to expand utility purchases of
electricity from solar facilities up to 3 MW in capacity at a guaranteed feed‐in‐tariff. This
incentive provides a fixed price for new renewable generation sold to utilities at an above
market rate and will apply until a 750 MW capacity cap is reached. The estimate of new Utility
DG market is based on average of $6,000/kW installed costs.

 $12 Billion invested in New “Renewable” Transmission – To deliver the new renewable
electricity generation needed in 2020, 7 new major transmission lines are needed at a cost of
$12 billion.10
6 California/Arizona ‐ Solar Electric Market Demand Through 2020
6.1 108 TWhs of Renewable Energy Needed in 2020
The 2020 Renewable Portfolio Standards (RPS) for California and Arizona will require 108 TWhs of
renewable energy. In 2020 California will have retail electricity sales 3 times greater than Arizona.11
However, because of higher RPS requirements and load growth, California will have a renewable energy
demand 15 times higher than Arizona.12

2‐7

2020 Comparative RPS Requirements for Renewable Generation
California and Arizona
RPS
RPS Total Retail Sales Requirements
Requirement TWh TWh
California 33% 308 102 94%
Arizona 15% 97 6.8 6%
Total ‐‐‐ 405 108.8 100%
6.2 26 GW of Renewable Energy Capacity Needed in 2020
California and Arizona are projected to require some 26.2 GW of renewable energy capacity to meet RPS
requirements by 2020. The California Public Utility Commission (CPUC) expects that 19.7 GW of new in‐
state renewable generation will be needed in 2020.13 The expected renewable resource mix for Arizona
is expected to be 65%

California Renewable Resource Mix 2020
33% RPS Reference Case (In‐State and Imports)
Renewable Resource MW Share

Biogas 279 1.2%
Biomass 478 2.0%
Geothermal 1,497 6.3%
Hydro‐Small 40 0.2%
Solar PV 3,235 13.6%
Solar Thermal 7,298 30.7%
Wind 10,972 46.1%
Total 23,799

2020 Arizona Renewable Resource Mix

In‐State
MW Share
Solar Thermal 1,529 63%
Solar PV 340 14%
Wind 401 17%
Geothermal 85 3%
Biomass 74 3%
Total 2,429 100%

 In 2020 solar is expected to account for 51% of California’s in‐state renewable energy installed
capacity and generate 38% of the renewable energy production. The disproportion between
installed capacity and energy production is explained by the lower capacity factor for solar
compared to other renewable energy sources.

 For Arizona in 2020, solar is expected to account for 77% of the state’s renewable energy
installed capacity and to generate 65% of the renewable energy production. Arizona will be
more reliant upon solar to meet its renewable demand than any state.

2‐8

 Utility‐scale concentrating solar thermal is expected to meet 70% of solar demand in 2020 in
California and Arizona.

 In Arizona there are active efforts to increase the RPS from 15% to 25% by 2025. In total, the
construction of solar power plants to meet the Arizona Corporation Commission’s RPS
requirements is estimated to cost approximately $22 billion in cumulative capital expenditures
by 2030.

 A renewable energy assessment14 commissioned by Arizona utilities reported:
 Solar is expected to account for 65% of Arizona’s RPS requirements
 Beginning in 2017, Arizona will need to be adding 200 to 400 MW of new solar thermal
installed capacity to be built each year through 2025

2020 Solar Demand from California and Arizona RPS Requirements
Renewable Utility‐Scale
Energy Solar Share Solar
Capacity MW MW PV MW Thermal MW
California 19,706 9,999 3,235 6,764
Arizona 2,429 1,869 340 1,529
Totals 22,135 11,868 3,575 8,293
Technology
Share> 30% 70%

6.1 $60.3 Billion of Solar Energy Capacity Needed in 2020
The market size for solar energy installation by 2020 in California and Arizona is estimated at $60.3
billion with PV accounting for 52% of the market value and utility‐scale solar electric accounting for 48%.

2020 California and Arizona RPS Solar Demand, Market Size by Technology

California MW Costs/kW Capital Costs
PV 3,235 $7,000 $22,645,000,000
Solar Thermal 7,298 $4,000 $29,192,000,000
Totals 10,533 $4,921 $51,837,000,000

Arizona
PV 340 $7,000 $2,380,720,588
Solar Thermal 1,529 $4,000 $6,115,806,667
Totals 1,869 $4,546 $8,496,527,255

California and Arizona
PV 3,575 29% $25,025,720,588
Solar Thermal 8,827 71% $35,307,806,667
Total 12,402 100% $60,333,527,255
2‐9

7 Supply Side to the Solar Electric Market
7.1 Supply Side of Utility‐Scale Solar Thermal Electric Market
On the supply side, the first application for a permit to construct and operate a large solar plant in
California since 1989 was submitted just in July 2008 for a 50 MW trough project in Victorville. Since
then, more than 10 GW of near‐term utility‐scale solar electricity projects in California and Arizona are
being developed. These projects have announced contracts or Power Purchase Agreements and in
various stages from development and permitting to having been approved and are in pre‐construction.
There is a pipeline of another 80 utility‐scale projects proposing another 60 GW of additional capacity in
the deserts of southern California and Arizona which are advancing through the process of acquiring
rights‐of way from the U.S. government. Of this 70 GW of potential projects, there will certainly be
projects which will drop out due to a variety of reasons such as permitting issues, land and
environmental compliance costs, inability to secure financing or water for “wet cooling” processes, and
lack of access to timely transmission.
7.2 Near‐Term Grid‐Scale Solar Supply
California’s long‐term 33% RPS estimates that 10 GW of installed solar will be needed in 2020. The
market appears to have responded and there are 10 GW of near‐term grid‐scale solar projects with
construction starts in 2010 to 2013 which appear capable of meeting the 2020 targets much sooner.
7.2.1 10 GW in Projects with $40.6 Billion in Project Costs
As of October 2009, the California Energy Commission has listed 35 utility‐scale solar projects which are
under permitting review or officially announced as being under a Power Purchase Agreement. The
Arizona Corporation Commission has approved a 280 MW parabolic trough plant which is in pre‐
construction. The estimated capital value of these projects in California and Arizona is some $40.6
billion.15

Announced Utility‐Scale Solar Projects in California and Arizona ‐ October 2009
Capital Costs
Projects per kW Total MW Capital Investment
CSP Parabolic Trough 12 $4,500 4,536 $20,413,350,000
CSP Power Tower 14 $3,000 2,547 $7,641,000,000
CSP Dish Stirling 2 $2,000 1,600 $3,200,000,000
CSP Compact Linear Fresnel 1 $2,825 177 $500,025,000
PV Thin‐Film 5 $5,000 1,153 $5,762,500,000
PV 1‐axis Tracking Silicon 2 $7,000 440 $3,080,000,000
Totals 36 10,453 $40,596,875,000

7.2.2 Annual Electricity Sales is a $3.2 Billion Market
The annual market for RPS‐related solar electricity sales to utilities by IPPs in California and Arizona is
estimated at $3.2 billion. This figured is based upon annual PPA sales by near‐term additions of utility‐
scale solar projects using an average sale price of $140/MWh.

2‐10

Announced Utility‐Scale Solar Projects in California and Arizona ‐ October 2009
Capital
Costs Total
Projects per kW MW Capital Investment
CSP Parabolic Trough 12 $4,000 4,536 $18,025,200,000
CSP Power Tower 14 $3,000 2,547 $7,641,000,000
CSP Dish Stirling 2 $2,000 1,600 $3,200,000,000
CSP Compact Linear Fresnel 1 $2,825 177 $500,025,000
PV Thin‐Film 5 $5,000 1,153 $5,762,500,000
PV 1‐Axis Tracking Silicon 2 $7,000 440 $3,080,000,000
Totals 36 ‐‐ 10,453 $38,208,725,000

Details of the status of this project inventory follow:

 4.9 GW Utility‐Scale Solar Projects in Permit Review by California Energy Commission –
Over the past 2 years, developers of 13 utility‐scale solar thermal and PV projects representing
4.9 GW of capacity have submitted “Applications For Certification” (AFC) to the California Energy
Commission (CEC).16 The estimated project costs are estimated to be $17 billion. The AFC
process takes at least a year of review leading to CEC approval and a certificate to construct and
operate the project.

California Energy Commission
Utility‐Scale Solar Thermal Projects
Under Permit Review ‐ October 2009
Projects MW Project Costs

Parabolic Trough 9 2,703 $10,811,200,000
Power Tower 1 400 $1,200,000,000
Dish Stirling 2 1,600 $3,200,000,000
Compact Linear Fresnel 1 177 $500,025,000
Totals 13 4,880 $15,711,225,000

 PPAs Announced for 3.7 GW of Utility‐Scale Solar Thermal Projects – Another 15 projects with a
capacity of 3.7 GW and estimated projects costs of $13.4 billion have received or have
announced PPAs in California. These projects have not yet submitted permitting applications.

Announced or Under Power Purchase Agreement ‐ October 2009
Utility‐Scale Solar Thermal Projects
Parabolic Trough 2 1,554 $6,214,000,000
Power Tower 13 2,147 $6,441,000,000
Dish Stirling 0 0 $0
Compact Linear Fresnel 0 0 $0
Totals 15 3,701 $12,655,000,000

2‐11

 PPAs Announced for 1.6 GW of Utility‐Scale PV Projects

Announced or Under Power Purchase Agreement ‐ October 2009
Utility‐Scale PV Projects
Thin‐Film 5 1,153 $5,762,500,000
1‐Axis Tracking Silicon 2 440 $3,080,000,000
Totals 7 1,593 $8,842,500,000

 Arizona’s 280 MW Solana Project – Abengoa’s Solana Project in Gila Bend, Arizona, is a 280 MW
parabolic trough solar plant with 6 hours of storage which will produce approximately 900,000
MWhs annually. Abengoa executed a PPA with Arizona Public Services in 2008 with announced
projects cost of $1 billion and a 30‐year PPA contract value of $4 billion.17
7.3 Another 60 GW of Utility‐Scale Solar in the BLM Pipeline for California and Arizona
Nowhere in the world is there more evidence of the explosive growth in utility‐scale solar than in the
southwest U.S. over the past 2 years. There has been a literal "land rush" since 2007 by solar developers
and speculators who have made massive filings for rights‐of‐ways to lock‐in large tracts of U.S.
government‐owned desert lands to site central solar projects.

In November 2008, there were approximately 119 applications before the California and Arizona BLM
requesting land for some 83 GW of solar projects. In over a year, 81 of these applications representing
60 GW of projects have moved forward in development and advanced to filing required “Plans of
Development” as of October 2009. The step between filing a BLM right‐of‐way application and
submitting a major technical and engineered document such as the “Plan of Development” requires
resources and separates out the land speculators. The project developers for most of these 81 projects
have demonstrated commitment and have gone the additional step of submitting the required “recover
fee” deposits to compensate BLM for application processing. Projects which have filed “Applications For
Certifications” to CEC and the other projects which have announced PPAs which involve BLM lands have
been screened out of the 81 projects. As such, the table below represents a reasonable profile and
inventory of potential new capacity additions which shows the enormous scale of the solar thermal
electric market in the southwest deserts.

Utility‐Scale Solar Projects with Active* BLM Applications
California and Arizona October 2009
Thermal
Projects MW PV Electric
California 49 39,358 13,920 25,456
Arizona 32 20,913 800 20,095
Total 81 60,271 14,720 45,551
22% 78%
*Active means projects which have advanced by filing a "Plan of Development" filed
with BLM

The dominant technology for grid‐scale solar is trough which is the proposed system for approximately
50% of the pending BLM projects. PV accounts for 22% of proposed projects with equal installed
capacity of PV silicone and Thin‐film.

2‐12

Utility‐Scale Solar Projects with Active*
BLM Applications
California and Arizona, October 2009
PV Thin Power Dish Not Known/

Projects MW PV Film CPV Trough Tower Stirling Fresnel Other
California 49 39,358 7,335 6,585 0 14,223 750 2,545 7,938
Arizona 32 20,913 800 0 14,895 4,300 900
Total 81 60,271 7,335 7,385 0 29,118 5,050 2,545 900 7,938

*Active means that either a "Plan of Development" has been filed with
BLM
8 New Distributed Generation Electricity Markets
The California and Arizona DG electricity market for Distributed solar thermal electric is estimated to be
at least $7 billion through 2020. This market represents more than 1.1 GW of new installed capacity
which will drive demand for collector fields and power blocks for installations ranging from 250 kW to 3
MW.
Distributed Generation Electric Market ‐ California and Arizona
2008 ‐ 2020
MW Market Value*
CA Utility Feed‐in‐Tariff ≤3 MW 750 $4,500,000,000
AZ Non‐Residential Utility DG 413 $2,478,000,000
Total 1,163 $6,978,000,000

* Assumes average costs of $6,000/kW
9 Solar Hot Water Market
9.1.1 Solar Hot Water Systems
Domestic Solar Hot Water (SHW) systems require 50°C (120°F) heat and a variety of collector
systems can deliver such low‐temperatures. In the U.S. and México glazed flat plate collectors
are most often deployed and, for the balance of the world, evacuated tubes are the most
common collector worldwide primarily due to low‐cost evacuated tubes made in China.
Solar Hot Water Collectors
Installed Capacity MWth
US México World

Glazed Flat Plate 1,329 311 46,391

Evacuated Tube 405 ‐‐‐ 74,120
Air Collector Glazed 151 ‐‐‐ 197
9.1.2 New $1.3 Billion California Solar Hot Water Market
As it has with Distributed PV, California has been equally aggressive in providing incentives to develop a
massive solar hot water (SHW) market in the state. California has invested $250 million in a new SHW
market development program which will provide cash incentives to install 200,000 solar hot water
heaters by 2017. The scale of the massive program is evident since annual installations will need to
2‐13

increase from 1,000 to 25,000 units.18 In 2009, there were only 2,000 SHW systems installed in the
entire U.S.
New SHW Installations to 2017 200,000
Residential Collector Area 8,000,000 ft² 740,000 m²
Per Unit Area 40 ft² 3.7 m²
New Installed SHW Capacity MWth 518 MWth
kWth/m² Collector 0.7
New Annual Installations ‐ California 25,000
SHW Program
Average System Costs $6,500
Program Incentives $250 million
Market Value of Installations $1,300,000,000

Businesses and residential owners who install solar hot water systems also qualify for the new 30%
Federal Investment Tax Credit which is available through 2016 with no cap on equipment costs.
10 Summary of Solar Market Potential in Arizona and California
10.1 Solar Market Demand
The size of the solar market in California and Arizona between 2009 and 2020 is projected to be over
$90 Billion.

Projections of market demand were collected from the various governmental programs and from
renewable energy requirements for utilities through 2020. An estimate of the demand‐side to the solar
market was calculated using industry standard “installed unit costs” by solar technology and official
projections from incentive programs and mandatory RPS requirements. The demand‐side of the solar
market in California and Arizona projected to be more than $90 billion. The basis for this projection is
provided in the following table:

Demand‐Side to Solar Market – Estimated Market Value of Installed Solar Capacity for Existing Programs
and Policies in California and Arizona in 2020
Market Value of Solar
Installed Costs Projects Leveraged by
MW $/MW Incentives
CA RPS Utility‐Scale Solar Thermal 7,298 $4,000 $29,192,000,000
CA RPS Utility‐PV 3,235 $7,000 $22,645,000,000
CA California Solar Initiative ‐ Distributed PV 3,300 $7,800 $25,740,000,000
CA 750 MW Utility Distributed Generation 750 $6,000 $4,500,000,000
CA Solar Hot Water + 200,000 systems 520 $6,500 $1,300,000,000
CA New "Renewable" Transmission ‐‐ ‐‐ $12,000,000,000
CA Total 15,103 ‐‐ $83,377,000,000

AZ RPS Utility‐Scale Solar Thermal 1,529 $4,500 $6,880,282,500
AZ RPS Distributed PV 340 $7,000 $2,380,720,588
AZ Total 1,869 ‐‐ $9,261,003,088

CA+AZ Total Projected Demand‐Side Market 16,972 ‐‐ $92,638,003,088
2‐14

10.2 Solar Market Supply
For comparative purposes a supply‐side estimate for the solar market in California and Arizona was
prepared using active project information from utility‐scale solar projects that have been permitted or
are in permitting, projects that have been announced with a PPA, and projects which are active with
BLM in advancing their applications for rights‐of‐way and have incurred costs including engineering and
preparation of plans of development. Supply‐side to the market could be as large as $109 Billion which
assumes that only 25% of the BLM projects advance to commissioning.

Demand‐Side to Solar Market: Estimated Market Value of Solar Installed Capacity for Existing
Programs and Policies 2020 in California and Arizona
Market Value of Solar
Installed Projects Leveraged by
MW Costs $/MW Incentives
CA RPS Utility‐PV 3,235 $7,000 $22,645,000,000
CA California Solar Initiative ‐ Distributed PV 3,300 $7,800 $25,740,000,000
CA Total 15,103 ‐‐ $83,377,000,000

AZ Total 1,869 ‐‐ $9,261,003,088
CA+AZ Total Projected Demand‐Side Market 16,972 ‐‐ $92,638,003,088
11 Business Models
Business models vary greatly between solar thermal electric and PV, between utility‐scale and
distributed markets and between solar generators and the solar supply chain. Unlike PV, business
models for utility‐scale solar thermal companies are structured around the vertical integration of most,
if not all, parts of the value chain from R&D and manufacturing to IPP project development and long‐
term solar plant operations. This difference is due largely to the massive size and costs of solar thermal
projects along with the fact that power tower, trough and Dish‐Stirling technologies are not “products”
and are unavailable for 3rd party sales. PV is scalable, modular and based on 3rd‐party sales. PV project
developers and system integrators can choose PV modules from a variety of technologies and from a
variety of vendors as PV fast approaches commodity‐status as the market matures with grid‐parity
predicted in 5‐8 years.

For generators, the business models throughout the various segments of the solar market are structured
to optimize opportunities to create investment‐worthy businesses and projects with strong returns by
leveraging know‐how and proven solar technology along with and construction and operational
experience.
11.1 Utility‐Scale Solar Generation
A prime business model for developers of proprietary large‐scale concentrating solar thermal
technology is to develop and execute PPAs or feed‐in‐tariff contracts which generate long‐term
revenues for subsidiary project companies which in turn place orders for solar equipment from the
company’s manufacturing/supply chain subsidiary.
2‐15

11.1.1 Turn‐Key Joint Ventures
This model leverages a partner’s proprietary and exclusive use of certain solar technology with the
capabilities and experience of other partners which join together for project development, turnkey
construction and financing of large‐scale solar thermal power plants. A recent example of this model is
Solar Trust of America LLC (STA) which was formed in October 2009. STA19 is a vertically‐integrated
industrial solar company formed through a joint‐venture to integrate the capabilities of its partners in
Project Development, Engineering, Procurement and Construction (EPC), financial resources and
Operational Management. Solar Trust includes the German industry giants Solar Millennium and MAN
Ferrostaal AG who formed MAN Solar Millennium GmbH as a 50‐50 joint venture in August 2009.
CitiGroup and Deutsche Bank joined STA to raise $6 billion in project financing for utility‐scale solar
projects under Power Purchase Agreements with California utilities. Solar Millennium had previously
acquired Flagsol to gain exclusive use of its proprietary trough technology.
11.1.2 “Post‐PPA Acquisition of Technology Developer” Model
This model applies to developers of proprietary solar technology who have advanced the technology
sufficiently to win a major Power Purchase Agreement with a utility but without the financial strength to
raise financing and overcome perceptions of financial institutions of “performance risk” of new
technology. The company could yield equity with new investors or leverage a large capable industry
partner and share control. A variation of this model is that the company becomes an acquisition target
which is what happened to Solargenix and Stirling Energy Systems (SES). Solargenix developed trough
technology which was the center piece of the “U.S. Trough Initiative”. In 2004 Solargenix won a PPA with
Nevada Power for a 65 MW project and was acquired by the large renewable energy Spanish company
Acciona. Nevada Solar One was commissioned in 2007 as the first large solar project in more than 20‐
years. Recently Acciona won a major PPA in California. SES developed proprietary Dish‐Stirling
technology and made international news by winning 2 PPAs in California for a total of 1750 MW. In 2008
SES was acquired by the Irish company NTR plc.
11.1.3 PPA/IPP Project Company Model
In this model Independent Power Producers (IPPs) develop and acquire Power Purchase Agreements
(PPA) after which a project company is established to execute and perform under the PPA. The project
company is isolated for liability issues and for structuring project finance in which the value of the PPA
contract, project equity investments and project leveraged financial incentives are the only sources of
revenues to retire debt which is usually structured in an 80:20 debt‐to‐equity ratio. Ownership of the
project company includes the project developer with various provisions for equity and tax equity
shareholders. A characteristic of a PPA is that the electricity generated is not used on‐site and is sent to
the grid through a transmission line to a sub‐station.
11.2 Distributed Solar Business Models
11.2.1 Commercial Customer‐Owned PV Model
In the company ownership model the company puts up the capital to install the commercial PV system
and bears the performance risk of ownership. All incentives such as tax credits, accelerated depreciation
and Performance‐Based Incentives accrue to the benefit of the company. The company also benefits
through deferred operating expenses with the output of the PV system off‐setting electricity expenses.
The value of the deferred electricity expenses will increase over time due to inevitable and volatile
annual rate increases. The PV may also contribute to significant reductions in demand charges through
peak shaving. Companies use different payback periods for capital investments and a PV project would
under
11.2.2 Residential/Commercial Solar Services Agreement Model
More than 80% of the commercial/industrial solar installations in California are accomplished through a
third‐party ownership model using a Solar Services Agreements (SSA)/Power Purchase Agreement (PPA).
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11.2.3 Public Entity SSA Model
Most schools, cities, counties and other public entities in California use SSAs for PV installations as a
means to benefit indirectly from federal and state solar tax credits. For example the 30% Federal Income
Tax Credit (ITC) on PV installations is not available to non‐taxable public entities. If such entities pursue a
direct acquisition of solar equipment, they pay the full installed costs where taxable entities pay the full
costs but can recover 30% through the Federal ITC.
California public entities have many choices of companies in a highly competitive SSA market place. A
typical SSA is structured with the public entity entering into long‐term agreement with the SSA company
and agrees to buy solar electricity generated on‐site at a fixed kWh price (usually the current price) for
the term of the agreement which is generally 10‐20 years. The SSA company leverages the tax credits to
buy down the cost of the installation.
11.2.4 SSA Company Model
Companies offering SSAs are generally joint ventures between system integrators, installers, PV
suppliers and financial partners with access to tax equity investments and debt financing. National banks
such as U.S. Bank and Wells Fargo are very active in the market and often set up dedicated “solar funds”
with system integrators. Banks, corporations and large‐net‐worth‐individuals provide the tax equity
investment funding. Some projects are also structured to generate pass‐through losses to investors. A
variation of this model is when a PV manufacturer establishes an SSA company with installation and
financing partners to provide a reliable project pipeline for sales.
11.2.5 Solar Equipment Lease Model
Under this leasing model, the solar leasing company installs finances and owns the solar system and
leases the solar system equipment to the property owner who benefits from the lease by consuming the
solar electricity output and by off‐setting electricity costs from the local utility. The solar leasing
company accrues the benefits of tax credits, accelerated depreciation and utility incentives. The lease
payments are calculated on annual PV production and on an agreed upon fixed long‐term price per
kWh.
12 Trends in Solar Incentives
12.1 Declining Incentives for Distributed PV
There are multiple public purposes driving government mandated Renewable Portfolio Standards (RPS)
and renewable incentives. Public policy drivers are:

 Reductions in greenhouse gases by off‐setting fossil generation

 Demand‐side market development by establishing required renewable generation targets

 Supply‐side market development by subsidizing the high capital costs of renewable systems as
the market develops in order to stimulate supply and accelerate deployment

 Economic development leading to jobs and private investments in the manufacturing and
installation of renewable products and systems

 Energy security through domestic‐based electricity generation to reduce energy import
dependency
As the market develops, volume‐based cost reductions are expected to lower the price of renewable
products, systems, and electricity as installed renewable capacity increases. Generally, incentives are
structured to decline in direct proportion to the reduction of renewable energy costs or as installed
capacity limits are reached.
2‐17

12.2 Up‐Front Incentives
RPS incentive programs in California and Arizona use Up‐Front Incentives (UFI) for smaller PV systems
which provide a one‐time per watt cash incentive. Incentives under the California Solar Initiative (CSI)
for PV are structured to decline at a rate of 7% each year. In California the first 70 MW of small PV
received $2.50 per watt for systems of 100 kW or less and are reduced after certain installed capacity
targets are reached. Utility incentives in Arizona range from $2.25 to $3.00 per watt for smaller systems
and can be adjusted annually by the utilities.
12.3 Performance‐Based Incentives
California and Arizona use Performance‐Based Incentives (PBI) for larger PV systems. The CSI program
uses PBI for systems of 100 kW and larger. Arizona Public Services use PBI for all non‐residential systems
and Tucson Electric Power for commercial systems more than 20 kW. The goal of the California Solar
Initiative is to accelerate the installation of 3 GW of Distributed PV by 2017. CSI is using Up‐Front
Incentives and Performance‐Based Incentives to leverage 2.6 GW of new PV capacity. The PV system
owner receives a fixed per kWh payment based upon kWhs produced for 5 years. The program started
at PBI payments based upon $.39/kWh moving to $.09/kWh after 1 GW to just $.03/kWh after 1.9 GW
of cumulative installed capacity. The installed cost for the average system over 10 kW is $8.02 per
watt.20 A scenario analysis of the value of declining incentives is illustrated in the table below which uses
a typical 500 kW roof‐mount commercial PV systems as a base configuration:

California Solar Initiative
Scenario Analysis of 500 kW Commercial Installations Under Declining PBI Payments
CSI
CSI Cumulative PBI % of
Project Program MW PBI System PBI System
Scenario Step Installed $/kWh Costs $/W Payments Costs
No. 1 Step2 170 $0.39 $4,010,000 $8.02 $1,641,008 41%
No. 2 Step 5 520 $0.22 $3,609,000 $7.22 $925,697 26%
No. 3 Step 7 1,050 $0.09 $3,067,650 $6.14 $378,694 12%
No. 4 Step 10 2,600 $0.03 $3,067,650 $5.22 $126,231 4%
System
Size 500 kW
Average Annual Output
841,542
Over 5 Years of PBI ‐ kWhs
5‐Year Annual Average
1,683
kWh/kW

12.4 Structure of Arizona Incentives for Distributed PV
Arizona Public Services (APS) and Tucson Electric Power (TEP) submit annual RPS Compliance Plans to
the Arizona Corporation Commission for approval. The utilities establish core PV incentive programs for
residential and non‐residential PV and adjust their incentive rates in the annual program plans.

The APS PV incentive program for non‐residential will pay up to 60% of a project’s capital costs in a PBI
over a 10, 15 or 20 year program. Though APS reduced its fixed kWh‐based PBI by 9% during 2009, this
means that APS will be paying 9% less to purchase Renewable Energy Certificates (RECs) with the owner
still receiving his total incentive payments but over a longer period of time.

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Arizona Public Services
Non‐Residential PV Declining PBI Rates

Term Apr 09 Oct 09 Reduction
10 Years $0.202 $0.182 9.9%
15 Years $0.187 $0.168 10.2%
20 Years $0.180 $0.162 10.0%
12.5 Internal Rates of Return and Incentives
The goal of public policy in providing and setting incentives and rates for renewable energy is to
accelerate the development of a market and to inversely correlate the amount of incentive payments to
installations. Installed costs of PV are expected to decline as the installed capacity of PV increases due to
an assumption that costs are reduced through increased volume. In California incentives are reduced in
steps as installed capacity increases with the assumption that as capacity increases, costs decline
through volume reductions.

The incentives are considered temporary market development tools and intended to improve the
economics of solar ownership which will lead to market growth through volume additions. Other factors
leveraging incentives for improved economics are rising electricity costs and declining installed costs.

The following Internal Rates of Returns (IRR) are expectations in the following segments of the solar
market:

 Residential PV – Expected IRRs for homeowners in California ranges from 9.9% to 24.6%
21depending upon system size and which utility area the home is located since electricity costs
vary considerable on tariffs, rate schedules and peak periods. The expected IRR for residential
homeowners under the Arizona Public Services incentive program is 8.7%, the low‐rate in part
explained by the lower electricity rates in Arizona.

Residential IRR by PV
System Size
Pre‐Solar
PV System Year, State, Monthly Usage Cost Pre‐Tax
Utility, Size and Rating Electric kWh Before Final Net Annual
Type Bill /month Incentive Cost IRR
2009 CA PG&E 9 kW CEC $499 1650 $81K $48K 24.60%
2009 CA SDG&E 9 kW CEC $460 1650 $81K $45K 23.50%
2009 CA SCE 9 kW CEC $373 1650 $81K $43K 21.10%
2009 CA SDG&E 6 kW CEC $278 1100 $55K $31K 20.70%
2009 CA PG&E 6 kW CEC $258 1100 $55K $33K 19.50%
2009 CA SCE 6 kW CEC $219 1100 $55K $30K 18.30%
2009 CA SDG&E 3 kW CEC $97 550 $28K $16K 13.50%
2009 CA SCE 3 kW CEC $81 550 $28K $16K 12.80%
2009 CA PG&E 3 kW CEC $74 550 $28K $17K 9.90%
2009 AZ APS 5 kW STC $89 800 $41K $20K 8.70%

 Residential Solar Hot Water – The expected IRR for residential solar hot water systems in
approximately 9.3%22

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 Commercial PV – Owners of commercial PV systems in California are expected to see after‐tax
IRRs in the 3% to 8% range which is comparable to other business investments. The value
proposition of PV also includes the un‐monetized value of “green marketing” to customers.
Actual IRR depends to a great deal upon system costs.23

 SSA Companies – The expected after‐tax financial returns for tax equity investors was 6% to 11%
but, due to the shortage of tax equity caused by the global financial crisis, financial expectations
have increased to 13%.

 Utility‐Scale IPPs – IRRs of 10%–20% are generally expected from IPP projects although,
depending on specific project risk, significantly higher IRR may be required.24
12.6 Legal Issues with SSAs in Arizona
Legal issues regarding the regulation of Solar Services Agreements in Arizona have to a great extent
stalled PV installations using this business model. It is legally ambiguous if the owners of SSAs who sell
electricity to 3rd parties should be considered public utilities and therefore subject to regulation by the
Arizona Corporation Commission (ACC). One structural steel company estimates that there is a backlog
of $300 million in PV projects in Arizona which are on hold until the ACC resolves the issue.

Some system developers in Arizona are using the solar leasing model until the ACC issue is resolved. The
“safe harbor” provided by the solar leasing model is based upon the business transaction being a lease
of equipment and not the sale of electricity.
12.7 Grid‐Parity
Grid‐parity is the point in time at which electricity generated from renewable energy is either equal in
cost or less expensive than grid power. The well respected Silicon Valley venture capital firm of Khosla
Ventures makes the following projections:

 Peak‐parity for Solar Thermal Electric in 2009 – utility‐scale solar thermal electric plants are
considered to be at parity with the electricity costs of California’s natural gas‐fired peaker power
plants at a peak price of $.175/kWh.

 Grid‐parity for Solar Thermal Electric in 2011‐2012 – By 2011, utility‐scale solar thermal electric
plants is expected to reach parity at $.15/kWh with conventional power plants.

 Grid‐parity for Distributed PV in 2015‐2018 – PV is expected to achieve parity with natural gas
peaker plants in 2015 at $.25/kWh and parity with conventional power plants at $.22/kWh in
2018

Declining incentives are directly related to “grid parity”. As the costs for PV decline, the costs of grid
power will be increasing each year. PV grid‐parity will likely be greatly influenced by geography and will
come sooner to California and Arizona than to other U.S. states because of superior solar resources,
lower installed PV costs, and rising electricity rates. Grid‐parity will be achieved from predictable
volume‐based cost reductions and no technical breakthroughs are required to achieve solar PV cost
reductions.25

2‐20

Source: Khosla Ventures26
12.8 PV Grid‐Parity Will Come First to California and Arizona
There are a large number of predications from the solar industry as to when and how grid‐parity will
“arrive”. Grid‐parity for Distributed PV will not arrive all at once but instead be achieved in certain
market segments and will be strongly influenced by geography. Grid‐parity will also be influenced by the
location of the PV project and the jurisdictional utility and its tariff rates and the hours scheduled for
peak, semi‐peak rate, intermediate and base. It is expected that grid‐parity will come first to certain
markets in California and Arizona. Grid‐parity will likely come first in certain segments of the Distributed
PV markets which have the highest solar resources and utilize either the lowest cost thin film PV
modules or the most efficient PV modules with 1‐axis tracking which adds approximately 20% more
output over fixed flat‐plate PV. In comparison, New Jersey needs 2 GW of solar capacity to meet solar
RPS state‐mandated RPS requirements. The average PV system performance in California and Arizona is
1,700 kWh of PV production per installed kW which is some 70% higher that New Jersey’s system output
of 1,000 kWh per kW. The economic effect of New Jersey’s lower production is evident from the average
payback period being over 20 years27.
12.9 Post‐Grid‐Parity Market for Distributed PV
12.9.1 Post‐Parity Boom for PV as the Market Matures
The global solar industry considers grid‐parity as the “Holy Grail”28 and most in the industry believe that
once grid parity is achieve there will be an entirely new level of market expansion. As solar loses its
reputation as being “expensive”, consumers in all market segments will have the choice to self‐generate
their own electricity at the same or lower price as their grid supplied power with the added value
proposition that solar electricity delivers environmental benefits.
12.9.2 Industry Shakeout as PV Moves to Commodity Pricing
For more than a year Stephen O‘Rourke, a senior analyst at Deutsche Bank Securities, has been on the
international solar conference circuit speaking on the effects of grid‐parity and provided several
predictions29:

2‐21

 Enormous build‐out of capacity
 Even greater corporate financing activity
 Improved PV stock performance after a shakeout with PV cell and module manufacturers with
the departure of many weaker companies
 Cyclical growth of PV moving to a more mature industry
 Broad cost convergence over the next 6 plus years
 The most profitable parts of the value chain –
o Selling energy on a commercial scale
o Manufacturing and selling silicon when the shortage returns
12.9.3 Long‐Term Solar Competitiveness
Cap‐and‐trade programs for greenhouse gas (GHG) emission reductions are universally assumed to
increase the price of electricity generated from fossil fuels which will make the costs of solar electricity
increasingly more cost competitive and accelerate grid‐parity and below grid pricing. As solar incentives
decline with the price of PV over the next 5‐7 years, the cap‐and‐trade programs mandated by the
Governor of California and the President of the United States will be phasing in. During this period,
utility‐scale solar thermal electric with energy storage will have reached grid‐parity at base and
intermediate loads. As such, the cap‐and‐trade carbon market in the southwest U.S. will likely make
grid‐solar the preferred generation source for new capacity additions based primarily upon competitive
price with the environmental attributes important but secondary. Utilities will have an alternative
compliance strategy and can buy Renewable Energy Credits (RECs) as carbon off‐sets but is unknown
how the mandatory carbon market will affect the value of RECs.

Most forms of renewable energy are expected to be competing at less than grid‐parity by 2020 and each
will compete based upon its inherent strengths as a supply source in adding value to the Utility and
Distributed energy markets. Technology innovation is expected to provide very low‐cost, long‐term
energy storage systems for utility‐scale solar thermal electric. The ability of utility‐scale thermal electric
to shift production to match a utility’s load profile through energy storage will likely give such projects
increasing value in the energy markets.

* * *

1
Interstate Renewable Energy Council (2009) "2009 Updates & Trends Report", October 2009; See
http://www.irecusa.org/fileadmin/user_upload/IRECGeneral/2009_annual_meeting/IREC_2009_Annual_ReportFi
nal.pdf
2
http://www.publicforuminstitute.org/activities/2008/tx2/Opportunities%20in%20Renewable%20Energy_v2.ppt
3
Kholsa Ventures (2007) “Mostly Convenient Truths from a Technology Optimist”, September 2007
4
http://www.azcommerce.com/doclib/energy/az_solar_electric_roadmap_study_full_report.pdf
5
International Energy Agency‐Photovoltaic Power Systems Programme (2006) “Compared assessment of selected
environmental indicators of photovoltaic electricity in OECD cities”, May 2006; See http://www.eupvplatform.org/
fileadmin/Documents/Brochure‐indicateurs_26_pays.pdf
6
“Photovoltaic Solar Resource: United States and Germany Map”, National Renewable Energy Laboratory, May 30,
2008; See http://www.seia.org/galleries/default‐file/PVMap_USandGermany.pdf
7
Solar Millennium – “The parabolic trough power plants Andasol 1 to 3”; See http://www.solarmillennium.de/
upload/ Download/Technologie/eng/Andasol1‐3engl.pdf
8
See http://www.gosolarcalifornia.org/csi/index.html
9
California Public Utilities Commission (2009) “California Solar Initiative ‐ Staff Progress Report”, January 2009
10
California Public Utilities Commission (2009) “33% RPS Implementation Analysis Preliminary Results”, June 2009
11
12
Black and Veatch (2007) “Arizona Renewable Energy Assessment ‐ Final Report for Arizona Public Service
Company, Salt River Project, Tucson Electric Power Corporation”, September 2007
13
California Public Utility Commission (2009) “33% RPS Implementation Analysis Preliminary Results”, June 2009
14
“Arizona Renewable Energy Assessment ‐ Final Report for Arizona Public Service Company, Salt River Project,
Tucson Electric Power Corporation”, Black and Veatch, September 2007
2‐22

15
http://www.energy.ca.gov/siting/solar/index.html
16
Average capital costs by technology are derived from applications and industry data. Trough at $4,500/kW,
Power Tower at $3,000/kW, Dish Stirling at $2,000/kW, Compact Linear Fresnel at $2,850, Utility 1‐axis tracking
silicone PV at $7,000 and Utility thin‐film at $5,000; data See http://www.energy.ca.gov/siting/solar/index.html
17
Abengoa “Application for a Certificate of Environmental Compatibility ‐ Solana Generating Station”, submitted to
the Arizona Corporation Commission on August 4, 2008; Also see http://www.SolanaSolar.com
18
“CSI‐Thermal Program Energy Division Staff Proposal for Solar Water Heating Program”, California Public Utility
Commission, July 15, 2009
19
http://www.solartrustofamerica.com
20
Lawrence Berkeley National Laboratory (2009) "Tracking the Sun II: The Installed Cost of Photovoltaics in the U.S.
from 1998‐2008," LBNL‐2674E, October 2009
21
On‐Grid Energy Systems (2009) “Payback on Residential PV Systems with 2009‐2016 Uncapped 30% Federal
Investment Tax Credit”, Presented at Solar 2009, Buffalo, New York, May 2009, to the American Solar Energy
Society
22
http://www.humboldt.edu/~ccat/econprojects/Econ309solarhotwaterheaterII.xls
23
http://www.ongrid.net/papers/PVAdvancedCommEconAndFinancingSlides.pdf
24
National Renewable Energy Laboratory (1999) “Financing Solar Thermal Power Plants”, NREL/CP‐550‐25901,
Prepared for the Proceedings of the ASME Renewable and Advanced Energy Systems for the 21st Century
Conference, April 11‐14, 1999, Maui, Hawaii
25
O‘Rourke, Stephen (2008) “Solar Photovoltaic Industry ‐ Solar PV Economics and Industry Outlook –November
2008”, Deutsche Bank Securities
26
“See Scalable Electric Power from Solar Energy”, KhoslaVentures; See http://www.theclimategroup.org/assets/
resources/Scalable_Electric_Power_from_Solar_Energy.pdf
27
Blue Summit Consulting and New Jersey Board of Public Utilities, “The Cost of New Jersey’s Solar PV Transition”
28
BP Solar Frontiers (2005) “Going for grid parity”, February 2005; See on‐line newsletter at http://www.bp.com
29
O‘Rourke, Stephen (2008)
2‐23

Section 3
Solar Sector Market Opportunities
1 Introduction
There are numerous and diverse niches in the various sectors and segments of the global solar market
which present a wide‐range of opportunities for Mexican companies to participate in the growth of
exports to the U.S. and especially in the southwest states of Arizona, California, Nevada and New
México. There is also an emerging domestic solar market in México and in Latin and South American.
México is well positioned to benefit from the continued growth of a domestic solar market and to be a
leader in the export of solar goods and services.

These opportunities range from the export sale of utility‐scale solar thermal electricity from northern
México to the global distribution of solar products such as photovoltaic panels, solar hot water systems
and solar street lights. Perhaps the largest market potential is positioning Mexican companies as
strategic players in the supply chain for the enormous capacity additions of utility‐scale solar power
plants near the border in southern California and Arizona where great opportunities exist to supply
mirrors, reflectors, solar receivers, structural supports and engineering services. There are numerous
business models and market entry strategies for Mexican companies expanding into U.S. markets which
include third‐party distributor/supply agreements, joint‐ventures and wholly‐owned subsidiaries as
system integrators, direct‐sale Power Purchase Agreements with U.S. utilities and large commercial
customers and large self‐generation/carbon projects using solar. Please also see Appendix 3 for
additional information on “solar sector market opportunities”.
2 Profiles of Mexican SMEs
This section describes various types of Small and Medium Enterprises (SMEs) and shows the range of
companies that form the base of México’s current and emerging solar industry. Opportunities exist for
Mexican companies to compete in all tiers of the solar supply chain such as:

 Tier 1 Supplier – A direct designer and supplier to the solar technology construction company
key systems, subsystems, assemblies or components and assists in continuous product
development and improvements

 Tier 2 Supplier ‐ A supplier to Tier 1 Suppliers or a direct supplier of less critical components,
systems or subsystems.

 Tier 3 Supplier – A supplier of engineered materials and special services such as rolls of sheet
steel, bars, heat treating, surface treatments, etc.

2.1 Representative Profiles of SMEs
2.1.1 Business Type 1 – Small PV System Integrators
“Business Type 1” is generally a small company integrating solar photovoltaic systems primarily for rural
off‐grid and grid‐connected commercial, industrial and residential systems in regional domestic markets.
The work force for this company is between 4 and 12 employees with at least 2 engineers. As the price
of PV has declined over the past 2 years, this type of company is emerging as one of the most common
in the industry. The company does not develop technology and would likely have PV module supply
3‐1

relationships with distributors for Kyocera panels manufactured in Tijuana or for silicon or thin‐film
(CIGS) panels from ERDM in Veracruz. Many of these companies also install solar hot water systems or
evolve as small ESCOs (energy services companies) which integrate other products and services as
described in Business Type 3 below. The annual income for such companies varies but is generally
around USD 500,000 and USD 1,000,000. These companies have seen strong annual sale increases for
2009 as the costs of PV continue to decline. Such companies are the backbone to México’s emerging
domestic solar industry but are not likely candidates for expanding into the U.S. market.
2.1.2 Business Type 2 – Energy Engineering Firm
“Business Type 2” is an energy engineering firm with experience in electrical and/or thermal industrial
processes which has added capabilities to design industrial systems with solar PV and solar thermal heat
for industrial process heat and process hot water. This type of business is generally a regional company
servicing industrial clients and has developed new capabilities to offer low‐ and medium temperature
solar industrial hot water and process heat using flat plat and evacuated tube collectors. The workforce
may vary from 4 to 20 employees with at least 4 engineers and an annual income is at least USD
1,000,000.
2.1.3 Business Type 3 – ESCO (Energy Services Company)
An ESCO “Business Type 3” company designs, installs, maintains, and in many cases finances retrofit and
upgrade projects to improve the energy efficiency of commercial and industrial buildings and facilities.
Often the business model calls for the ESCO being paid from the energy savings over time. Some ESCO’s
are incorporating PV and solar thermal energy into commercial and industrial projects to demonstrate
to the public the company’s commitment to being “green”. A key aspect of the ESCO work is identifying
energy efficiency measures with a payback analysis of energy savings from reduced usage and demand
charges. The workforce is variable but many have 4 to 10 employees with companies having annual
income after 5 years in a range of USD 1,000,000 to USD 5,000,000.
2.1.4 Business Type 4 – Solar Hot Water System Integrators
“Business Type 4” is a system integrator that installs solar hot water (SHW) systems for residential,
commercial and industrial customers and is the most prevalent type of solar company in México largely
due to low costs for SHW, a very favourable payback period of 18‐36 months and demand from
government housing programs. These companies may also be distributors of imported and domestically
manufactured solar hot water systems. Some companies may import evacuated tubes from China and
manufacture the balance of the system in México. Many of these companies work in local and regional
markets and have greatly benefitted and have expanded due to participation as subcontractors in
governmental programs for large national housing programs through Infonavit which provides
affordable housing for low‐income workers through programs such as Casas de Interés Social and
Hipoteca Verde (“Green Mortgage”). Such companies are generally regionally‐based with a workforce
of at least 5 employees with larger commercial/industrial focused companies having as many as 40‐50
employees. Annual income would likely range between USD 500,000 and USD 1,500,000 and the
companies are seeing large sales increase in 2009 and are very optimistic about the future growth. Such
companies are also a key part of the backbone to México’s emerging domestic solar industry but are not
likely candidates for export markets.
3‐2

2.1.5 Business Type 5 – Design Engineering Firm
“Business Type 5” is a full‐scale design and energy engineering firm for large‐scale energy projects with
electrical, mechanical, civil and structural capabilities. Such companies have a track record working for
CFE and large Self‐Generation projects with many having experience in carbon projects under the UN’s
Clean Development Mechanism (CDM) as part of the Kyoto protocols. Many of these companies are
working in “turn‐key” project development teams on large‐scale wind and hydro projects and can easily
expand to projects involving large‐scale solar electric. The workforce is generally 20 or 30 employees
comprised of mostly engineers. Annual incomes are well above USD 1,000,000. Strong opportunities
exist as outsourced lower‐cost engineering services for international utility‐scale solar projects and
especially for the large Spanish technology providers/system integrators which are dominating the
Southwest U.S. utility solar market and will continue to do so for the foreseeable future.
2.1.6 Business Type 6 – Large Commercial HVAC Contractor
“Business Type 6s” are existing HVAC design and installation companies working in commercial and
industrial markets on projects such as manufacturing plants, malls, hotels, and universities. These
companies work with conventional “commercially‐available” systems for heating, cooling and
ventilation with no experience or knowledge of the potential to integrate solar thermal systems as a
secondary heat source for thermal‐based heating and cooling systems. Such companies work in the
national and regional markets with many having multiple locations and a workforce of at least 20
employees who are mostly technicians. Annual incomes are in the range of USD 1,000,000 to USD
5,000,000. Such companies are key candidates to become earlier adopters of solar thermal cooling using
low‐temperature solar thermal collectors and the new medium‐temperature parabolic troughs.
2.1.7 Business Type 7 – Large Commercial Electrical Contractor
“Business Type 7s” are successful electrical contractors working on utility‐scale electricity and
transmission projects for CFE and for large Self‐Generation for industrial and commercial customers.
Such businesses are often part of Engineering, Procurement and Construction (EPC) companies and
work in “turn‐key” project development partnerships. Some of these companies may have recently
started development or construction on large‐scale wind, hydro and biomass CDM carbon projects.
Companies without CDM‐type experience are likely new entrants to the market and have certainly
watched the energy and carbon market trends in México for self‐generation and CFE projects. “Business
Type 7” companies are strong candidates with significant financial strength which can provide EPC
services for utility‐scale PV and solar thermal electric projects. These are strong companies with multiple
office locations with capacity to work projects nationwide or in a team on international projects. The
workforce of such companies is at least 60 employees with annual incomes well above USD 5,000,000.
2.1.8 Business Type 8 – Machine Shop
“Business Type 8s” are small‐ and medium‐sized machine shops and/or metal workshops with
capabilities to make structural supports and components such as transmission towers, antennas, large‐
scale billboards, and steel buildings. Such companies currently serve local, regional and/or national
markets as Tier 1, Tier 2 and Tier 3 suppliers. Fabrication‐related processes are diverse and include
Aluminum extrusion, water‐jet cutting, sheet metal, and high‐quality welding along with a variety of
others process capabilities. The workforce varies depending on the degree of vertically‐integration but
generally consists of 10 to 50 employees with mostly skilled technicians. Annual incomes are generally
3‐3

between USD 500,000 and USD 5,000,000.
2.1.9 Business Type 9 – High‐Precision Metal Work Shop
“Business Type 9” includes well‐established and technologically advanced “high‐precision metal shops”
currently working for the automotive, aerospace, medical devices, optics and machine design industries.
The level of precision and quality control requirements for components requires CNC equipment,
metrology for Quality Assurance and industrial design engineering (CAD and CAM capabilities). Due to a
high level of automation, the workforce is between 10‐25 employees with most employees working as
individual equipment operators supported by design engineers. Annual income varies widely but, as a
baseline, a company workshop with 10 equipment units operating at 68% capacity would generate USD
1,000,000 annually.
2.2 Non‐SME Business Profiles
2.2.1 Business Type 10 – High‐Level Construction Company
“Business Type 10s” are often part of Engineering, Procurement and Construction (EPC) companies
and/or work in “turn‐key” project development partnerships. Such companies are critical components
to building a domestic utility‐scale renewable energy sector and to export construction services for
global renewable projects. The potential large role for such companies in global energy development is
clearly evidenced by the dominance of large Spanish and German construction companies which have
teamed with technology providers and have entered the California and Arizona utility‐solar market after
successfully building‐out Spain’s solar thermal industry. Such large Mexican companies have the
capability to lead large‐scale solar electric development in México along with selective markets in Latin
and South America. Great opportunities exist also for teaming with the global solar development
companies as they too consider entering new markets in the Americas.
2.2.2 Business Type 11 – Flat Glass Manufacturer
The “Business Type 11” glass company has the potential to play a significant role in the global supply
chain for “solar glass” which crosses all segments of solar technology from PV modules and solar hot
water collectors to large‐scale solar thermal concentrators. The existing global supply chain for solar
glass can not come close to meeting the near‐ and long‐term market demand. This lack of an adequate
supply chin is considered a barrier to solar development especially as solar approaches grid‐parity with
expectations of commodity pricing. There are significant opportunities for Mexican flat glass
manufacturers to form strategic supply partnerships with the PV module manufacturers and with the
solar technology developers now entering the California and Arizona markets.
2.2.3 Business Type 12 – Mining, Chemical and Fertilizer Companies
“Business Type 12” companies are Tier 3 suppliers of raw materials used for many components and
parts in the solar industry. These companies will likely see significant growth starting with expanded
demand in the near‐term as many large projects in the U.S. move from permitting to construction. New
opportunities exist to also supply the emerging energy storage market using phase‐change materials
along with thermal and battery storage systems. These are new and emerging technologies and México
has great potential in supply this market with extraordinary resources in cooper, silver, selenide, silicon,
molybdenum, arsenide, cadmium, tungsten, zinc, and various salt banks for nitrates.
3‐4

2.3 Solar Value Chains
2.3.1 PV Industry Value Chain
2.3.2 Utility‐Scale Solar Thermal Electric Value Chain
3‐5

2.4 Matching México’s Supply Chain to Solar Value Chains
Enormous opportunities exist for México’s SMEs and large engineering, manufacturing, and construction
companies to participate in all aspects of the various solar value chains while continuing to build a
strong national solar industry and becoming a major diversified player in the long‐term global solar
supply chain. México’s strong industrial base, world‐class manufacturing capabilities and “Asian cost”
structure offers extraordinary opportunities for SMEs and for large companies. As large Mexican
companies become Tier 1 suppliers of components and systems for utility‐scale solar projects,
enormous opportunities open up for Tier 2 and Tier 3 domestic suppliers. This section matches the
above “business‐types” to the PV and the solar thermal electric value chains.
3 Supply Chain Demand for California and Arizona Solar Markets
3.1 Undersized Supply Chain and Unprecedented Demand Through 2020
The existing supply chain in North America cannot come close to meeting the demand for PV, utility‐
scale solar or for solar hot water systems. A recent renewable energy assessment for Arizona utilities
prepared by Black and Veatch1 characterized utility‐scale solar electric development as being
“constrained in the near term due to the practical limitations of the industry’s supply chain”. It was
expected that “demand for solar thermal equipment and for the supporting engineering and
construction services is at an unprecedented level worldwide. It is assumed that the near term supply
chain constraints in the industry will be alleviated by 2013”. This solar thermal demand is concurrent
with the projected growth in global PV production at 5 times the current capacity by 2012 with
monocrystalline silicone (c‐Si) dominant and with Thin Film seeing greater growth.2
3.1.1 Concentrating Solar Optical Components
The core components to the optical systems of concentrating solar thermal technologies are precision
reflective materials to collect and concentrate direct sunlight. Much higher solar‐to‐energy conversion
efficiencies are possible with concentrating solar technologies than for flat‐plate PV. The grid‐scale
concentrating solar industry requires enormous quantities of high‐performance mirrors, reflectors and
lenses for a wide‐array of types of solar modules, collectors and concentrators.

A brief overview on the use of reflectors and mirrors for the main concentrating solar thermal
technologies follows:

 Power Towers – Thousands of ground‐mounted heliostats (mirrors) use 2‐axis tracking to focus
direct beam radiation onto a tower‐mounted central receiver filled with a molten‐salt working
fluid that produces steam. The hot salt can be stored extremely efficiently to allow power
production to match utility demand, even when the sun is not shining. BrightSource is the
largest developer of power tower projects in the southwest U.S.

o BrightSource’s LPT 550 heliostats consist of two flat‐glass mirrors, a support structure, a
pylon and a tracking system. The mirrors are mounted onto the pylon and track the sun
in two dimensions, reflecting the sunlight onto a boiler atop a tower.

o BrightSource reports that it uses smaller, flat mirrors which are more efficient, simpler
to manufacture, and cost less to install than parabolic mirrors used in solar troughs. The
heliostats are highly accurate with a 35‐year useful life with practically zero
maintenance with the exception of cleaning.

o The average BrightSource Energy solar plant is 100 MW and consists of 50,000
heliostats.

3‐6

 Parabolic Trough – A parabolic trough system uses linear mirror collectors with 1‐axis tracking to
maintain the optical focus of direct beam radiation upon a linear oil‐filled receiver to collect
heat which is transferred to generate steam to power a steam turbine. The mirrors used for
parabolic trough collectors are dual‐surface silvered glass mirrors which have the reflective
silver layer mounted on the backside of the glass. The glass thickness is 4‐milimeters and is a
thick, special low‐iron or white glass with a high transmittance. The mirrors have a solar‐
weighted specular reflectivity of about 93.5%. A special multilayer paint coating protects the
silver on the back of the mirror. Each mirror panel has an area of approximately 2 m². All current
parabolic trough power plants use glass mirror panels manufactured by Flabeg GmbH.3

 Parabolic Dish‐Stirling – A highly‐reflective parabolic dish is used to concentrate and focus direct
beam radiation onto the head of a thermal receiver which external heat to drive a Stirling
engine.

 Linear Fresnel Systems – Ausra’s Compact Linear Fresnel Reflector technology consists of a
series of slightly curved linear solar reflectors that concentrate solar energy on pipes in an
elevated receiver structure approximately 17 m (56 feet) tall. The receiver carries a row of
specially coated steel pipes in an insulated cavity. When the reflectors focus on the receiver,
saturated steam at approximately 270°C (518°F) is produced as cooler water is pumped through
the receiver pipes and thereby heated up. The steam is then used to drive a turbine to generate
electricity.4

 Reflector Area per MW Capacity – The size of the reflective surface area for 1 MW of
concentrating solar thermal varies considerably between the technologies5:

Parabolic Trough 5,800 m²
Power Tower 5,500 m²
Dish Stirling 1,234 m²
Compact Linear Fresnel 9,519 m²

 Key Reflector Materials –

Glass
Thick Glass (>3 mm)
Thin Glass (~ 1mm)
Mirror Coatings
Equipment Vendors
Non‐Glass
Anodized Aluminium
Polished Metal
Silvered Polymer Films

 Alternative Reflector Designs and Materials – A number of alternative mirror concepts have
been under development to reduce cost, improve reliability, or increase performance. Several
glass/mirror manufacturers outside of the solar industry are evaluating the market.
Considerable R&D has been and is being conducted on options using silvered or aluminized
films, thin glass, and front‐surface mirrored glass.6 Considerable R&D is also being done at the
National Renewable Energy Laboratory in Golden, Colorado, on advanced reflectors that will be
high‐reflective, long‐life and have reduced costs which are 50% less than traditional trough
mirrors.7

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 Key Suppliers – there is a very limited supplier‐base for manufacturers of solar mirrors and
reflectors with 2 key German suppliers dominating the market:

o Flabeg GmbH – In August 2008, Flabeg broke ground on its first Solar Mirror Plant in the
U.S. which will establish the production capacity for high‐precision parabolic mirrors
which are used to help generate electricity at large‐scale solar power plants. The new
209,000‐square‐foot manufacturing facility plant is near Pittsburgh, Pennsylvania. The
factory will have a capacity of up to 1 million parabolic curved mirrors and had orders
for 700,000 mirrors at the time of ground breaking.8

o Alanod‐Solar GmbH & Co. KG – Alanod‐Solar9 of Ennepetal, Germany, is one of the
world’s leading manufacturers of reflective and absorptive solar surface solutions.
Alanod offers an alumized polished aluminium reflector with a nanocomposite oxide
protective layer. Alanod’s reflecting surfaces use various materials with a total solar
reflectance ranging between 85% and 95%. Many of the new generation of Distributed
troughs use Alanod “brushed aluminium” reflectors.
3.2 Projected Component Volume for Near‐Term Solar Thermal Projects
3.2.1 Reflectors and Mirrors for Utility‐Scale Concentrating Solar Thermal Electric
The projected reflectors and mirror supply for concentrating solar thermal projects in the southwest
U.S. through 2020 is almost 100 million square meters. Almost 75% of this reflector area is required for
parabolic trough projects which totals approximately 24 million individual mirrors comprising some 74
million square meters of surface area.

Projected Quantities of Reflectors and Mirrors for
Concentrating Solar Thermal Electric Projects
in California, Arizona, Nevada and New Mexico
to 2020
MW Collector Area Share

Power Tower 4,217 23,193,500 m² 23%
Trough 12,753 73,969,140 m² 74%
Dish‐Stirling 2,236 2,759,533 m² 3%
Total 19,207 99,922,173 m²
Hectares 9,992
Acres 24,691

3.2.2 Receivers
There are only 2 German supplies providing receivers to the global trough industry – Schott AG and
Siemens AG which acquired the Israeli company Solel Solar Systems in October 2009. Solel has self‐
supplied its own project companies with receivers for projects in the U.S. and Spain.

Schott Solar opened a USD 100 million production facility in Albuquerque, New Mexico in May 2009 to
make components for the utility‐scale parabolic trough and photovoltaic markets. The peak production
capacity will be 400 MW for trough receivers which incorporate coated steel absorber tubes in
evacuated glass envelopes. The plant will also have a peak production 85 MW for 225‐watt
polycrystalline PV modules.10
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3.2.3 Structural Supports
All utility‐scale trough systems require structural metal support system. These structures rotate in a 2‐
axis or 1‐axis depending upon technology. A key design requirement is sufficient strength to withstand
wind loads during maximum wind speeds to prevent catastrophic damage. Pedestals supports are used
for each 2‐axis tracking heliostat mirror unit for power towers. The Stirling Energy Systems dish units
requires a more substantial pedestal which holds an approximate 90 m² parabolic collector and a 25 kW
Stirling engine mounted on a boom connected to the pedestal all of which tracks on a 2‐axis drive
system. Trough systems use linear collectors which consist of pylons and mirror support structures
which track on 1‐axis. Most of the trough structures use steel or aluminium for supports and space
frames to hold the reflector. Solargenix/Acciona uses an organic space frame hubbing structure with
extruded aluminium using 70 to 80% recycled content. Abengoa uses a Torque tube with stamped steel
cantilever mirror support arms. The LUZ LS‐3 collector uses a bridge truss and galvanized steel. Some of
the new smaller Distributed trough systems use a combination of metal and lightweight composite
panel materials for reflector backing.11
3.2.4 Supply Chain Requirements for U.S. Trough Projects
This estimate uses detailed quantities and technical parameters from Nevada Solar One12 which went
online in 2007 as the 1st utility‐scale trough installation in the world since the 1980's. Nevada Solar One
was built by Solargenix/Acciona using a proprietary collector design. The metrics for the Acciona project
were used as the basis for projecting the per MW volume of the supply chain for key components. The
actual supply chain requirements will vary between projects and between various proprietary trough
designs. The Nevada Solar One figures are used to show the magnitude of the supply chain
requirements by key components and not to provide precise figures.

The basis for 12.7 GW of trough projects is the combined total of: 12 trough projects with 4.8 GW of
new capacity which is undergoing permitting by the California Energy Commission or have announced
PPAs; 8 GW of future BLM‐sited projects in California, Arizona, Nevada and New Mexico which
assumes just 25% of all trough projects which have completed “Plans of Development” will go online;
250 MW of Distributed trough which represents 33% of new capacity additions under California
Distributed feed‐in‐tariff program; and the 280 MW Abengoa Solana project under a PPA with Arizona
Public Services.

Projected Volume of Parabolic Trough Mirrors, Receivers and Structural Supports
for Concentrating Solar Thermal Electric Projects in California, Arizona, Nevada
and New Mexico to 2015
Number Number Space Frame

MW Collector Area Mirrors Receivers Metal
Trough 12,753 73,969,140 m² 30,607,920 3,101,603 539,915 mT
7,400 Hectares 12,406 km

Unit Basis per MW of Trough
5,800 m² Mirror surface area
2,400 Mirrors ‐ number
243 Receivers ‐ number
4 m Receiver ‐ length
122 Spaces frames
42.3 Aluminum ‐ metric Tons
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4 Climate Change Pressures on the Supply Chain Creates Opportunities
Global climate change initiatives will create increasing pressures to reduce the carbon footprint of all
aspects of the solar supply chain and to reduce the embodied energy content of materials used in solar
components and parts. These climate change initiatives will also create new opportunities in the solar
supply chain for existing, new and emerging Mexican companies which understand and anticipate these
trends by implementing carbon‐reducing policies and practices which go far beyond previous “Greening
the Supply Chain” initiatives. Additional opportunities will come from companies working to provide
materials with lower “embodied” energy.
4.1 Beyond ISO 14000
Traditionally the “greening of the supply chain" referred to buyer companies requiring suppliers and
vendors to practice a certain level of environmental responsibility in core business practices which in the
past may have required the company to become certified to ISO 14000 standards. ISO 14000 is a series
of international standards on environmental management which were developed after the 1992 Rio
Summit on the Environment. It provides a framework for the development of both the system and the
supporting audit program. During the 1990’s “environmentally‐conscious manufacturing” and “waste
minimization” were also terms associated with the “greening” of the supply chain.

Suppliers will gain competitive advantages as the global solar industry will increasingly expect and
demand reduced carbon‐footprints for all aspects of the supply chain. Manufacturers adopting self‐
generation projects to provide renewable electricity, industrial process heat and process hot water will
reduce their carbon footprints and enhance their value and position in the long‐term solar supply chain.
4.2 Opportunities for Alternative Materials with Lower Embodied Energy
There will on‐going opportunities for supply chain companies to identify, develop and source alternative
and recycled content materials with lower embodied energy content for renewable energy systems,
components, and parts. “Embodied Energy” is the total energy required to fabricate a given material or
component, from extraction of raw materials to manufacturing, and all transport steps along this chain.
In addition, “end‐of‐life” disposal options, including recycling, land filling, and incineration, are
accounted for. This is often referred to as “cradle‐to‐grave” accounting.13

As an example, a recent analysis by the National Renewable Energy Laboratory found that the embodied
energy of the curved glass mirrors which dominate all trough collector designs is 61% higher than a new
alternative light‐weight solar film.

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The embodied energy of a new solar film‐based mirror is comprised of an Aluminum support substrate
(62 MJ/m²), a new ReflecTech® polymer substrate (22 MJ/m²), and a Reflec ‐Tech® silver layer (1 MJ/m²)
with a total embodied energy total is 85 MJ/m². The embodied energy of the EuroTrough’s curved glass
mirrors is comprised of the curved glass (345 MJ/m²) which includes the silver layer and the back‐coated
layers along with the transportation of the mirrors to the project site (20 MJ/m²) which totals 365
MJ/m². 14

The making of steel releases 2 tons of CO₂ for every ton of steel produced. With steel and Aluminum
being the predominant material for the space‐frame support structures for trough collectors,
considerable opportunities exists for companies looking at composites as an alternative light‐weight,
high‐strength material with lower embodied energy content.
5 Export Sales of Solar Electricity to U.S.
Perhaps the largest near‐term solar opportunity for Mexican companies is to initiate the development
and construction of utility‐scale solar power plants in México for the export sale of electricity to the
United States. Specifically there is a new and emerging market for the export of solar thermal electricity
from northern México to California by Mexican Independent Power Producers (IPPs). The export of
renewable electricity to California has already begun with recent sales of geothermal and wind by CFE
and IPPs to California utilities. For California to meet its Renewable Portfolio Standards of 33% by 2020,
the California Public Utility Commission expects that 17% of its renewable electricity will come from out‐
of‐state which equates to 4.1 GW of renewable capacity additions which will provide more than 12,000
GWhs of electricity.15
5.1 U.S. Anticipates Renewable Export Electricity from México
5.1.1 US‐México Bilateral Framework on Clean Energy and Climate Change
The “US‐México Bilateral Framework on Clean Energy and Climate Change”, agreed to by Presidents
Calderon and Obama in April 2009, builds upon cooperation in the border region and promotes efforts
to reduce greenhouse gas emissions and to strengthen the reliability and flow of cross‐border electricity
grids along with facilitating the ability of neighboring border states to work together to strengthen
energy trade.
5.1.2 California and Arizona
California has anticipated that renewable energy generated in Baja California will contribute to state
utilities meeting their Renewable Portfolio Standards (RPS). California’s Renewable Energy Transmission
Initiative (RETI) has identified renewable resources in California and adjoining areas that can deliver
energy to California to meet its RPS requirements and to identify the necessary transmission to deliver
this energy. RETI has included the northern part of Baja California as part of the assessment area.
Arizona also expects to import a portion of its renewable energy requirements.16
5.1.3 Western Renewable Energy Zones
The Western Governors’ Association and U.S. Department of Energy launched the Western Renewable
Energy Zones (WREZ) initiative in May 2008. Participating in the initiative are representatives from
throughout the Western Interconnection which includes 11 states, two Canadian provinces and areas in
northern México.
5.2 5 GW of Solar Thermal Potential in Northern México
The quality and quantity of northern México’s solar resources are as good as anywhere in the world.
México’s best solar thermal resources are in the northern states of Baja California, Sonora, and
Chihuahua. There is 5 GW of solar thermal generation capacity in Baja California which has the potential
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to generate 11.6 GWhs of solar electricity annually.17 Though there has been considerable wind
development planned for northern Baja for export to the U.S., there are considerably more solar
thermal resources than wind.18

Solar Resources in Baja California

Renewable Generating Capacity (MW)
Solar Thermal Wind
DNI ≥7 kWh/m² day Class 4 & Class 5+ Baja
Baja North 3,980 1,684 5,664
Baja South 1,012 1,253 2,265
Total 4,992 2,937 7,929
Share 63% 37%
Renewable Generation (GWh)
Solar Thermal Wind
DNI ≥7 kWh/m² day Class 4 & Class 5+ Baja
Baja North 9,274 5,169 14,443
Baja South 2,357 3,745 6,102
Total 11,631 8,914 20,545
Share 57% 43%
5.3 Selling Electricity to California
There are 2 mechanisms to sell renewable electricity generated in México to the U.S.:
 Direct sales by Comisión Federal de Electricidad (CFE) of electricity transmitted through the
interconnected Western States Coordinating Council grid between Baja California and California
o In February 2009, CFE agreed to sell the City of Los Angeles 100 MW of geothermal
electricity in a 3‐year agreement with the Los Angeles Department of Power and Water. The
power comes from CFE’s Cerro Prieto geothermal facility in Méxicali, Baja California.19

 Direct sales by Independent Power Producers of electricity transmitted through dedicated cross‐
border interconnections to utility substations in Southern California which is then delivered to
California utilities and/or large industrial customers
The United States and México have traded electricity since 1905, when privately owned utilities located
in remote towns on both sides of the border helped meet one another’s electricity demand with a few
interconnected low voltage lines.20 The 1992 reform of the Electric Energy Public Service Law21 made
certain changes that allowed the private sector to invest and participate in activities for exporting
electricity generated in México22 such as:
 Independent Power Production – Private investment is allowed in larger generation plants with
a minimum capacity of 30 MW for the sole purpose of selling electricity to or for export.

 Import and Export – Private investors are allowed to participate in the import and export of
electricity.

México has an active electricity trade with the U.S. and in 2007 exported 1,300 GWhs of electricity to
the U.S. while importing 600 GWhs. Companies have built power plants near the U.S.‐México border
with the aim of exporting generation to the United States. Any company seeking to establish private
electricity generating capacity or to begin importing/exporting electric power must attain a permit from
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Comision Reguladora de Energia (CRE). Since 2007, CRE has issued permits to 4 private companies which
has led to a major expansion of electricity exports to the U.S. totaling some 12.1 GWhs. The largest
exporter is Sempra Energy’s 700 MW combined‐cycle natural gas plant near Méxicali.23
To meet the growing demand for electricity and natural gas, the cross‐border transfer of significant
amounts of electricity and natural gas is increasingly being integrated into the energy sectors of both
California and Baja California.24
Baja California and Sonora border California and Arizona which are the 2 states in the U.S. which have
the greatest demand for renewable energy and which expect solar to play the a major role in the
renewable supply mix. The border area of Baja California is an ideal location to generate solar electricity
for deliveries in San Diego, Los Angeles and Phoenix which are within a 200‐300 mile radius. The
Southern California grid is undergoing major upgrades in order to support large‐scale renewable
capacity additions from the California desert and from Baja California.
5.4 Transmission Interconnection
5.4.1 Cross‐Border Grid Interconnections
México has 9 transmission interconnections with the United States and 5 of these lines are high‐voltage
direct current connections that operate only in emergency situations. The electrical grid for Baja
California is isolated from México’s National Electric System (SEN) and is connected to the Western
Electricity Coordinating Council (WECC) in the Unites States and Canada. The main flows of electricity
between the U.S. and México are between SEN in Baja California and the Western Electricity
Coordinating Council (WECC), where there is a medium voltage (230 kV) connection capacity of 800
MW.
5.4.2 IPP Projects Require Dedicated Transmission to U.S. Grid
New IPP solar generation in northern México for export to the U.S. requires dedicated cross‐border
transmission lines. Currently some major wind export projects in the La Rumorosa, Baja California, are
being sited with transmission access to the U.S. just a few miles away. The siting of solar projects along
the U.S./México border provides far more options for optimal locations close to grid interconnections
than wind since wind must be located at a specific place due to the site‐specific character of the wind
resources. Solar projects can be sited based upon proximity to transmission since the solar resources are
inherently non‐site specific.

PowerLink Transmission Lines
5.5 Business Models for Mexican IPPs for Sales to California
Independent Power Producers (IPPs) develop, finance, construct, own and operate power plants and
enter into long‐term contracts with utilities or large industrial customers to supply electricity in a long‐
term Power Purchase Agreement (PPA).
5.5.1 Competitive RFPs and “Least‐cost, best‐fit” for Investor‐Owned Utilities
The procurement of renewable energy in U.S. markets is much different than in Europe. The standard
business model for utility procurement of renewable energy is competitive Request For Proposals (RFPs)
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with the bidder proposing a long‐term price generally over a 20‐year PPA period. Utilities often issue
annual renewable energy RFPs and file annual renewable energy procurement plans to the California
Public Utility Commission (CPUC) or the Arizona Corporation Commission (ACC).

Utilities use a selection process called “least‐cost, best‐fit” in reviewing renewable RFPs which allows
the utility to select the project based on the value to the ratepayer and the utility. The utility selects and
“short lists” a project and enters into negotiations with the IPP proposing the project. The terms of the
PPA must then be approved by the CPUC or ACC which considers estimates of indirect costs associated
with the project including new transmission investments and ongoing utility expenses resulting from
integrating and operating the proposed renewable energy resources. Standard procedure is to negotiate
utility PPAs with options for capacity additions in future phases. The terms of contracts are not disclosed
but sometimes the kWh sale price of electricity can be inferred from Press Releases and permitting
applications. For example Abengoa’s Solana Project for Arizona Public Services generates 600,000 MWh
annual under a 30‐year PPA with the total PPA value of USD 4 billion. This would be the equivalent of a
fixed price of USD 222/MWh.

Multiple‐Party PPAs – A common energy purchasing strategy is for multiple parties to join in a multi‐
party PPA to benefit from shared lower costs from larger contracts which no party alone could manage.
Such multiple parties could be publicly‐owned utilities or large industrial customers or a combination of
both. It is not unusual for a mine and an investor owned utility to joint‐venture in such agreements in
the southwest U.S. states.
5.5.2 Export Sales to Publicly‐Owned California Utilities
A new niche market is the direct sale of renewable electricity to publicly‐owned utilities in California
which provide 18% of the state’s electricity. In September 2009 publicly‐owned utilities became subject
to Renewable Portfolio Standards (RPS) for the first time when the Governor signed Executive Order S‐
21‐09 which increased the RPS requirement to 33% by 2020 for all publically‐owned and investor‐owned
utilities. By 2020, the 6 largest publicly‐owned utilities are required to add 18.8 GWh of renewables into
their electricity sales and 5 of 6 utilities are well within 200 miles of the Tijuana‐Méxicali border area.
These publicly‐owned utilities include Los Angeles Department of Water and Power (LADWP),
Sacramento Municipal Utility District, California Department of Water Resources, Imperial Valley
Irrigation District and the Cities of Pasadena and Burbank‐Glendale. LADWP is the largest municipal
utility in the U.S. and is larger than San Diego Gas and Electric, an investor owned utility. Using
Abengoa’s Mojave Project as a baseline, it would require 30 x 250 MW trough projects with a combined
capacity of 7.8 GW to meet the RPS requirements for publicly‐owned utilities in 2020. Abengoa’s Mojave
project is a USD 1 billion 250 MW trough project with annual production of 615 GWhs.25

Renewable Requirements for California
Public Utilities

Planning Area Annual Consumption Forecast
(GWH) and RPS
33% RPS
Utility Planning Area 2018 2020
LADWP 27,154 8,961
SMUD 12,851 4,241
California DWR 8,865 2,925
Imperial Valley ID 4,441 1,466
Burbank‐Glendale 2,305 761
Pasadena 1,301 429
Publicly‐Owned Utilities 56,917 18,783
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5.6 Specific Opportunities
The market demand from California presents significant opportunities for developing utility‐scale solar
thermal electric and utility PV projects by IPPs in Baja California for exporting solar electricity.
5.6.1 Utility‐Scale Projects
It is assumed that the same global solar system integrators which are dominating the competitive utility‐
scale solar markets in California, Arizona, Nevada and New Mexico are actively considering locations in
Baja California. Prime locations are the flat desert areas just west and east of Méxicali and the area
around San Luis Río Colorado bordering Yuma County, Arizona. The companies likely to be considering
sites in the Méxicali/San Luis Río Colorado area are Acciona, Abengoa, Solar Millennium, Solel, Iberdrola
and BrightSource.

Map of Méxicali and San Luis Río Colorado Area

Opportunities exist to locate utility‐scale solar thermal electric plants which are generally sized 250 MW
to 1000 MW. A typical 250 MW utility‐scale parabolic trough project with no storage represents a USD 1
billion investment requiring substantial engineering services and some 1,200‐1,500 construction jobs
along with 200 permanent jobs for operation.
5.6.2 Utility‐Scale PV
California utilities are diversifying their solar portfolios and are entering into long‐term PPAs for utility
PV projects sized between 45 MW and 550 MW which use thin‐film or one‐axis tracking silicon modules.
This part of the solar utility market offers additional opportunities and better access to the market for
Mexican IPPs to develop projects since the PV technology is available and “on the market” unlike the
utility‐scale solar electric market dominated by global project developers with proprietary solar
technology.
5.7 Opportunities for Large‐Scale Carbon Projects on the Border
The large‐scale wind projects being developed in México are “self‐generation” where the electricity is
used by large Mexican industrial customers and the either the entire project and its carbon credits or
just the carbon credits are sold to European investors such as large utilities who are in a mandatory
carbon market and require carbon off‐sets. These projects are qualified for under the United Nation’s
Clean Development Mechanism (CDM) as provided under Kyoto.

For large‐scale solar projects located in México, there are at least 3 conceptual scenarios for the sale of
solar electricity with (“bundled”) and without (“unbundled”) the environmental attributes which maybe
qualified as Renewable Energy Credits (REC) or as Certified Emission Reductions (CER):

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 Export Solar Electricity and RECs to U.S. Utilities: A “bundled” IPP project with export sales of
electricity with RECs to California and Arizona utilities which must comply with Renewable
Portfolio Standards (RPS) and require the RECs for mandatory compliance; This scenario
requires a project site near the border since a dedicated cross‐border transmission is required to
interconnect with a U.S. utility sub‐station.

 “Self‐Generation” Project for Mexican Industrial Customers/Sell CERS to Europe: An
“unbundled” IPP “self‐generation” project which sells the electricity to large Mexican
commercial/industrial customers and sells the CERs to European carbon investors; Project can
be located near the customer’s location using a distribution interconnection; This scenario is the
business model for most of México’s wind projects currently under development; Solar offers an
interesting alternative to wind for self‐generation projects since wind requires higher
transmission costs than solar due to the distance between remote wind farms and the industrial
point‐of‐use.

 “Self‐Generation” Project for Mexican Industrial Customers/Sell CERS to U.S.: An “unbundled”
IPP “self‐generation” project which sells the electricity to large Mexican commercial/industrial
customers and sells the CERs to the new carbon markets in the U.S. being implemented by the
U.S. Environmental Protection Agency and the by the Air Resources Board of the State of
California.
5.8 Carbon Off‐Sets for a Representative Utility‐Scale Solar Project
Using a USD 25 per Certified Emissions Reduction sale price for the offset of the equivalent of 1 metric
ton of CO₂, carbon off‐sets would produce about USD 92.2 million annually in additional income for a
typical 250 MW solar thermal electric project using trough technology in greater Méxicali area. This
scenario uses an emissions factor of .62 for México which means that, for every MWh of renewable
energy generated, the equivalent of .62 tons of CO₂ is offset. The sale of CER credits would add USD 285
million to project revenues over the lifetime of the project which is some 28.5% of the USD 1 billion
capital cost for the solar plant. Using an electricity sales price of USD .15/kWh, the sale of CER credits
would contribute about 10.3% in additional income from providing USD .016 more per kWh. This
projection uses the average capital costs for a project in California. Cost reductions of 20‐30% or more
are anticipated for a project located in northern México which means that the carbon revenues, as a
share of total revenues, would be expected to be higher than 10.3%.

Projected tCO₂ Emissions Reductions
Typical 250 MW Trough Solar Thermal Electric Plant
Northern Baja California Location
Certified
Emissions
Electricity Reduction
Production México Emissions Factor (CER) Sales ‐ Electricity Sales
Size MWh tCO₂e/MWh tCO₂e USD ‐ USD
Annual 615,000 381,300 $9,532,500 $92,250,000
0.62
30‐Years 12,300,000 11,439,000 $285,975,000 $1,845,000,000
CAPEX USD1,000,000,000
CER Price tCO₂e USD 25
Electricity Sale Price USD .15 kWh
Additional CER Price
Value USD .016 kWh +10.3%
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6 Global Thermal Energy Market
Most of the world’s energy is used to generate heat which consumes more than 2 times the energy that
is used for electricity and 50% more than is used for transportation. Thermal energy represents 54% of
the global final energy demand with electricity accounting for just 17%.

Global Final Energy Demand26
Medium‐ and Low‐Temperature Heat ≤ 250°C (480°F) 44%
Transport Fuels 29%
Electricity 17%
High‐Temperature Process Heat 10%

The market potential for utility‐scale solar thermal electricity, solar hot water and PV is well known. The
use of direct solar thermal energy for process and for conversion applications is the least known and
least developed sector of the solar industry. There may even greater opportunities to use low‐ and
moderate‐temperature solar thermal heat in direct applications to displace fossil‐fuel electricity
generation and to replace the direct combustion of fossil‐fuels for heat. Solar thermal energy out‐
performs PV in Greenhouse Gas reductions due to a much higher solar‐to‐energy conversion factor.
Solar thermal will soon have a great advantage over PV as global incentives shift from performance‐
based incentives on kWh produced to actual kgs of GHGs and CO₂ reduced. The replacement of direct
combustion fossil fuels by solar thermal has a potential to reduce more GHGs than PV and even utility‐
scale solar thermal electric.
6.1 Opportunities
Significant opportunities exist for Mexican companies in all aspects of the emerging direct solar thermal
market. These opportunities include system integrators, engineering services and manufacturers of the
solar thermal generation systems and the thermal conversion equipment and systems used to transform
heat into productive “work”. Key products of direct solar thermal which present great opportunities for
México are industrial process heat and process hot water, cooling, heating, desalinated water and
“distributed‐scale” thermal power blocks for electricity and heat.
6.2 New Distributed Troughs for Medium‐Temperature Applications
A new generation of scaled‐down parabolic trough collectors is entering the market which will create
great opportunities to generate electricity and drive thermal applications for cooling, industrial heat and
desalination. There are now numerous companies from Europe, the U.S. and Australia entering the new
market for Distributed solar thermal with new designs for “Distributed” parabolic troughs. Unlike any
other solar technology, these types of Distributed solar thermal systems allow extraordinary capability
and flexibility to reduce or replace fossil fuel‐driven, combustion‐based generation for a wide range of
thermal applications and processes. Such solar thermal collectors can be configured in hybrid operations
with natural gas or biomass and with energy storage system to extend the hours of operation to near
base load capabilities as well as peak. The following list shows operating temperatures for
representative Distributed trough collectors from 5 companies:

New Generation of Medium‐Temperature Troughs
DE – Trough Solarlite DSG 330°C 626°C
DE – Trough SOLERA Sunpower GmbH SPR 240/300 (oil) 90°C‐300°C 194°F‐572°F
DE – Trough SOLERA Sunpower GmbH SPR 120/300 (oil) 90°C‐250°C 194°F‐482°F
US – Trough Sopogy SopoNova Next Generation 204°C‐288°C 400°F‐550°F
US – Trough Sopogy SopoNova 4.0 93°C‐204°C 200°F‐400°F
DE – Trough NEP Solar PolyTrough 1200 220°C 428°C
DE – Trough Solitem 200°C 392°C
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There are great opportunities to manufacturer these Distributed trough collectors in México to achieve
significant cost‐reductions which will accelerate market entry and create numerous opportunities for
Mexican companies in product design, manufacturing, system integration, engineering , installation and
operations and maintenance.
7 Industrial Process Heat
Europe has long understood the potential of using solar thermal energy for industrial processes and has
lead efforts for many years through the International Energy Agency’s Solar Heating and Cooling
Programme and the European Solar Thermal Industry Federation’s “Intelligent Energy” initiative.
7.1.1 Industrial Thermal Markets
 Industry accounts for 30% of global energy usage which is more than any other sector – For
industrialized countries, the industrial sector has a 30% energy consumption which is higher
than all other sectors such as transportation, services and residential sectors.27 Industry
consumes 41% more thermal energy than electricity28.

 More than half of the industrial heat used by industry is low‐ and medium‐temperature heat –
More than 50% of the thermal energy needed by commercial and industrial companies for
production processes and for heating large industrial facilities is below 250°C (480°F).

 Key thermal markets by industry sectors:
o Iron, steel and aluminum
o Petroleum refining and fertilizer production
o Cement, lime, glass and ceramics
o Pulp and paper
o Food processing
7.1.2 Process Temperatures for Industrial Applications

Industrial Process Heat Applications and Temperatures
Temperature
Industrial Sector Process °C
Food and beverages drying 30 90
washing 40 80
pasteurizing 80 110
boiling 95 105
sterilizing 140 150
heat treatment 40 60
Textile industry washing 40 80
bleaching 60 100
dyeing 100 160
Chemical industry boiling 95 105

distilling 110 300
various chemical processes 120 180
All sectors pre‐heating of boiler feed water 30 100

heating of production halls 30 80
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7.1.3 Applications
Low‐temperature solar thermal heat is below 90°C and can easily be generated by low‐cost flat plat and
evacuated tube collectors. Direct solar thermal applications include:

 “Useful process heat” for generating large quantities of hot water for bottle washing in the
beverage industry, for and for commercial laundries and car washes

 “Use supply heat” for preheating natural‐gas fired boilers

 Drying and dehydration

México’s solar industry is most experienced in solar thermal due to the growth and market share of
solar hot water systems. Several Mexican system integrators have already made the transition from
using solar hot water systems for domestic hot water to providing industrial hot wash water for large
multi‐national beverage bottling plants and for pre‐heating boilers. These are fairly straight‐forward
technical designs which require just the addition of an additional hot water inlet to the feed water for a
boiler or for the bottle washing hot water tank. Several Mexican companies have developed proprietary
industrial solar hot water units and integrated solar collectors and solar drying for agricultural products.

Medium‐temperature solar thermal heat is between 90°C and 250°C and can be provided by evacuated
tubes and by the new generation of small‐scale parabolic trough collectors. The global market for higher
temperature industrial process heat is wide open with significant opportunities available for system
integrators and industrial process engineers to integrate the thermal output of a solar collector field into
industrial processes using direct heat or heat exchangers, thermal buffers and storage systems.
8 Solar Cooling
One of the largest global applications for low‐ and medium‐temperature solar thermal is to drive
thermal‐based space cooling. Perhaps no other solar application can contribute more to reducing peak
electricity usage, peak demand and greenhouse gas emissions that solar cooling.

There are 3 primary technical configurations for thermal‐based solar cooling:

 Low‐temperature flat plat collectors providing 60°C heat to drive adsorption chillers for small
commercial and residential applications

 Evacuated tube collectors providing 90‐100°C heat to drive single‐effect absorption chillers for
small‐ and medium‐size commercial/industrial applications

 New generation of medium‐temperature parabolic troughs providing 150‐200°C to drive double‐
effect absorption chillers for commercial/industrial customers with minimum cooling loads of
350 kW (100 Tons)
8.1 Available Thermal‐Based Chillers
The potential of solar cooling is well known by Europe policy makers, research institutions and a handful
of SMEs. The potential is also well known by researchers at the Centro de Investigación en Energía,
Universidad Nacional Autónoma de México (CIE‐UNAM), who have been participating in the Solar
Heating and Cooling Programme of the International Energy Agency’s work.

Specific opportunities exist for Mexican companies to enter into the manufacturing, distribution and/or
channel partner relationships with the global technology providers of low‐ and medium‐temperature
thermal‐based “chillers”.
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Type of Chillers and Thermal Requirements

Coefficient
of
Cooling Technology Thermal Requirement Performance
Absorption Chiller ‐ Double‐Effect 163°C 325°F 1.35
Absorption Chiller ‐ Single‐Effect 88°C 190°F 0.7
Adsorption Chiller 60°C 140°F <.5

The global manufacturers of commercial/industrial absorption chillers include TRANE/Thermax, Broad,
Carrier, York, MacQuay, Toshiba, Hitachi, Ebara, Sulzer Escher Wyss, LG, Mitsubishi, Entropie, and
Colibri. The size range of the chillers is 350 kW to 5.6 MW (100‐1600 Tons). Yazaki from Japan has
dominated the small commercial market with single‐effect absorption chillers from 100‐350 kW (30‐100
Ton) and has some 100,000 units installed world‐wide.

A new generation of smaller chillers has been developed in Europe which offers great potential for small
commercial and residential markets world‐wide and particularly in the southwest U.S. and northern
México.

New Small‐Scale Solar Chillers

Absorption
EAW (Germany) 15‐30 kW 4.3‐8.5 Tons
SolarNext AG (Germany) 12 KW 3.4 Ton
Sonnenklima (Germany) 10 kW 2.8 Ton
Pink (Austria) 10 kW 2.8 Ton
Climatewell (Sweden) 10 kW 2.8 Ton
Rotartica (Spain) 5 kW 1.3 Ton
Adsorption
SorTec AG (Germany) 5‐75 kW 1.5‐20 Tons
SolarNext AG 8‐15 kW 2.3‐4.3 Tons
InvenSor (Germany) 5‐10 kW 1.5‐2.8 Tons
8.2 Solar Cooling Opportunities
Significant opportunities exist for Mexican companies to participate in at least 2 aspects of the solar
cooling value chain:

 Companies which enter into manufacturing and distribution agreements with European
technology providers of chillers

 Energy/HVAC system integrators which develop the integrated engineering capabilities and
standard designs for solar thermal collector fields and chillers for commercial/industrial
installations

Low‐cost manufacturing of adsorption and absorption chillers in México will lead to an accelerated
market entry for solar cooling in the hot arid areas of the Americas. Given the import barriers of high
European manufacturing costs and the extremely high currency conversion for Euros‐to‐Pesos and
Euros‐to‐US Dollars, México offers very promising near‐term low‐cost manufacturing opportunities. It is
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expected that Mexican manufacturing could reduce costs for solar cooling chillers by 40% or more over
European manufacturing.
8.3 Solar Cooling Opportunities in Southwest U.S./Northern México
Perhaps no market in the world has more demand and better incentives for solar cooling than California
and Arizona. Arizona Public Services and Tucson Electric Power offer owners of solar cooling systems
performance‐based financial incentives equal to 60% of the capital costs of the solar collector field and
the new chiller equipment. The incentive is paid based upon production which is measured using a BTU
meter installed at the chillers’ inlet pipe to register inlet temperature and flow rates of the heat transfer
fluid from the collector field. Monthly BTUs are divided by 3412 to produced kWhs and the utilities will
then pay the owner approximately USD .119/kWh for kWh produced until 60% of the capital cost is paid
back. California is adopting new incentives for solar cooling which will are expected to be comparable to
those in Arizona. In exchange for this incentive, the utilities will own the RECs generated by the solar
cooling system which are used by the utilities to comply with mandatory Renewable Portfolio Standards.

As an emerging segment of the solar market, there are great opportunities for new companies to lead in
the roll‐out of solar cooling in North America as the market is wide open with perhaps only 2 or 3 small
system integrators/engineering companies with technical know‐how capable of serving the Arizona and
California market. Perhaps the greatest opportunities are to add solar cooling to the large
manufacturing plants along both sides of the U.S./México border which are facing increasing energy
costs especially for summer intermediate and peak period rates/tariffs and demand charges. Such
projects offer great potential for new and emerging companies entering the solar cooling market to
package such projects for the sale of carbon‐offsets and to finance the installations with long‐term loans
from the North American Development Bank for energy‐efficiency improvements.
9 Thermodynamic Converters for Solar Thermal
The global commercial and industrial market for Distributed solar electric is estimated at USD 750 billion
with the current market penetration at less than 1%.29

A substantial part of this market can be served by the new generation of medium‐temperature trough
collectors integrated with several new technical approaches to generating solar electricity with smaller
thermal‐based power blocks. The availability of the new scaled‐down solar collectors delivering
medium‐temperature heat has led to an emerging market for scalable power blocks matched to the
thermal outlet temperatures of the new collector fields. These new power blocks include
thermodynamic converters such as Organic Rankine Cycle (ORC) turbines and new “distributed” steam‐
based turbines. Unlike the conventional steam Rankine power blocks used for central solar plants, this
new generation of turbines is smaller, scalable and modular and work at lower temperatures and can be
sized from 30 kW to 20 MW. Distributed solar thermal electric can directly compete against Distributed
PV in installations sized 30 kW and larger at lower installed costs while providing more electricity per
installed kW.
9.1 New Approach to Distributed Solar Thermal Electricity
Until recently, the prevailing wisdom was that in order to be economic and successful, solar trough
projects had to be larger, or integrated with natural gas plants, to achieve low‐cost economies of scale.30

Several initiatives were launched over the past 5 years in the U.S. and Europe to develop and
demonstrate smaller parabolic trough technologies in the 80°C to 250°C temperate ranges. Parallel
technical paths were taken with proven solar technologies. One path was to optimize non‐concentrating
flat plate and evacuated tube collectors to deliver higher temperatures. The other approach was to
scale‐down parabolic troughs for small distributed applications such as industrial process heat and to
use smaller power blocks adapted from the geothermal industry to generate electricity.
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In 2005 the International Energy Agency (IEA) launched a development initiative to improve and
demonstrate multiple approaches to medium temperature collectors with concentrating and non‐
concentrating collectors. In the U.S., the National Renewable Energy Laboratory focused upon
developing “Distributed Trough” which led to the 1 MW Saguaro Project, a demonstration project
implemented by Arizona Public Services outside of Tucson. The project used a smaller Solargenix
parabolic trough collector with a 1 MW Organic Rankine Cycle (ORC) turbine from Ormat, a leading
geothermal developer and ORC manufacturer. In the 2006 the project was commissioned and
recognized as one of the top solar projects in the world.

Advantages of Distributed trough collectors include:

 Collector fields can be sized from a few collectors to a 5 MW field and be operated unattended

 Lower kW investment costs available on a Distributed basis which were previously only achieved
through economies of scale on utility‐scale solar plants

 Collectors are a half to a third smaller in height than utility‐scale collectors allowing the use of
lighter weight structures and smaller drives motors

 Operating at lower temperatures and lower pressures allows the use of less expensive and
fewer high‐performance components such as hydraulic pumps, receivers and glass mirrors

 Water can be used as the heat transfer fluids for systems operating at 200°C or less. For higher
operating temperatures to drive power blocks for electricity the heat transfer fluid is mineral oil
which is used in the large solar plants.
9.2 Organic Rankine Cycle Turbines
Organic Rankine Cycle (ORC) power blocks have been used very successfully for geothermal power
plants and for industrial waste for decades. Minimum temperatures for ORCs are in the 95°C range with
higher temperatures producing higher efficiencies. Traditionally ORCs were powered by waste industrial
heat to provide cooling and then became used in the geothermal industry. The 1 MW Saguaro Project
near Tucson, Arizona, was the first solar project to use an ORC turbine as the power block for a down‐
sized trough collector and is largely responsible for driving the recent resurgence of interest in
manufacturing new generations of ORCs to power the emerging Distributed solar electricity generation.
Most of the new ORCs designed for waste heat and renewable applications are from Europe as shown in
the following list:

Manufacturers of Medium‐Temperature Organic Rankine Cycle Turbines
Year
Company Country Sizes Introduced Inlet Temp
United Technologies Corporation US 200kW 2004 74°C +
Global Energy US 30kW ‐250kW 2008 125°C +
Conpower Energieanlagen GmbH DE 30kW ‐ 120kW 2008 75°C‐105°C
ORMAT US 200kW ‐ 20MW 1980's 150 °C +
Turboden s.r.l. IT 450kW ‐ 1500 kW 1980 100‐265°C
GET GmbH DE 220kW 2003 98°C +
GMK GmbH DE 500kW ‐ 5MW 1999 95°C ‐ 400°C
Adoratec GmbH DE 300kW to 1.6MW 2004 320°C

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There may be opportunities to leverage the medium‐temperature solar thermal market and México’s
low‐temperature geothermal potential to drive the market for domestic manufacturing of ORCs. The
unexploited potential of base‐load geothermal energy is estimated at over 1,500 MW. México is
currently the third largest producer of geothermal energy in the world, with an installed capacity of 960
MW, based on high temperature reservoirs. Low temperature reservoirs have been solely used for
recreational purposes but a project is planned to assess and map the full potential of these low enthalpy
reservoirs.31
9.3 Direct Steam Generation and Distributed Steam Power Blocks
Direct Steam Generation (DSG) has been considered an alternative and promising approach to thermal
energy generation from parabolic trough systems. DSG generates steam directly in the receiver tubes
with preheating, evaporation and superheating occurring in different row sections within the solar field.
Traditional trough systems use a heat transfer fluid (oil) which is heated and pumped through the
absorber/receiver which is transferred to the steam cycle of the Rankine power block through a heat
exchanger. 32 One disadvantage of the conventional Rankine cycle is the limited upper temperature
(400°C) of the fluid circuit due to thermal stability of the oil. With this temperature limit, the power
cycle efficiency is limited as well.33 DSG eliminates the need for an intermediate heat transfer fluid and
steam‐generation heat exchangers and allows the solar field to directly operate at higher temperatures
resulting in higher power cycle efficiencies and lower fluid pumping parasitics.34 Much of the focus of
DSG has been at the European solar test center at Spain’s Plataforma Solar de Almería where testing
continues to be conducted by Spain’s Ceimat (Center for Energy, Environment and Technological
Research) and DLR (German Aerospace Center).

Solarlite GmbH has developed the highest medium‐temperature trough collector which generates up to
330°C which allows the use of direct steam generation with a new generation of small steam Rankine
power blocks for projects as small as 2 MW. Recently small steam Rankine power blocks in the 2 to 8
MW range have become available in Europe from Siemens, ABB and MAN Turbo which offers new
possibilities for Distributed Energy generation.
9.4 Stirling Engine Manufacturing
Of all solar technologies, Dish‐Stirling has the highest solar‐to‐electricity conversion efficiency and, in
2008, Stirling Energy Systems (SES) set the world’s solar efficiency record of 31.25%.35 There are just a
handful of players in Dish‐Stirling due to the difficulty of producing reliable Stirling engines which
require high‐precision, medium‐volume manufacturing. These companies include SES, Stirling Sun
Power International which is commercializing the SBP 10kW and 25 kW EuroDish and Infinia which is
bringing a 3 kW and larger units to market.

SES has executed Power Purchase Agreements with 2 California utilities for 2 projects comprising 1.6
GW which requires the manufacturing of 72,000 25kW Dish‐Stirling units each of which has a 380cc, 4‐
cylinder engine. SES has initially sourced the manufacturing of the Stirling engines with a medium‐sized
Canadian engine plant which is a key supplier to the Detroit auto industry. SSPI planned on using SOLO,
a German company, to manufacture its Stirling engines but insolvency led to its closing in 2007‐2008.

It is understood that SES, SSPI and Infinia are seeking to develop and continuously improve their
respective supply chains for the Stirling power block which consists of a high‐temperature thermal
receiver, the engine block, a radiator, a generator and electronic controls.
9.5 Opportunity for México to be Global Lead in Distributed Solar Thermal Electric
The manufacturing of this new generation of power blocks is almost exclusively confined to low‐volume
production in Europe which have the highest manufacturing costs in the world compounded by
consistently high Euro conversion rates. The global market potential for Distributed solar thermal
electricity will not be realized without significant cost reductions in the manufacturing of the
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thermodynamic converters such as ORCs, Stirling engines and small steam power blocks. Manufacturing
such turbines are ideally suited to the capabilities of México’s automotive and industrial manufacturing
industry base and represents a significant global solar opportunity by manufacturing and deploying
Distributed solar thermal electric in the Mexican market place through targeted self‐generation and CFE
projects which demonstrate the use of the new scaled‐down troughs for Distributed solar thermal
electricity while reducing México’s GHG emissions. México could lead in developing this little known, but
emerging, segment of the solar market which is potentially larger than utility‐scale solar thermal and PV.
10 PV‐Thermal for “Green Building” Markets
Opportunities exist for México’s energy entrepreneurs, product developers and manufacturers to
leverage existing capabilities in the design of new proprietary low‐cost, high‐quality PV‐Thermal systems
products and systems.

A PV‐Thermal (PV‐T) system uses arrays of modules with each module producing electricity from PV cells
and thermal energy by collecting the unused heat off the PV cells through an active cooling system using
air or a fluid which transfers the thermal energy from the modules to a central heat exchanger which is
then stored or distributed for productive uses such as hot water, space heating and space cooling using
adsorption chillers. PV‐T systems are roof‐mounted or building‐integrated into a south‐facing wall. The
efficiencies of PV‐T systems are much higher than PV since the solar‐to‐energy conversion includes both
the electricity and the thermal energy generated through an active cooling system of the PV cells. These
systems will generate approximately 2 to 4 kWhth for every 1 kWhe which provides net solar‐to‐energy
conversions of well more than 60%. Some PV‐T systems are actually Concentrating PV‐T and incorporate
a linear concentrator or lens system. The active cooling system offers additional performance gains by
preventing the overheating of the PV cells. The heat transfer fluid is typically water and the usable
temperatures ranges from 50°C‐95°C with higher temperatures coming from concentrating systems.

Much of the research being done on PV‐Thermal systems was started in 2005 through the International
Energy Agency’s (IEA) work with the “PV‐Thermal Solar Systems" component to the Solar Heating and
Cooling (SHC) Programme. The advantages of PV‐T are ideally matched to meet the requirements for
low‐carbon, high energy‐performance for residential and commercial/industrial buildings. Perhaps no
other building system can assist developers and owners meet the U.S. Green Building Council’s LEED
(Leadership in Energy and Environment) certification requirements for “green buildings” than multi‐
functional PV‐T systems. McGraw‐Hill Construction estimates that the size of the current green building
market for residential and non‐residential buildings is USD 36‐49 billion and that the market will double
in size by 2013 to USD 96 ‐140 billion. Over the past 4 years, more than 10 companies from Europe and
Canada have developed and brought PV‐T products to the marketplace.
11 “Low‐Carbon” Industrial Parks with Renewable Electric/Thermal Micro‐Grids
11.1 Concept
An innovative concept is being developed in Germany which integrates new approaches to incorporating
solar thermal energy with power into “smart” electric/thermal micro‐grids, energy storage and
sustainable industrial development. The tradition function of a micro‐grid is to improve the quality and
reliability of electrical power. Industrial or commercial micro‐grids are typically connected collections of
critical and/or sensitive loads requiring high power quality and reliability such as data centers, university
campuses, shopping centers, residential neighborhoods and industrial facilities. The electrical loads can
be further sub‐divided into groups within the micro‐grid according to the required grade of power
quality and reliability. The micro grid can switch over to island operation in the event of a grid fault,
during maintenance, periods of poor power quality, or when grid energy prices are high.36
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11.2 How It Works
The new micro‐grid model incorporates the functions of an electrical micro‐grid and incorporates for the
first time solar thermal electricity into the electrical supply loop along with a parallel “hot water”‐based
solar thermal energy micro grid. The process flow for such a “low‐carbon” industrial park follows:

 An industrial park would be developed along with an adjacent concentrating solar thermal
generation facility which would provide for the first time the full‐value chain of thermal energy
products to the park’s industrial customers including electricity, cooling and process heat
delivered through an integrated electric/thermal micro‐grid backed by energy storage and the
national grid.

 For solar, the new generation of commercially‐available Distributed parabolic trough technology
would be used which is offered by multiple U.S. and German vendors. Distributed trough
generates temperatures in the range of 90°C‐300°C (194°F‐572°F) which is ideal to generate
electricity with smaller steam power blocks at less than 20 MW and to generate thermal energy
for applications such as district cooling, space cooling, process heat, domestic and process hot
water, etc. The solar generation would be sized to handle intermediate and peak loads for the
industrial park tenants and backed up by the national grid for electricity and by natural gas for
thermal energy. Bio‐diesel fueled generators would also part of the back‐up strategy. Short‐
term 1‐4 hour energy storage could be achieved with low‐tech hot water or chilled water
storage available at a central location and on‐site with the industrial facilities depending upon
demand. The park would designed to be flexible, scalable and modular to integrate new
generation and storage technologies such as advanced energy storage as they are deployed in
the market. Options for thermal energy storage are well known but new technologies are
entering the market to store electricity for load shifting and backup. For example, a technical
team is developing a “virtual” grid project in Abu Dhabi which will incorporate the first use of
NGK’s sulfur sodium Battery Energy Storage System which will provide a 300 MWhs of electricity
over 5‐6 hours.

 The energy performance goal of such a park would be to reduce the amount and load demand
of grid‐supplied electricity and natural gas and reduce GHG emissions and serve as a model for
sustainable development.

 The park’s energy micro‐grid would balance the supply and demand of electricity and thermal
heat by and between the individual electrical and thermal loads of the industrial buildings. The
thermal micro‐grid would have a hot water distribution loop piped to each industrial building.
Each tenant may use the heat to drive specific thermal‐based applications. The hot water for
one building may drive a variety of thermal applications such as a double‐effect absorption
chiller for space cooling and/or for cooling injection molding machines, or provide process hot
water for a bottling or dehydration operation. The delivery of solar‐based industrial process
heat provides unprecedented flexibility to meet an industrial customers needs. Each industrial
facility would have different and varying thermal loads which can be accommodated by the
thermal micro‐grid.
11.3 A New “Self‐Generation” Model Using Solar Electricity and Thermal for Carbon “Off‐Sets”
A conceptual business model for the industrial park’s owner would be to provide reliable, carbon‐free
electricity and thermal energy which will reduce and provide predictability to the energy costs for
industrial tenants while reducing their intermediate and peak energy demand and usage. Such a
renewable electric/thermal micro‐grid is completely scalable and modular. The industrial property
developer can recruit energy‐intensive companies and offer enhanced value to park tenants by being
identified with “world‐class low‐carbon” sustainable development. Such solar‐based parks serve as an
alternative to the self‐generation wind projects for large industrial energy users which requires
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extensive and costly transmission lines and/or wheeling costs for new wind projects. Solar’s ability to
reduce peak energy usage and demand can offset the lower capacity factors for solar thermal compared
to high‐quality wind projects. However, low‐cost thermal storage can easily be added to solar plants to
not only increase capacity factor but to shift on‐demand solar thermal output for 1‐6 hours.

This concept has great potential for developing low‐carbon, maquila‐like industrial parks across México
and especially along the U.S./México border which can leverage the advantages of geography through
proximity to the U.S. markets and to exploit the region’s world‐class solar thermal resources. The
technical system integration expertise gained by Mexican companies in establishing and operating such
a low‐carbon models for sustainable industrial development would provide a solid base for exporting
the model and creating business opportunities for Mexican companies. Opportunities also exist for
Mexican commercial and industrial real estate developers to replicate the business model as a new
competitive advantage in the Americas as well as national markets.
11.4 Micro‐Grid Markets in North America
A recent market research study37 predicts that 3 GW of new microgrid capacity will come on‐line
globally by 2015 which represents a cumulative investment of USD 7.8 billion. North America is expected
to be the largest market for microgrids during this period with 74% of the total industry capacity. In
North America, the largest functional use category will be institutional microgrids, followed by
commercial/industrial and community grids. Industrial thermal heat at temperatures under 250°C
represents some 44% of the global final energy demand38 which is more than twice that of electricity. As
such the market potential for thermal microgrids could be much more than 6 GW world‐wide.
12 Need for System Integrators and Multi‐Disciplined Engineering
Perhaps the greatest gap in the value chain for Distributed solar thermal is a shortage of experienced
system integrators, project developers and multi‐disciplined energy engineers who can package turn‐key
solar industrial process heat, solar cooling, solar desalination and small thermal electric projects. Such
commercial/industrial projects require extensive site‐specific engineering and integrated technical
design at a level far beyond that required for PV or solar hot water. The technical challenges for low‐
and medium‐temperature projects is the integration of the solar collector field and the closed‐loop
hydraulics of the heat transfer fluid (usually water) which is delivered either as a pre‐heat to a boiler or
to a heat exchanger in an existing system with the solar usually supplementing the existing heat source.
Complicating such systems is the need to provide thermal energy storage to buffer uneven cloud‐
induced variations in solar resources. Roof‐mount collectors add structural, design and cost
complications with existing roof‐mount HVAC equipment and with issues such as mounting structural
supports, weight and wind effects.

This new field of system integrators requires competencies in a wide‐range of engineering disciplines
such as electrical, mechanical, hydraulic/plumbing, industrial processes, environmental, civil and
structural as well as competencies in energy efficiency, analysis and management. There are significant
opportunities for energy project developers, energy services companies, engineers and turn‐key energy
or industrial equipment installation companies to enter this space by scaling‐up existing capabilities.
Companies can specialize in clean water, cooling industrial heat or combined heat and power. Clear
opportunities also exist for companies to enter into exclusive relationships with the technology
providers of the low‐ and medium‐temperature solar collectors and of the conversion equipment such
as the chillers, desalination equipment, and power blocks for local, national and regional markets. In
addition to selling turn‐key Distributed solar thermal systems, a promising opportunity may exist for
system integrators to design, install and operate a solar cooling system on the premise of a
commercial/industrial customer and to sell to the customer process heat, cooling, clean water or
electricity in a long‐term thermal‐type Solar Services Agreements now being extensively used in the U.S.
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The industrial customer benefits from reliability and from long‐term predicable energy rates. Such
projects in México also have additional value by generating carbon off‐set revenues by being packaged
as carbon off‐set projects.
13 Export of Proprietary Solar Products
Several Mexican SMEs have developed and are now manufacturing proprietary solar products for the
domestic market and are starting to export to Europe and to Latin and South America. These are low‐
cost high‐quality products which are strong candidates for export to the California and Arizona markets.
13.1 Solar Hot Water Heaters
Most of México’s proprietary products are solar hot water heaters which is the largest segment of the
domestic solar market. Recently 2 Mexican manufacturers were recognized among the world’s top solar
hot water system providers. In June 2009, Sun and Wind Energy Magazine published a survey of 61
global manufacturers of solar hot water systems which included 2 Cuernavaca companies which have
designed and manufactured proprietary systems:

 Commercializadora General Solar, S.S. d C.V. (Módulo Solar)

 Sunway de México S.A. de C.V.
13.2 PV Modules
ERDM is the largest domestic manufacturer of PV panels for domestic markets with some 40 distributors
across México. The company uses both thin‐film from Global Solar (U.S.) and silicon cells from Q‐Cells
(Germany) for its high‐quality panels. ERDM achieves very low production costs due to low setup, labor
and operational costs leveraged with production facilities in rural Veracruz. Niche export opportunities
exist as the company anticipates expanding production capacity to more than 50 MW over the next few
years.
13.3 Solar Street Lights
Several companies in México have developed, manufactured and installed proprietary solar street lights
on national highway projects. These products use PV panels, batteries and LED lights and have great
potential as an export product to the U.S. and to the rest of the Americas. These products will need UL
certification and evidence of conformance to the standards of the U.S. Department of Transportation.
13.4 Certifying Mexican Solar Products for the U.S. Markets
Solar product manufacturers exporting solar products to the U.S. must have their products tested and
certified under various standards. Product‐ and component‐level certification applies to concentrating
and non‐concentrating PV modules, inverters, metering equipment, and solar thermal collectors (flat‐
plate, evacuated tubes). Importantly, product certification is required if the product is used in
installations subsidized by Federal or state renewable energy financial incentives.

Key listings, certification programs and independent test laboratories for the California and Arizona
market include:

 California Energy Commission (CEC) – All solar equipment that is eligible for incentive programs
in California is listed in the “eligible solar electric equipment” database.39 This is generally
regarded as the most comprehensive database in the U.S. and is included as the reference
baseline by the National Renewable Energy Laboratory which incorporates technical and
performance parameters from the CECs database into the Solar Advisory Model software, a
highly‐regarded simulation software for project analysis. The solar incentive program for Arizona
Public Services refers to the “technology specific qualification requirements developed by the
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California Energy Commission” as an acceptable standard for solar equipment in Arizona.

 Solar Rating and Certification Corporation (SRCC) – Located in Coca, Florida, SRCC operates a
certification and testing program for solar collectors and evaluates the maintainability of solar
collectors and the thermal performance rating characteristic of all‐day energy output of a solar
collector under prescribed rating conditions. The scope of the program includes collectors used
for swimming pool and recreational heating, space heating, cooling, and water heating.
Residential SWH systems are certified to SRCC OG‐300 standards and solar collectors used in
multifamily residential, commercial, or industrial water heating are tested and certified to the
SRCC OG‐100 SWH System Certification40.

 Nationally Recognized Testing Laboratories (NRTLs)41 – Compliance with electrical safety
standards for solar equipment are certified by private 3rd party NRTLs which are recognized by
the U.S. Occupational Safety and Health Administration (OSHA). There are 19 certified NRTLs
with just 2 labs located outside of the U.S. (Canada and Germany). NRTL relates to solar‐related
electrical equipment with California requires a NRTL Certification Letter all solar electric
generating technologies that are not flat‐plate non‐concentrating photovoltaic modules.

 TÜV Rheinland Photovoltaic Testing Laboratory LLC (TÜV PTL) – Newly located in Phoenix,
Arizona, TÜV PTL is an affiliate of the internationally recognized‐TÜV Rheinland and is a
comprehensive independent laboratory capable of testing, evaluating and certifying all current
international standards related to PV and solar thermal technologies such as the International
Electrotechnical Commission (IEC). TÜV/PTL performs photovoltaic module qualification testing
and related activities. It is one of three such unique facilities in the world testing modules from
manufacturers around the world. Its staff is experienced in the analysis and full testing
sequence of commercial Si solar cell technologies required by IEC 61215, IEC 61626, IEEE 1262,
and UL 1703. The test lab can also run IEC testing and certification for parabolic trough
collectors.
14 Off‐Grid Solar Products
14.1 Global Off‐Grid Market – 7 GW by 2020
The off‐grid market in the developing world is enormous with more than 1.6 billion people without
electricity which represents more than one‐quarter of the world population. Some 4 out of 5
people without electricity live in rural areas of the developing world. The Off‐Grid market for solar
electricity is expected to grow approximately 16% annually through 2012 and to account for 13% of the
global PV market by 2020 with some 7 GWp of installed capacity expected.42 In México more than 6.5
million43 people live “off‐grid”.

Globally off‐grid projects see much higher installed costs due to one‐off and small‐quantity equipment
prices, remote mobilizations and installation logistics. However, rural electrification, as an autonomous
micro‐grid, is considered a cost‐effective alternative to extending transmission lines and is becoming
increasingly part of national grid plans. In the industrialized world, there is an off‐grid market which is
mainly confined to remote residences, communities and industrial applications such as cell towers,
highway lights, sensing equipment, etc. In the U.S., some 20% of PV installations are off‐grid.

A major segment to this market is SMEs who use diesel‐generators for electricity to power inefficient AC
appliances as part of off‐grid enterprises. These are ideal candidates for energy‐efficient PV‐powered DC
appliances such as refrigerators which favorable payback and substantial less monthly expenses for
energy. In addition, several Mexican energy entrepreneurs have designed and now manufacture
patented “hot water”‐type flat plate collectors which heats air that is delivered to a self‐contained
3‐28

dehydration unit used to dry fruit, vegetables, meat and other products for rural agricultural
enterprises.
14.2 Need for Products Designed for Off‐Grid Solar Applications
Most off‐grid rural electrification projects in México are installed through international development
programs for rural electrification which mainly bring imported PV systems, inverter/charge controllers
and battery banks to remote communities and homes. Key to these projects is the unique skills and
capabilities of the sustainable development/energy engineers and system integrators who design, install
and train the rural communities on how to use and maintain the systems. Very often, the system
integrator uses multiple small renewable technologies such as solar hot water, pico hydro, small wind
and biomass. Almost all PV products are manufactured in Europe, Asia and the U.S. and are designed for
grid‐connected applications in industrialized countries. These products are highly‐engineered, extremely
efficient, feature‐rich and are not designed for the requirements of the off‐grid rural market. Great
potential exists for Mexican companies to simplify, redesign and manufacture balance‐of‐systems for
off‐grid PV. Such components can be redesigned and reengineered to match the requirements for
remote applications in order to achieve lower‐costs and maintain high‐performance and reliability. This
market needs high‐quality, durable, reliable and low‐cost products in order to transition from subsidized
international donor projects to market‐based competitiveness. Such “off‐grid parity” is possible already
in some niche markets due the high costs of “portable” fossil fuels and the disproportionately higher
share of remote family income and business expenses going to energy. Some rural electrification
system integrators are finding ways to directly compete against the current energy prices paid in off‐grid
communities for candles, kerosene, and diesel.
14.3 Types of DC Products Needed for Off‐Grid Markets
With some 7 GWp of new PV capacity predicted by 2020, there will be significant demand from millions
of new “consumers” in a market traditionally undervalued as being off‐grid and poor. This off‐grid PV
market represents great opportunities for developing and manufacturing DC‐powered refrigerators, ice‐
makers, air conditioners, fans, residential and street LED lighting, power tools, radios, TVs, hand‐helds,
PCs, etc. Such electronic and electrical products ideally match the product design, engineering and
manufacturing capabilities of many Mexican manufacturers. A well practiced strategy for Mexican
companies is to enter into an exclusive manufacturing and distribution agreement with an off‐shore
technology provider. The Mexican company may import certain keep components, source the balance
of the unit domestically and assemble a low‐cost high‐quality product for the Americas and/or for global
distribution. This strategy is now being applied by a few Mexican companies which are bringing lower‐
cost DC products to off‐grid solar‐powered projects and consumers.

* * *

1
Black and Veatch (2007) “Arizona Renewable Energy Assessment ‐ Final Report for Arizona Public Service
Company, Salt River Project, Tucson Electric Power Corporation”, September 2007
2
Renewable Energy Test Center (2009) “Solar Energy ‐ Harvesting the Sun and Reaping Its Benefits”, September
2009
3
Also see “http://www.flabeg.com/en/index.html”
4
California Energy Commission(2007) “Volume 1 – Application for Certification, Carrizo Solar Farm”, October 2007
5
Sources for collector area per MW: parabolic trough figure is an average per m² from Abengoa, Acciona and Solar
Millennium collectors; power tower figure is from BrightSource; Dish‐Stirling figure is from Stirling Energy Systems;
and the linear Fresnel figure is from Ausra
6
Kearney, Dr. David (2007) “Parabolic Trough Collector Overview”, Parabolic Trough Workshop, March 2007,
National Renewable Energy Laboratory
7
U.S. Office of Energy Efficiency and Renewable Energy (2009) “DOE Solar Energy Technologies Program Peer
Review, CSP Technical Track”, March 2009, Denver, Colorado
8
Flabeg GmbH (2008) “Start off for FLABEG’s first Solar Mirror Plant in the U.S.A.”, Press Release, August 25, 2008
9
See http://www.alanod‐solar.com
10
Schott Solar ‐ Press Release, May 11, 2009
3‐29

11
See http://www.nrel.gov/csp/troughnet/solar_field.html
12
Sources consulted for Nevada Solar One data include: Extrusion Americas Unit of Hydro Aluminum ‐“Seeing the
Light ‐ The Use of Aluminum Support Structures in Concentrated Solar Power Energy Generating Facilities”, a
White Paper; U.S. Office of Energy Efficiency and Renewable Energy, “Specialty Glass Needs for the U.S. Solar
Industry Workshop” , 2008
13
See http://www.reflectechsolar.com/pdfs/EmbodiedEnergyWhitePaper(ReflecTech).pdf
14
See http://www.reflectechsolar.com/pdfs/EmbodiedEnergyWhitePaper(ReflecTech).pdf
15
16
“Arizona Renewable Energy Assessment ‐ Final Report for Arizona Public Service Company, Salt River Project,
Tucson Electric Power Corporation”, Black and Veatch, September 2007
17
Solar thermal resources were inventoried as part of the Western Renewable Energy Zones Project; see
http://www.westgov.org/wga/initiatives/wrez/WREZ%20Map%20and%20Tables%20Only.pdf
18
“Western Renewable Energy Zones Initiative Renewable Energy Generating Capacity Summary”, Western
Governors Associations, June 15, 2009; see http://www.westgov.org/wga/initiatives/wrez/
19
http://www.rechargenews.com/energy/geothermal/article171238.ece
20
United States‐México Chamber of Commerce; See http://www.usmcoc.org/b‐nafta10.php
21
“Comision Federal de Electricidad ‐ A Vertical Integrated Company”, Renewable Energy Forum, Eugenio Laris,
February 1, 2006
22
The Global Energy Market: Comprehensive Strategies to Meet Geopolitical and Financial Risks – Nuclear Power
Trends in the World”, Institute for Public Policy, Rice University, May 2008
23
http://www.eia.doe.gov/emeu/cabs/México/Electricity.html
24
“Potential for Renewable Energy in the San Diego Region”, San Diego Regional Renewable Energy Study Group,
August 2005
25
California Energy Commission, “Abengoa Mojave Solar Project Power Plant Licensing Case Docket Number: 09‐
AFC‐5 “Application For Certification”
26
Wohlgemuth,N. and Monga, P. (2007) “Renewable Energy for Industrial Applications in Developing Countries”,
Proceedings of ISES World Congress 2007 (Vol. I – Vol. V) Solar Energy and Human Settlement
27
Weiss, Werner (2006) “Task 33: Solar Heat for Industrial Processes”, IEA Industry Workshop Lisbon, 13 October
2006
28
Salem, J. (2007) Solar Heat for Industrial Processes, United Nations Industrial Development Organization,
Vienna, 2007.
29
Kimura, D. (2009) “Shrinking CSP to scale new markets”, CSP Today, November 2, 2009; See
http://social.csptoday.com/
30
National Renewable Energy Laboratory (2006) “Solar Trough Organic Rankine Electricity System (STORES) Stage
1: Power Plant Optimization and Economics”, NREL/SR‐550‐39433, March 2006
31
Inter‐American Development Bank (2009) “IDB Public‐Private Sect or CTF Proposal ‐ México Public – Private
Sector Renewable Energy Program”
32
http://www.nrel.gov/csp/troughnet/power_plant_systems.html#steam
33
http://www.flagsol‐gmbh.com/flagsol/cms/front_content.php?idcat=37
34
http://www.nrel.gov/csp/troughnet/power_plant_systems.html
35
http://www1.eere.energy.gov/solar/review_meeting/pdfs/prm2008_martin_stirling.pdf
36
“Industrial or commercial micro grids”, January 26, 2009, Leonardo Energy ‐ The Global Community for
Sustainable Energy Professionals; See http://www.leonardo‐energy.org
37
http://www.pikeresearch.com/research/microgrids
38
Wohlgemuth,N. and Monga, P. (2007) “Renewable Energy for Industrial Applications in Developing Countries”,
Proceedings of ISES World Congress 2007 (Vol. I – Vol. V) Solar Energy and Human Settlement
39
See http://www.gosolarcalifornia.ca.gov/equipment/index.html
40
See http://www.solar‐rating.org
41
See http://www.osha.gov/dts/otpca/nrtl/index.html
42
Wollny, M (2009) “Best Technological Solutions for Rural Electrification”, SMA Solar Technology AG presentation
at European Union Sustainability Wee February 9‐13, 2009
43
See http://www.erdm‐solar.com/v2/proyectos.php
3‐30

Section 4
Overview of México’s Solar Sector
1 México’s Solar Market
1.1 PV Solar Resources in México
The quality of México’s photovoltaic (PV) and solar thermal resources is widely known as being among
the best in the world.
1.1.1 Photovoltaic Resources
 Average Global Horizontal Irradiation (GHI) is approximately 5 kWh/m² per day which is the
energy equivalent of 50 times México’s annual national electricity generation.1

 70% of the territory has GHI values greater than 4.5kWh/m²2

 Just 0.06% of the Mexican national territory would be sufficient to generate the overall
electricity consumption of México in 2005 according a GTZ report3.

1.1.2 PV Performance Compared to Germany and Spain
México’s average solar resources for PV (5 kWh/m² per day) is more than 60% higher than the best solar
in Germany which has 5.4 GW of installed PV. Spain and Germany are the global PV leaders with a total
of 8.7 GW which is 67% of the world’s PV installed capacity.4

4‐1

Comparative Solar Resources, PV Performance, Energy Pay‐Back and Energy
Return5
Energy Pay‐ Energy
GHI kWh/m² Back Time ‐ Return
Day Year kWh/kW Years Factor
Guaymas 6.0 2,190 1,818 1.4 20.6
Cd. Obregón 6.0 2,190 1,818 1.4 20.6
Hermosillo 6.0 2,190 1,818 1.4 20.6
Chihuahua 5.9 2,154 1,787 1.4 20.2
Durango 5.7 2,081 1,727 1.5 19.5
La Paz 5.7 2,081 1,727 1.5 19.5
Guadalajara 5.6 2,044 1,697 1.5 19.2
Puebla 5.5 2,008 1,666 1.5 18.8
Nogales 5.5 2,008 1,666 1.5 18.8
Los Tuxtlas 5.5 2,008 1,666 1.5 18.8
Méxicali 5.5 2,008 1,666 1.5 18.8
Riviera Maya 5.4 1,971 1,636 1.5 18.4
Oaxaca 5.3 1,935 1,606 1.6 18.1
Acapulco 5.3 1,935 1,606 1.6 18.1
Poza Rica 5.3 1,935 1,606 1.6 18.1
Matamoros 5.3 1,935 1,606 1.6 18.1
México ‐ Average 5.0 1,825 1,515 1.7 17.0
Cd. Juárez 5.0 1,825 1,515 1.7 17.0
San Luis Río Colorado 5.0 1,825 1,515 1.7 17.0
Distrito Federal 4.9 1,789 1,484 1.7 16.6
Mazatlán 4.9 1,789 1,484 1.7 16.6
Cd. Altamirano 4.9 1,789 1,484 1.7 16.6
Culiacán 4.9 1,789 1,484 1.7 16.6
Sevilla, Spain 4.8 1,754 1,460 1.7 16.3
Tepic 4.8 1,752 1,458 1.7 16.3
Mérida 4.7 1,716 1,424 1.8 15.9
Reynosa 4.7 1,716 1,424 1.8 15.9
Cuautla 4.6 1,679 1,394 1.8 15.6
Madrid, Spain 4.5 1,660 1,394 1.8 15.6
México ‐ 70% of Country 4.5 1,643 1,363 1.9 15.2
Tampico 4.5 1,643 1,363 1.9 15.2
Piedras Negras 4.5 1,643 1,363 1.9 15.2
Monterrey 4.4 1,606 1,333 1.9 14.8
Barcelona, Spain 4.0 1,446 1,193 2.1 13.2
Munich, Germany 3.1 1,143 960 2.6 10.4
Berlin, Germany 2.7 999 839 3.0 9.0
Cologne, Germany 2.7 972 809 3.1 8.6
1.1.3 México has an “Energy Pay‐Back Time” Much Higher than Germany and Spain
PV installed in many cities across Northern and Central México has an “energy pay‐back time” (EPBT) of
less than 2 years which is the time required for these PV systems to produce the amount of energy that
was required to manufacture all of the PV components. The EPBT is based upon a figure of 2,525 kWh
4‐2

which is the electrical energy required to manufacture 1 kW of a complete PV system. This kWh figure
includes PV panels, wires, and electronic connection devices. The EPBT varies according to the PV
location’s solar resources. This 2,525 kWh figure was used by the International Energy Agency in a 2006
report titled “Compared assessment of selected environmental indicators of photovoltaic electricity in
OECD cities”.
1.1.4 México has an “Energy Return Factor” Much Higher than Germany and Spain
The “energy return factor” (ERF) for PV installed in most of México produces 17 times the electricity that
is required to manufacture the PV system. This figure is 1.5 times higher than the ERF for Germany and
is equal to most of Spain. The ERF refers to the amount of electricity produced over a 30‐year period less
the electricity required to manufacturer the complete system. The ERF is the number of times that the
embodied energy from the PV manufacturing is produced over the life of the system. The average ERF
for PV systems in México is 1.7 years compared to 2.6 years for Munich.
1.2 Solar Thermal Resources
 Northern México’s Direct Normal Insolation is equivalent to best in the U.S. Southwest and in
the North African deserts.

 Assuming a net system efficiency of 15%, a square of 25 km in Chihuahua or in the Sonora desert
would be sufficient to supply all of Mexico’s electricity.6

1.3

4‐3

1.4 Existing Market by Type of Solar Installation
México’s extraordinary solar resources have largely gone untapped but the solar sector is emerging with
a very promising future.

México Solar Installations by Type 2007 ‐ 2008
Installed
Capacity Annual Growth
MW
2007 2008 MW %
Solar Thermal Electric 0 0 0 0%
Solar Hot Water 108 116 8.0 7%
PV 18.4 19.4 1.0 5%
Totals 126.4 135.4 9.0 13%

 There are no solar thermal electricity plants in México
 80% of PV installations in México is for rural electrification and are off‐grid7
 78% of all solar hot water installations is for swimming pool heating8
1.5 “Huge” Potential Solar Market
México’s photovoltaic and solar thermal market potential is as large as 45 GW which is approximately
75% of México’s 2008 electricity generation capacity. In 2008, México had approximately 59.5 GW of
total installed electricity generation capacity9 and expects to add 10.8 GW in new capacity additions by
the end of 2017.10

11
México Solar Market Potential
Solar Thermal Electric
Western RE Zone Project ‐ Baja California 5 GW
Photovoltaics 15.8 GW
Institute of Electrical Investigations ‐ Off‐Grid 2015 0.02 GW
GTZ 28 Cities ‐ Residential Grid Connected 1.8 GW
GTZ Study (10% x 2.7 Million enterprises) 14 GW
Solar Thermal Hot Water 24.5 GW
SENER & GTZ ‐ m² collector area 35,000,000
kWth/m² 0.7
Total Potential Solar Market 45.3 GW

One estimate presented at the recent “Global Renewable Energy Forum – Scaling Up Renewable
Energy” in León in October 2009, expects that solar thermal and PV electricity will account for up to 5%
of the country’s energy supply by 2030 and 5‐10% by 2050. Solar thermal is expected to play a greater
the role in heat generation rather than generating electricity with 5‐10% of México’s heat expected to
come from solar thermal in 2030 and 10‐15% by 2050.

4‐4

Solar Potential in México by Use 2030‐205012
2030 2050
Electricity Generation
PV 0‐5% 5‐10%
Solar Thermal 0‐5% 5‐10%
Heat
Solar Thermal 5‐10% 10‐15%

1.5.1 5 GW of Solar Thermal Potential in Northern México
The quality and quantity of Northern México’s solar resources are as good as anywhere in the world.
México’s best solar thermal resources are in the states of Baja California, Sonora, and Chihuahua. There
is 5 GW of solar thermal generation capacity in Baja California which has the potential to generate 11.6
GWhs of solar electricity annually.13 Though there has been considerable wind development planned for
Northern Baja for export to the U.S., there are considerably more solar thermal resources than wind.14
1.6 Potential PV Market
In 2009, SENER and GTZ released a landmark report on “Market Niches for Grid‐connected Photovoltaic
Systems in México”15 and estimated that the potential residential market 26 cities under the “optimistic
scenario is 1.3 GW of additional capacity with a market of at least 1.5 million homes. The potential
industrial/sector market is 2.7 million enterprises which represents 98% of all enterprises.16 If just 10%
of these enterprises installed 50 kW PV systems, the market potential would be 14 GW.
1.6.1 Potential Solar Hot Water Market
The potential for solar hot water is approximately 35 million m² of collector area which could provide
115 PJ of energy per year which equates to 2.5% of the final energy consumption in México.17 This is
approximately 35 times greater than the current installed capacity and all of this potential is considered
“economically feasible”. Using a factor of .7 kWhth for every m² collector, the market potential for solar
hot water is 24.5 GW of installed capacity. The most developed market is unglazed collectors for water
heating for swimming pools which accounts for 78% of all sales, followed by industrial and commercial
applications which had 14% of sales.18
1.6.2 Rural Electrification
The Institute of Electrical Investigations (IIE) estimated a total potential for off‐grid PV systems at a
range between 10 MW and 20 MW for the period 2005‐2015.19
2 Government Policies
2.1 “Subsidized” Residential Energy Market
Photovoltaic electricity is “unsubsidized” in México and competes against “subsidized” residential
electricity rates. Residential electricity rates in México are subsidized by the government and were
described by a recent World Bank report as among the largest electricity subsidies in world. In 2006
residential electricity subsidies accounted USD 9 Billion which represented more than 33% of total
electricity sector revenues and equated to 1% of the gross domestic product. Over 66% of electricity
subsidies go to residential consumers and the volume of subsidies to residential customers increased by
46% between 2002 and 2006 in real terms.20

4‐5

2.1.1 “Unsubsidized Renewables” in a “Subsidized” Electricity Market
México is a fundamentally different market for solar when compared to the industrialized countries such
as Europe using feed‐in‐tariffs and the U.S. using tax credits and renewable portfolio standards as
market drivers for solar. In México, low‐cost is the fundamental driver for PV market penetration since
“feed‐in‐tariffs” are unconstitutional21.

The 2009 SENER/GTZ report on “Market Niches for Grid‐connected Photovoltaic Systems in México”22
considered the PV market for 26 cities with varying tariffs rates under 3 PV cost scenarios from 2009 to
2014.

The “optimistic outlook” was expected to occur over 5 years with the installed costs for residential PV
dropping by 50% to MXN 51,500 per kWp and for industrial/services costs dropping to MXN 50,500 to
MXN 45,100 for 50 kW to 500 kW PV systems.

The GTZ Report makes several key comments regarding the penetration of PV and the effect of
subsidized electricity markets:

 Subsidies cause significant market distortion to the disadvantage for the application of PV
systems.

 The subsidies currently granted to households pose a barrier to PV market development in
México; above all if we take into account that those regions with the best conditions for the use
of photovoltaic systems, i.e. the regions with the highest solar radiation in country, do ‐ for social
policy reasons ‐ receive as well the highest subsidies. This makes it even more difficult for PV
systems to be competitive against electricity prices since these are kept artificially low. Any
cutbacks of these subsidies would directly increase market niches for photovoltaic systems in
México.

 Nevertheless and even with subsidies in place, it seems very likely that photovoltaic systems will
become cost‐saving for middle and upper class households and most companies throughout
México in the near future.

 As PV approaches grid‐parity, reductions in residential grid demand and usage means a
corresponding reduction from higher tariff blocks of electricity to lower tariffs. It is likely that
the net effect of this market penetration of PV will increase the total amount of subsidies the
Mexican government has to pay since less electricity is used at the unsubsidized tariff rates.

 The GTZ Report concluded that, under the “optimistic scenario” for PV costs dropping by 50%,
PV can provide cost savings to some 824,500 households over the 20‐year useful life of a PV
system compared to grid‐electricity purchases. Importantly, the GTZ Report went on to conclude
that the potential market penetration of PV could be 3 times greater if there were no tariff
subsidies.
4‐6

"Optimistic Outlook" on Residential PV Costs
GW Households Market Size
"No Tariff Change" 1.8 824,533 USD 8.4 Billion
"No Tariff Subsidies" 7.3 5,607,111 USD 34 Billion
2.2 New Renewable Energy Law
The “Renewable Energy Development and Financing for Energy Transition Law” (LAERFTE)23 became
effective in November 2008 and mandated SENER to produce a National Strategy for Energy Transition
and Sustainable Energy Use and a Special Program for Renewable Energy. The main objective of the Law
is to regulate the use of renewable energy resources and clean technology and to establish a national
strategy and financing instruments to allow México to scale‐up electricity generation based on
renewable resources. SENER and Comisión Reguladora de Energía (CRE) are responsible for defining
those mechanisms and establishing legal instruments to allow México to increase renewable power
generation.

With LAERFTE, the Mexican Congress took the first key steps to address the lack of regulatory and
pricing certainty for renewable energy project implementation. Perhaps of greatest significance is that
the LAERFTE shifts responsibility from CFE to CRE for developing a clear and transparent tariff system for
power producers.

The following functions are the responsibility of SENER, among others:

 Defining a national program for ensuring a sustainable energy development both in the short
and the longer term

 Creating and coordinating the necessary instruments to enforce the law

 Preparing a national renewable energy inventory

 Establishing a methodology to determine the extent to which renewable energies may
contribute to total electricity generation (such a contribution must be expressed in terms of
minimum percentages of installed capacity and minimum percentages of electricity, and should
take into account different kinds of renewables and regional available sources)

 Defining transmission expansion plans to connect power generation from renewable energy to
the national grid

 Promoting the development of renewable energy projects to increase access in rural areas

The CRE is responsible for developing rules and norms regarding the implementation of the Renewable
Energy Law, including provisions for promotion, production, purchase and exchange of electricity from
renewable sources. CRE, in coordination with the Secretary of Finance (SCHP) and SENER, will determine
the price that suppliers will pay to the renewable energy generators. Payments will be based on
technology and geographic location. In addition, CRE will set rules for contracting between energy
generators and suppliers, obliging the latter to establish long‐term contracts from renewable sources.24
2.3 “Net Metering”
In July 2007 a resolution was passed by CRE allowing investors the possibility to set up small scale grid‐
connected photovoltaic systems (up to 10 kWp for households and up to 30kWp for companies). This
4‐7

interconnection is regulated on the principle of Net Energy Metering that allows the owner to offset the
cost of the electricity use with the energy fed into the grid. This resolution opens up opportunities for a
wider use of photovoltaic systems in México – beyond the currently prevailing application as isolated
systems.

Net metering is an electricity policy for consumers who own (generally small) renewable energy
facilities, such as wind, solar power or home fuel cells. "Net", in this context, is used in the sense of
meaning "what remains after deductions" — in this case, the deduction of any energy outflows from
metered energy inflows. Under net metering, a system owner receives retail credit for at least a portion
of the electricity they generate. Most electricity meters accurately record in both directions, allowing a
no‐cost method of effectively banking excess electricity production for future credit. However, the rules
vary significantly by country and possibly state/province; if net metering is available, if and how long you
can keep your banked credits, and how much the credits are worth (retail/wholesale). Most net
metering laws involve monthly roll‐over of kWh credits, a small monthly connection fee, require
monthly payment of deficits (i.e. normal electric bill), and annual settlement of any residual credit.25
2.4 Renewable Energy is Key to México’s Climate Change Strategy
México is internationally recognized for its increasing leadership role in global efforts to accelerate and
expand new climate change initiatives to reduce greenhouse gas emissions after the Kyoto Protocols
expire in 2012.

México is one of the first developing countries to commit to a specific reduction of emissions through
the use of clean and efficient energies. México initiated a landmark study of the economic impact of
climate change on its territory which provided the first compelling evidence that concluded that the
costs of mitigation and adaptation to climate change in México could be considerably lower than the no‐
action alternative. A recent World Bank study on low‐carbon development concluded México could
reduce its carbon emissions by at least 42% (or 477 million tons) per year by 2030 without sacrificing
economic development. Approximately 61% of México's CO₂ emissions are a result of energy
consumption, especially in the transportation, industrial, and residential/commercial sectors.26
Renewable energy will play a key role in GHG emission reductions in all sectors of the economy.

The Mexican government is now implementing a National Climate Change Program (Programa Especial
de Cambio Climático, PECC) that establishes short‐ and medium‐term mitigation and adaptation
objectives and includes commitments with measurable results for priority sectors. A new Climate
Change Policy General Directorate within SEMARNAT (México's Environment and Natural Resources
Ministry) has been established to take charge of climate policy and the implementation and monitoring
of the PECC. This will help consolidate efforts to link emerging scientific and technical knowledge under
the responsibility of the National Institute of Ecology (known as INE), with the formulation of public
policies at federal and state level.27
2.4.1 Recent Major Development Investments into México’s Climate Change Strategy
World Bank Provides USD 1.5 Billion Loan in October 2009: The World Bank approved a USD 1.5 billion
loan aimed to develop public policies to support the stimulus of the economy while strengthening the
framework for long‐term sustainable growth. In order to achieve this, regulatory, monitoring and
financial frameworks will be developed for low greenhouse emissions evolution of the urban transport
and energy sectors, key to generate a low carbon growth model.28

Inter‐American Development Bank provides USD 400 Million Loan in September 2009: Finally, under the
new PBL México will set in motion a series of financial mechanisms to jump‐start investments in
renewable energy and energy efficiency. These will include the Fondo de Transición Energética (energy
transition fund) that was established under México’s recently adopted renewable energy law (LAERFTE,
for its initials in Spanish); expanded participation in carbon markets; and new programs to finance green
4‐8

energy through México's national development banks (such as NAFIN).29

The following table is from SENER’s 2009 Report “Renewable Energies for Sustainable Development in
México”30 and summarizes the different policies, programs and projects related to renewable energies,
which are implemented by the Federal Government.

Policy/Program/Project Institutions Technologies
Sectorial Program of Energy SENER All
Action Plan for Removing Barriers to the Full‐ SENER, IIE,
Wind
scale Implementation of Wind Power in México GEF, PNUD
Large Scale Renewable Energy Development SENER, GEF,
Wind
Project BM,
Integrated Energy Services for Small Rural SENER, GEF, Solar, hydro, wind,
Communities in the Southeast of México BM bioenergy
SENER, GEF,
Solar thermal project Agua Prieta II Concentrating solar power
BM
SENER,
Program for Sustainable Energy in México CONUEE, CRE, All
CFE, GTZ
Program for the Promotion of Solar Water CONUEE, GTZ,
Solar water heating
Heaters in México ANES
Draft Program for the Sustainable Production of
Bioenergy Inputs and for the Scientific and SAGARPA Biofuels
Technological Development
Draft Program for the Introduction of Bioenergy SENER Biofuels
Program for the Substitution of Open Stoves by
SEDESOL Firewood stoves
Ecological Stoves
Sustainable Rural Development Project for the
Promotion of Alternate Energy Sources in Agri‐ Solar photovoltaic, solar
FIRCO
business, promoting energy efficiency in the heating, wind, bio‐digesters
Agricultural Sector
Accelerated Depreciation SHCP All
Sectorial Fund CONACYT‐Ministry of Energy‐ CONACYT,
All
Energy Sustainability SENER
3 Governmental Support Programs for Solar
Government programs, often in conjunction with international development entities, are most often the
sponsors of large‐scale solar development. Often solar is a key component to programs focused upon
providing affordable housing and promoting rural development.
3.1 Government Housing Programs
The Mexican government has implemented several major housing programs which has driven the
market demand for PV and solar hot water systems. Housing is a key sector in México’s efforts to reduce
the greenhouse gas emissions that cause global warming, and that energy efficiency is an essential
element in México’s sustainable national housing policy. Housing consumes more than one quarter of
the electricity and most of the liquefied petroleum gas (propane) produced in México, and the demand
for natural gas in the housing sector is growing.31 Many of these programs have been stimulated by
GTZ and also serve as carbon off‐set projects for German investors.
3.1.1 “Hipoteca Verde”/ “Green Mortgage” Programme
INFONAVIT is the National Workers’ Housing Fund Institute headquartered in México City and is a
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national home lending institution that provides housing for low‐income workers through direct loans.
INFONAVIT is the largest originator of residential mortgages in México and initiated a new lending
program called “Green Mortgage” several years ago. The “Green Mortgage” program is aimed at
improving the environment, promoting the incorporation of sustainability criteria in the homes that
INFONAVIT finances, supporting the National Strategy for Climate Change, and ensuring energy and
water savings that will make homes more affordable.32

Since its foundation, Infonavit has granted 5.3 million mortgage loans and 22.4% of México’s population
live in a house financed by Infonavit. As part of its Vivir Mejor Strategy (Live Better), through the
National Housing Commission, the Mexican Federal Government helps workers who earn less than USD
320 per month with a subsidy up to USD 4,000 for acquiring a home. “Hipoteca Verde” provides
additional credits of up to MXN 16,000 with attractive interest rates which allow the borrower to invest
in ecological technologies such as solar water heaters or energy‐savings. The investment costs of the
solar water heater are not “subsidies” and can be refinanced by savings on monthly energy bills over a
longer period with typically pay‐back in 4 years. Infonavit has granted more than 60,000 “green
mortgage loans” during 2009, of which, almost 50 thousand have been acquired by low income workers
with the subsidy from the Federal Government. The cost of the houses goes from USD 15,000 to 28,000
and it includes an average of USD 600 in green technology.
3.1.2 GTZ 25,000 Solar Roofs Programme
The German Agency for Technical Cooperation (GTZ) is funding a new EUR 2.5 million program which
will assist in the installation of 25,000 new residential solar hot water systems in México beginning in
2010. GTZ will offer a subsidy of around EUR 100 per 2 m² and 150 liter tank system.
3.1.3 Procalsol
Procalsol is a national program to promote the use of solar collectors and is an initiative of the National
Commission for Energy Efficiency (CONUEE) in collaboration with the National Solar Energy Association
(ANES) and GTZ. The goal of the program is to accelerate the solar thermal market and to promote the
installation of 1.8 million m² of newly installed collectors from 2007 to 2012.
3.1.4 México City
In 2006 a new environmental requirement went into effect in México City which requires new facilities
which require hot water for their activities, including swimming pools and companies with more than 51
employees, are to cover 30% of the hot water demand through solar energy. This rule applies to all hot
water that is used domestically, in kitchens, as well as for washing and cleaning. Private households and
entrepreneurs with no more than 51 employees are not subject to this solar obligation.
3.2 Rural Electrification – Southeast México
The Ministry of Energy, through the Integrated Energy Services Project, will be providing solar electricity
to 50,000 households and approximately 250,000 inhabitants. Beneficiaries of this program are mostly
indigenous populations among the municipalities with lowest human development index in the States of
Chiapas, Guerrero, Oaxaca and Veracruz. The resources for its development will consist of USD 100
million, including a World Bank loan of USD 15 million, a Global Environment Facility (GEFWorld Bank)
grant of USD 15 million, and includes a contribution of USD 60 million by the participating States and
beneficiary municipalities.
3.3 Planned Large‐Scale Solar Thermal Projects
Currently there are no grid‐scale solar thermal electricity generation plants in México but 3 small Solar
Combined Cycle System (ISCCS) plants have been proposed for northern México. Of these, 2 projects
with a combined solar thermal capacity of 61 MW may be operational in 2011. SCCS technology uses
conventional parabolic trough systems to generate solar steam to assist in driving a conventional gas‐
fired combined cycle generating plant.
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3.3.1 Sonora ‐ Agua Prieta 31 MW Solar Project ‐ 10‐years in Development
In 2006, the World Bank announced the funding of a $50 million grant for a Hybrid Solar Thermal Power
Plant Project at Agua Prieta, Sonora. The project was initially approved in 1999 with the construction
contract expected to be awarded in 201033. The project will demonstrate the benefits of integrating a 31
MW parabolic trough solar field with a 535 MW conventional thermal facility using combined cycle gas
turbines which will contribute to reducing the long‐term costs of the technology to reductions in
greenhouse gas emissions.34 The project grant is funded through the Global Environmental Facility Trust
Fund of the World Bank.
3.3.2 Baja California ‐ Rosarito 25 MW Project ‐
A new ISCCS plant with a 25 MW solar component is planned at the Rosarito III generating plant
scheduled to enter service in April of 2011.35
3.3.3 Baja California ‐ Méxicali 30 MW Solar Project ‐ Cancelled Due to Lack of Solar Expertise
CFE studied the excellent solar thermal resources in the Méxicali area and assessed the technical and
economic feasibility of an ISCCS component to a new gas power plant. The solar component was
incorporated into the tender requirements issued by CFE on March 14, 2002 for the Méxicali II plant to
be located near San Luis Colorado at the eastern side of the Méxicali Valley. The total output of the
ISCCS plant was to generate between 198 MW and 242 MW at summer design conditions. The unique
and specialized expertise to design the solar component of the plant caused complaints from the
prospective bidders until CFE agreed to separate the bidding for the traditional and solar components.
The tender for Méxicali II was subsequently postponed to be re‐issued minus the solar component.36
4 Market Trends
4.1 Global Oversupply of Modules Driving Down PV Costs
Photovoltaics module prices are dropping faster than all predictions which is driving unprecedented PV
growth in México during 2009. PV prices are now approaching the GTZ Report’s “optimistic pricing”
scenario for 2009‐2014 already in 2009. In the past 2 years México has seen dramatic reductions in the
installed costs for PV ranging from 30% to 60% with the variation depending under system integrator
and whether the module uses silicon or thin‐film cells. México is benefiting from an enormous global
oversupply of modules as additional PV production capacity has been added in the past 1‐2 years as
demand in certain key markets has declined or slowed. An October 2008 market report37 predicted the
overcapacity in PV module production in 2009 as the demand for solar was reduced due to Spain
capping its feed‐in‐tariffs for PV, uncertainty in the U.S. markets, and slower adoption rates for PV in
France and Italy. The predicted module oversupply in the fourth quarter of 2008 was approximately 400
MW which was expected to increase significantly to 3.9 GW in 2009.
4.2 Very Favourable Payback Periods and Near‐Term Grid‐Parity
Generally payback periods for solar hot water systems are 1.5 to 3 years and for photovoltaics 5‐9 years
depending upon regional solar resources, energy consumption, equipment selection and installer
pricing. Payback periods were reported by system installers during TechBA interviews during November
2009.
Payback Period in Years for Solar Installations México
2009
Commercial/
Residential Industrial
Solar Hot Water Systems 1.5‐3 2‐3
Photovoltaics 7‐9 5‐7

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As PV prices decline and “subsidized” electricity prices increase annually, it is likely that México will see
grid‐parity for PV sooner than in the U.S., Spain or Germany. Another key factor leading to early grid‐
parity in México is that labor costs for PV and solar hot water installation are already market‐based and
are unsubsidized through financial incentives which keep prices artificially high in the industrialized
countries.
4.3 Annual Energy Costs Continue to Rise
National power consumption is expected to grow at an annual rate of 6.3% during the period 2005‐2015
(7.6 % in a high demand scenario and 5.4% in a conservative scenario)38. Annual electricity price
increases of 8% is expected for the residential sector and increases of 7% are expected for the industrial
and services sectors.39
4.4 More Solar Hot Water Capacity but Stronger Growth of PV in 2009
In 2008 there was 5 times more installed capacity for solar hot water systems than there was for PV but,
between 2007 and 2008, the annual growth rate for PV was more than twice than the rate for new solar
hot water capacity additions. For 2009, all indications are that the annual growth rate PV will increase
and in the near future surpass solar hot water capacity. During 2006, the total installed capacity for PV
was less than 1 MWp and during 2009 several companies have each reported installations approaching
1 MWp.40 SENER expects annual electricity usage by residential and by medium‐sized businesses to
increase 3.7% annually to 2017 compared to the average for all sectors at 3.4%.41 These markets are key
segments for photovoltaics and solar hot water and expectations are that these segments will see strong
growth in solar penetration due to increasing energy consumption to 2017 and due to increases in grid
tariff prices.
4.5 Solar Thermal Electric is Viewed as “High Cost” by CFE
Solar thermal electric costs for all CSP technologies are already seeing grid‐parity pricing in the U.S. for
peak and for “dispatchable” solar from thermal plants using 3‐6 hour energy storage. Such projects in
México are expected to more cost‐effective given domestic engineering, construction and operations
cost structures. However, all indications are that solar is expected to play a large role in Distributed
Generation and in industrial “self‐generation” but not in utility‐scale generation according to CFE’s
future capacity plans.

Currently, utility‐scale solar thermal electric is not projected to be a major player in México’s long‐term
energy mix. A recent report42 by the Inter‐American Development Bank described the potential of
renewable energy in México with no reference to solar as part of the mix and that, even with carbon off‐
set funding solar is not considered “cost competitive”:

Despite having world‐class renewable energy resources and the prospect of wind power and
other sources achieving economic competitiveness in the short to medium term, the renewable
energy sector of México remains relatively untapped . . . Assuming a cost of CO2e of as little as
USD 10/ton is factored in, low‐carbon energy technologies – hydro, wind, biomass, geothermal,
and efficient cogeneration – could become cost competitive options replacing much of the
projected investments in conventional fossil fuel based thermal power generation in the least‐
cost scenario.

CFE expects wind and geothermal to be the dominant renewable resources in future capacity additions
to 2018. The following figure shows CFE’s planned capacity mix for 201843 with no solar:

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Source: CFE
5 Key Organizations, Research Institutions and R&D Focus
5.1 Instituto de Investigaciones Eléctricas (IIE)
The Instituto de Investigaciones Eléctricas (IIE) is a decentralized governmental research institution, with
an operational focus on technological innovation and development. IIE was created by presidential
decree in 1975. Its mission is to promote and support technological innovation within México’s electric
industry, its suppliers and users, through applied research, technological development, and specialized
technical services. It is organized in four technical divisions: Alternative Energy Sources, Electrical
Systems, Electronic Control Systems, and Mechanical Systems. Planning, Finance and Administration
functions are embedded in two additional divisions. The IIE has a staff of over 650 research specialists
and over 20 experimental facilities located in different regions of the country.44 IIE represents México in
the Photovoltaics Power Systems Programme of the International Energy Agency. In 2008, IIE finished
the construction of a 1‐kW prototype inverter for grid‐connected PV systems.45 The actions of the PV
Grid Connected Project GEF/PNUD‐IIE were focused on technology promotion, regulatory issues, and
industry training. Two diploma courses on PV grid‐connected systems were offered during 2008 with an
enrollment of more than 50 people. Course participants included project developers, members of PV
industry associations, investors, industry professionals, and energy commission representatives of
several Mexican states.
5.2 Centro de Investigación en Energía, Universidad Nacional Autónama de México (CIE‐UNAM),
Cuernavaca‐Temixco
CIE is the principal research university in México for renewable energy with a major focus in solar R&D
including the development of PV materials, optics, optical electronics, system evaluation, thin films solar
control coatings, energy systems such as concentrating solar, solar water heating with low‐temperature
system designs for domestic and industrial applications, solar drying systems for agriculture products,
water treatment with high temperature solar heating systems, and solar thermal applications. For
several years a team of researchers at the Centro de Investigación en Energía have participated in an
international collaborative project “Task 38 Solar Air‐Conditioning and Refrigeration” in the framework
of the Solar Heating & Cooling Programme of the International Energy Agency (IEA). The initiative
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implements measures to accelerate market introduction of solar air‐conditioning and refrigeration with
a major focus on improved components and system concepts. The work in this Task wants to contribute
to the process of rising acceptance of the technology and to overcome the main barriers on technical
and information transfer levels.46 A short list of representative papers follows:

 R. Best, “Recent Developments in Thermal Driven Cooling and Refrigeration Systems”

 W. Rivera , “A Solar Absorption Refrigeration System operating with the Mixture Ammonia‐
Lithium Nitrate”

 A. Ordaz‐Flores, O. García‐Valladares and V. H. Gómez ,“Evaluation of the Thermal Performance
of a Solar Water Heating Thermosyphon Versus a Two‐Phase Closed Thermosyphon Using
Different Working Fluids”
5.3 Universidad de Sonora Developing Utility‐Scale Solar with U.S. Company
TxTec AC is the institute for technology transfer at the University of Sonora, which has a long history of
cooperation with industry in areas of aquaculture, agriculture, metallurgy, geology, energy and the
environment. TxTec promotes university‐industry collaboration for mutual support of technology
development and technology transfer to improve the socio‐economic conditions and productivity of
society. TxTec has experienced faculty and researchers as well as equipped laboratories in multiple
specialties such as the National Laboratory of Solar Concentration Systems in collaboration with
Universidad de Sonora and Universidad Nacional Autónoma de México (UNAM), and provides
confidential industrial research facilities as well as economic and business consulting to nurture
successful new technology developments in the region.

In 2008, TxTec and Utility Scale Solar, Inc., (USS Inc.) of Palo Alto, California announced a collaboration
agreement for development of advanced CSP power plant designs featuring TxTec’s contributions to
tower receiver designs and USS, Inc’s breakthrough heliostat (sun tracker) technology. Under the
agreement TxTec and USS, Inc. will jointly develop CSP plant designs suited for México’s Sonoran
Plateau, one of the best solar regions in the world and ideally suited for the CSP plant configuration
known as “power tower”. TxTec will deploy and test USS, Inc’s next generation heliostat technology at
TxTec’s CSP lab plant, in conjunction with advanced tower receiver designs developed and tested by
TxTec. The two parties are also working together on a 50 megawatt power tower plant that will supply
enough power to the Mexican power grid for over 53,000 households.47
5.4 GTZ
GTZ (Gesellschaft für Technische Zusammenarbeit) is a private sustainable development company
formed and owned by the German Federal Government. For more than 30‐years, GTZ has been a
cooperative strategic and development partner with México. The current focus of GTZ’s cooperative
program with México is sustainable energy and expanding the use of renewable energy resources. In
April 2009, development cooperation with México in the energy sector entered a new phase with the
addition of KfW for financial cooperation. GTZ renewable programs will be supplemented with climate
protection initiatives. GTZ has instrumental in launching major projects to promote renewable energy
and energy efficiency and has prepared several major renewable energy assessments for SENER which
includes:

 “Renewable Energy for Sustainable Development in México”, 2009

 “Nichos de Mercado Para Sistemas Fotovoltaicos en Conexíon a la Red Eléctrica en México”,
2009
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5.5 La Asociación Nacional de Energía Solar
La Asociación Nacional de Energía Solar (ANES) is the Mexican chapter of the International Solar Energy
Society (ISES) and is the leading solar association in México. ANES was in 1980 is 29 years old and
conducts an annual congress for solar researchers and industry stakeholders to meet and exchange
technical information on all aspects of renewable energy. The association has been a catalyst for solar
research in México and has been instrumental in establish industry standards for solar hot water
collectors. Another key function of ANES is providing a national training program to increase the use of
renewable energy which includes professional development and working with governmental programs
which incorporate solar energy.
6 Foreign Direct Investments in México’s Solar Industry
Solar is a promising and emerging sector for FDI investment in México which has been limited over the
past few years due to the global financial crisis and the over‐supply of PV cells. More than 70% of FDI
into México comes from the U.S. and the European Union.48

6.1 PV FDI in 2008‐2009
There were several PV‐related FDI investments announced during 2008 leading to 2 plant openings in
2009 by Kyocera and Sanyo and to Q‐Cells’ announced USD 3.5 Billion investment in Méxicali likely
cancelled as the company struggles to survive with EUR 1 Billion in losses so far during 2009. There were
at least 2 smaller FDI investments in manufacturing in European solar hot water systems and an
additional FDI in a key supplier of copper tubes.
6.1.1 50 MW Sanyo PV Plant in Nuevo León
In November 2009, SANYO Electric Co. Ltd. of Japan opened a new PV production plant in Nuevo León
operated by its subsidiary, México SANYO Energy S.A. de C.V. The plant will assemble SANYO's HIT
(Heterjunction with Intrinsic Thin‐layer) solar modules with an annual production capacity of 50 MW
which will be sold in North America.
6.1.2 Kyocera Solar’s New 150 MW PV Plant in Tijuana49
In March 2009, President Calderón helped inaugurate Kyocera Solar's second PV module manufacturing
plant in Tijuana. The two‐story production facility will have a maximum annual output of 750,000
crystalline‐silicon modules which is equivalent to a nameplate capacity of 150 MW. President Calderón
also announced his intention to implement a large‐scale program of renewable energy in México, which
will include Mexican‐made solar modules such as those produced at Kyocera.

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6.1.3 Q‐Cells in Méxicali?50
In May 2008, the world’s largest PV manufacturer, Q‐Cells from Germany, announced its intentions to
develop a major thin film photovoltaics manufacturing facility at the Silicon Border Industrial Park near
Méxicali, México at a projected cost of USD 3.5 billion. The development is dependent on the future
growth of the PV market in the US, México and Latin America and is part of a mid‐ to long‐term plan
according to Q‐Cells. The German PV manufacturer referred to the planned plant as part of its
“internationalisation strategy.” Plans for the Q‐Cell consisted of multiple buildings built in phases, with
the construction of the first phase to have begun in the fourth quarter of 2008. In early November 2009,
Q‐Cells announced that it just completed third straight quarter of losses and that it was closing
manufacturing facilities in Germany and Malaysia. The company has lost nearly EUR 1 Billion in 2009
compared to a net profit of EUR 152.7 Million at the end of third quarter of 2008. In November 2009 Q‐
Cells reported that the price of solar cells has fallen 20% during the previous three months and that
prices are down 40% for the year.51 Q‐Cells will likely cease to be the world's largest cell maker in 2009
and many expect to company to collapse or be acquired.
6.1.4 Finish Investment – Cooper Tubing for Flat Plate Solar Water Heaters
Luvata has also expanded its manufacturing capacity by opening a USD 40 million dollar copper‐tube
manufacturing plant in Guadalupe, Nuevo Leon, near Monterrey. This new facility began tube
production in September 2008 and increases Luvata’s copper‐tube capacity in North America by
approximately 50,000 tonnes annually for solar water heaters.52
6.1.5 Kioto in Guadalajara
In May 2009, Austrian Kioto Clear Energy AG established Kioto S.A. as a 100% subsidiary and began
production of its proprietary flat plate collectors which consists of laser‐welded full plate absorbers with
a high selective coating and tempered low‐iron glass. The factory has an annual capacity of 100,000 m²
with 30 employs 30 people. The company developed water tanks and mounting systems with local
suppliers in Guadalajara and Kioto S.A. expects the EUR 4 Million plant to supply distributors through
the Americas.
6.1.6 Hydro’s Extrusion Americas Plants Supplying U.S. and Spanish Solar Projects
A smaller, but promising example of FDI in México is Extrusion Americas which is a unit of Norsk Hydro,
a global supplier of aluminum and aluminum products, and is another example of FDI investments in
facilities in Phoenix and Guaymas which are providing aluminum frames for large‐scale solar plants in
the U.S. and in Spain. Based in Norway, the company employs 23,000 people in 40 countries and has
activities on all continents. Hydro is the world's third‐largest aluminum supplier, the largest single
manufacturer of primary metal and extruded aluminum products in Europe, and a leader in delivering
innovative light metal solutions to the automotive and building industries worldwide.53 Hydro Aluminum
is supplying the extruded materials for use in the trough frames for 2 Spanish solar power plants which
will together utilize 17,800 aluminum frames. Hydro will ship nearly 15 million pounds of aluminum for
the two projects during a 10‐month window. Both facilities are being built by Acciona, a Spanish energy
company. The frames are desired for their rigidity, light weight, durability and tight tolerance to
specifications. Hydro’s extruded aluminum frames will be produced in the company’s Phoenix plant and
fabricated at its facility in Guaymas, México. Extrusion Americas also provided the frames for the
Nevada Solar One Project in 2004 which was is a 65 MW trough project in Las Vegas which is also owned
by Acciona.
* * *

1
http://www.cec.org/files/pdf/ECONOMY/Pres‐Elvira‐RenEnergyMeeting_es.pdf
2
3
GTZ (2009) “Nichos de Mercado Para Sistemas Fotovoltaicos en Conexíon a la Red Eléctrica en México”, June
2009
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4
IEA Photovoltaic Power Systems Programme (2009) “Annual Report 2008, International Energy Agency”; See
http://www.iea‐pvps.org/products/download/rep_ar08.pdf
5
Sources: GTZ (2009) “Nichos de Mercado Para Sistemas Fotovoltaicos en Conexíon a la Red Eléctrica en México”,
June 2009; International Energy Agency‐Photovoltaic Power Systems Programme (2006) “Compared assessment of
selected environmental indicators of photovoltaic electricity in OECD cities”, April 2006
6
SENER and GTZ (2009) “Renewable Energy for Sustainable Development in México”
7
SENER and GTZ (2009) ”Renewable Energy for Sustainable Development in México”
8
SENER and GTZ (2009) ”Renewable Energy for Sustainable Development in México”
9
10
México Secretaría de Energía (2008) “Dirección General de Planeación Energética, Prospectiva del sector
eléctrico
2008‐2017”, March 2008
11
Sources: Western Governors Associations (2009) “Western Renewable Energy Zones Initiative Renewable Energy
Generating Capacity Summary”, June 15, 2009; Inter‐American Development Bank (2009) “IDB Public‐Private Sect
or CTF Proposal ‐ México Public – Private Sector Renewable Energy Program”; GTZ (2009) ”Nichos de Mercado para
sistemas fotovoltaicos en conexión a la red eléctrica en México”, June 2009; and SENER and GTZ (2009)
“Renewable Energy for Sustainable Development in México”
12
Ravindranath, Prof. N.H.. Center for Sustainable Technologies, Indian Institute of Science (2009) “Renewable
Energy for Industrial Applications”, presentation at Global Renewable Energy Forum – Scaling Up Renewable
Energy”, León, México, October 7‐9. 2009; See http://www.grefMéxico2009.org
13
Solar thermal resources were inventoried as part of the Western Renewable Energy Zones Project; see
http://www.westgov.org/wga/initiatives/wrez/WREZ%20Map%20and%20Tables%20Only.pdf
14
“Western Renewable Energy Zones Initiative Renewable Energy Generating Capacity Summary”, Western
Governors Associations, June 15, 2009; see http://www.westgov.org/wga/initiatives/wrez/
15
SENER and GTZ (2009) “Nichos de Mercado Para Sistemas Fotovoltaicos en Conexíon a la Red Eléctrica en
México”, June 2009
16
17
18
World Energy Council “Energy Efficiency Policies and Indicators – ANNEX 1”
19
20
World Bank (2009) “Residential Electricity Subsidies in Mexico Exploring Options for Reform and for Enhancing
the Impact on the Poor“, World Bank Working Paper No. 160
21
From personal conversation with Peter Eschenbach, Director de Finanza y Desarrollo de Negocios, ERDM Solar,
14 November 2009.
22
SENER and GTZ (2009) “Nichos de Mercado Para Sistemas Fotovoltaicos en Conexíon a la Red Eléctrica en
23
http://www.diputados.gob.mx/LeyesBiblio/pdf/LAERFTE.pdf
24
World Bank (2009) “Low‐Carbon Development for Mexico”, October 15, 2009; See
http://siteresources.worldbank.org/INTLAC/Resources/Medec_final_Oct15_2009_Eng.pdf
25
http://en.wikipedia.org/wiki/Net_metering
26
World Bank Group (2009) “World Bank: Green Growth is Possible in México, Report Concludes”, Press Release,
October 26, 2009
27
Inter‐American Development Bank (2009) “México partners with IADB to fight climate change, gets $400M PBL”,
Press Release, September 17, 2009
28
World Bank Group (2009) “ World Bank/México: US$1.5 Billion to Stimulate Green Growth”, Press Release,
October 20, 2009
29
Inter‐American Development Bank (2009) “México partners with IADB to fight climate change, gets $400M PBL”,
Press Release, September 17, 2009
30
SENER and GTZ (2009) “Renewable Energy for Sustainable Development in México”; See page 54
31
http://ase.org/content/news/detail/6031
32
See http://www.infonavit.gob.mx
33
“México ‐ Second Agua Prieta Solar Thermal Project : procurement plan/México ‐ Plan de contrataciones
especifico : procurement plan”, The World Bank, August 11, 2009; see http://go.worldbank.org/L0L83OXFL0
34
“Eco‐Innovation Policies in México”, OECD Environment Directorate, 2008.
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35
“Energy Supply and Demand Assessment for the Border Region”, California Energy Commission, May 2005
36
http://www.renewablesg.org/docs/Baja/RS_Baja_051805.doc
37
Lux Research (2008) “Solar State of the Market Q3 2008: The Rocky Road to $100 Billion”
38
Global Environmental Facility (2007) “México: Grid‐connected Photovoltaic Project – Medium‐Sized Project
Proposal”, April 7, 2007
39
SENER and GTZ (2009) ”Nichos de Mercado para sistemas fotovoltaicos en conexión a la red eléctrica en
40
Based upon TechBA interviews of solar companies during November 8‐20, 2009
41
SENER (2009) “Prospectiva del sector electric 2008‐2017”
42
43
SENER; See http://gspp.berkeley.edu/programs/docs_EnergyForum/CEPP%20Berkeley%20August%2024‐
25_Acosta.pdf
44
Global Environmental Facility (2007) “México: Grid‐connected Photovoltaic Project – Medium‐Sized Project
Proposal”, April 7, 2007
45
International Energy Agency, “Photovoltaics Power Systems Programme, Annual Report 2008”
46
IEA – SHC Task 38 Solar Air‐Conditioning and Refrigeration (2009) “Industry Newsletter, First Edition, 01‐2009”
47
Utility‐Scale Solar Inc. (2008) “TXTEC and Utility Scale Solar, Inc. to Collaborate on Next Generation 50
Megawatt Concentrating Solar Power (CSP) Electric Plant for Sonora, México”, Press Release, August 14, 2008
48
http://www.proMéxico.gob.mx/wb/ProMéxico/reasons_to_invest_in_México
49
http://www.pv‐tech.org/news/_a/kyocera_solar_opens_new_pv_module_plant_in_tijuana_México/
50
http://www.pv‐tech.org/news/_a/q_cells_plans_35_billion_thin_film_manufacturing_complex_in_Méxicali_México/
51
Recharge News “Q‐Cells takes axe to production as losses deepen”, November 12, 2009; See
http://www.rechargenews.com/energy/solar/article198527.ece
52
"Solar Heating Industry Review 2009", Renewable Energy World, September 21, 2009; See
http://www.renewableenergyworld.com/rea/news/article/2009/09/solar‐heating‐industry‐review‐2009
53
http://www.maquilaportal.com/news/index.php/blog/show/Hydro‐Aluminum’s‐Guaymas‐Plant‐Fabricates‐
Extruded‐Aluminum‐Solar‐Arrays‐for‐Two‐New‐Therm.html
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Section 5
Financing Enablers
1 Introduction
The purpose of this section is provide an overview of the “financing enablers” and key financing tools
being used to drive the explosive growth of all segments of the solar industry in the U.S. and particularly
in California and Arizona.

 The financing strategies, programs and practices of these enablers can be of great support
directly and indirectly to existing, new and emerging Mexican solar companies along the solar
value chain who maybe new entrants to the supply chain and manufacturing sectors of the
California and Arizona solar market.

 The financing enablers range from national to local governments, from global solar companies
and international development funds to cross‐border business‐to‐business relationships. The
financing tools range from traditional programs and tools for economic development and export
trade now focused on the solar industry to wide array of specialized incentives and support
mechanisms to drive solar manufacturing and solar energy generation.

 The tools of financing enablers can range from tax credits to tax equity funds, from donor
carbon credit funds to performance‐based electricity payments, and from demand‐driven
mandatory green energy delivery requirements to targeted Foreign Direct Investments.
2 Approaches to Financing the Solar Sector
The general types of support programs, solar incentives and financial tools used by “enablers” to
leverage investment in the various value chains of the solar industry which include:

 Economic Development – traditionally consists of targeting individual companies with
conventional grants, loans, and tax incentives to solar companies locating and/or expanding in
certain regions or locations; some efforts are marketed at promoting new “solar cluster
development” along with “green jobs”.

 Export Trade Development – existing initiatives which use direct loans and credit enhancements
to assist foreign customers buying solar products, goods and components produced
domestically; some countries are targeting the renewable energy sector for export trade
initiatives.

 Targeted Financing for Solar Manufacturers – consists of national and state tax credits targeted
to assist the financing of solar manufacturers along with utilities receiving “Renewable Energy
Credits” for payments to solar manufacturers for sales leading to in‐state solar generation.

 Renewable Energy Generation Incentives and Portfolio Requirements – the “market drivers” for
the explosive growth of solar in the US is due to a mix of voluntary incentives and mandatory
requirements for generating solar energy in California and Arizona which makes large and small
solar projects “bankable” which leverages equity and debt investments in solar manufacturing
and in the solar supply chain.

 Private Investment/Tax Equity Financing – comprised largely of institutional and tax equity
investors, private syndicated investments and private bond placements offering equity, debt
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and leveraged investments with tax‐offsets and pass‐through net operating losses.

 Carbon Funds, Kyoto Protocols and Post‐2012 Funds – consists of international players buying
“certified emission reduction” credits from renewable energy projects which assists in financing
projects and assists countries meet their carbon reduction commitments under the Kyoto.

 International “Donor Trust Funds” – established to buy the environmental attributes of solar
energy projects in long‐term contracts which are used to secure conventional financing.

 Foreign Direct Investment and Strategic Alliances/Partnerships – usually consists of equity and
debt financing to build manufacturing capacity in low‐cost countries with local strategic partners
in order to guarantee a supply of solar products for fast growing markets.
3 Traditional Governmental Support Programs
Traditional economic development and export trade development programs are very active in all sectors
of the solar industry and enable the leveraging of financing, incentives and development tools to
support large companies as well and small‐ and medium‐sized enterprises.
3.1 Economic Development/Industrial Recruitment
The Solar Energy Industries Associations reports that approximately 90% of global solar cell
manufacturing occurs outside the United States and that the U.S. is fifth in global solar manufacturing
capacity with less than one‐third of the capacity of Japan, China or Germany.1 California and Arizona are
very aggressive in recruiting global solar manufacturing and services to their respective states. Nearly all
of the economic development/industrial recruitment groups in the major metro areas of California and
Arizona are targeting solar companies. Traditional economic development tools that States and local
entities offer are grants for R&D, infrastructure improvements and workforce training along with tax
incentives such as personal income tax, corporate income tax, cash sales tax, property tax, etc. Examples
of such successful efforts include:

 New Automated Solar Thermal Component Plant in Nevada – In June 2008, Ausra opened a
reflector production line at its first North American facilities in Las Vegas. The 130,000‐square‐
foot, highly automated manufacturing and distribution center will supply the reflectors,
absorber tubes, and other key components of the company's solar thermal power plants to the
rapidly growing utility‐scale solar power industry in the Southwest states. Ausra has
headquarters in Palo Alto and uses a Compact Linear Fresnel Reflector (CLFR) technology that
was developed in Australia.2

 Competition within China for Industrial Recruitment of International Solar Companies – It is
being reported that Chinese governments at the national, provincial and even local level have
been competing with one another to offer international solar companies ever more generous
subsidies, including free land, and cash for research and development. State‐owned banks are
flooding the industry with loans at considerably lower interest rates than available in Europe or
the United States.3

 $2.6 Million Spanish Grant to Assist Solar Manufacturer – In September 2009, the Ministry of
Innovation, Science and Enterprise of the Andalusian Region of Spain awarded a $2.6 Million
grant to Solel Solar Systems, Ltd. to be used for the construction and development of a solar
thermal manufacturing facility to build solar fields components. The facility will be Solel's first
manufacturing plant in Spain, and will include lines for the production of parabolic reflectors,
metal supports for solar collectors, and other essential components used for conversion of
sunlight to clean electricity. Investment by Solel in the first Spanish facility is $12 million, and
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total investment by Solel in manufacturing plants in Spain is expected to reach $140 million.
Solel commenced operations in Spain in 2006 and is supplying 15 solar thermal power plants
with a combined capacity of 750 MW which are being built in partnerships with Spain's leading
infrastructure companies. In addition to being a technology provider, Solel has joined with Sacyr
Vallehermoso, a leading Spanish construction company, in a joint venture to build three power
plants with a total capacity of 150 MW.4

 $58 Million German/EU Grant to U.S. Solar Manufacturer – In 2005 First Solar, the U.S.
manufacturer of thin‐film solar, closed a project deal for a new manufacturing plant in which
Germany and the European Union provided $58 million of the $150 million costs for
constructing the plant. First Solar also received wage subsidies for local workers hired who was
previously unemployed. By the end of 2007, the First Solar plant in Frankfurt/Oder was running
at full capacity and now employs more than 600 people along with another 100 staff at its
European sales and marketing offices in Mainz, Germany. The First Solar plant went on to
leverage other manufacturers in the solar‐power industry to the region including Aleo Solar,
Conergy, Odersun, PVflex, 5N PV and Yamaichi Electronics. There are some 3,700 workers in the
solar industry in the region with more than $650 million having been invested which has lead
Foreign Direct Investment Magazine to rank the region as one of the top 25 European locations
for foreign investment in 2008.5
3.2 Export‐Import Bank of the United States6
The Export‐Import Bank of the United States (Ex‐Im Bank) is the official export credit agency of the
United States with a mission to assist in financing the export of U.S. goods and services to international
markets. Ex‐Im Bank provides working capital guarantees (pre‐export financing), export credit insurance
along with loan guarantees and direct loans (buyer financing). The Ex‐Im Bank has established an
“Environmental Export Financing” program to help mitigate risk for U.S. companies and offers
competitive financing terms to international buyers for the purchase of U.S.‐made environmental goods
and services. This program specifically targets U.S. exports of renewable energy equipment and provides
financing products such as short‐term working capital, export credit insurance, medium‐term insurance,
medium‐ to long‐term loan guarantees, project and structured finance, and long‐term direct loans. The
Ex‐Im Bank supported the U.S. solar sector in 2008‐2009 with the following export financing:

 Evergreen Solar (ESLR) received low interest financing (4.9% fixed over 18 yrs) from the Export‐
Import Bank of the U.S. for overseas projects using ESLR panels. ESLR currently has 90MW of
projects in varying stages of the loan app process with the bank which will cover 85% of the
product cost and up to 30% of installation costs.

 Spire Solar Inc. is a global solar company providing turnkey solutions for module and cell
factories as well as individual equipment to feed the rapid expansion in the solar market
worldwide. In 2009 Ex‐Im Bank approved a $5 million revolving working capital loan guaranty for
Spire Solar as a credit enhancement to a direct loan from Silicon Valley Bank in Santa Clara,
California.

 SolarWorld USA, a manufacturer in Camarillo, California, exported photovoltaic solar modules
for the construction of five solar‐energy projects at the Gochang Solar Park in Korea. Ex‐Im Bank
is supporting the financing of this transaction with long‐term loan‐guarantees totalling $61
million.

 United Solar Ovonic LLC in Auburn Hills, Michigan, used a $25 million revolving credit line
guaranteed under Ex‐Im Bank's 'Fast Track' Working Capital Guarantee Program to finance the
export of its thin‐film solar laminates to customers in Europe and Asia. The guaranteed lender is
JP Morgan Chase Bank in Cleveland, Ohio.
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 Applied Materials Inc. of Santa Clara, California used an Ex‐Im Bank €11 million loan guarantee
to support the financing of $14 million in exports of solar‐cell manufacturing tools and
equipment to Signet Solar LLC of Dresden, Germany.
4 Solar Manufacturing Financial Support Programs
All segments of the U.S. solar manufacturing sector are benefiting from the major financing tools and
incentives resulting from governmental actions at the Federal and state level which have been taken to
stimulate the economic and to develop a the supply‐side of a new manufacturing base in solar. These
governmental actions include adoption of the American Reinvestment and Recovery Act of 2009 (ARRA)
and various manufacturing incentives at the state level.
4.1 ARRA 30% Advanced Energy Manufacturing Tax Credit
The ARRA authorized the award of $2.3 billion in tax credits for qualified investments in advanced
energy projects which includes the support of new, expanded, or re‐equipped domestic manufacturing
facilities. The new Advanced Energy Manufacturing Tax Credit (MTC)7 offers a 30% Federal tax credit to
stimulate the growth of the domestic manufacturing industry in clean energy which will thereby support
the larger goals of ARRA to stimulate economic growth, create jobs, and reduce greenhouse gas
emissions. The $2.3 billion in MTCs can support total capital investments of almost $7.7 billion in new
renewable and advanced energy manufacturing projects.
4.2 ARRA 80% Loan Guarantees
New ARRA loan guarantees are directed to open access to the traditional credit markets for debt
financing during the recovery of the global recession. The U.S. Department of Energy is offering loan
guarantees up to 80% of a renewable manufacturer’s cost for new facilities and equipment. The ARRA
appropriated approximately $3.9 billion in funding for a new program for rapid deployment of
renewable energy systems, electric power transmission and leading edge biofuels projects. The
financing of solar manufacturing facilities and large‐scale solar projects are eligible activities under the
loan guarantee program and at least 2 large projects representing $725 million in funding have been
announced or are in final negotiations:

 The 1st approval was announced in September 2009 with a $535 million Loan Guarantee
awarded to Solyndra to provide debt financing for approximately 73% of the project costs which
will allow the company to initiate construction of a solar panel fabrication facility in California.
Once completed, the plant is expected to have an annual manufacturing capacity of 500 MW.

 SoloPower is expecting a $190 million Loan Guarantee after being selected in July 2009 by the
U.S. Department of Energy for due diligence and negotiation of funding to expand the
production capacity of a manufacturing plant in California for SoloPower’s flat‐plate PV modules
built from flexible CIGS (copper‐indium‐gallium‐selenide) cells.
4.3 ARRA “Buy America” Provisions
The American Recovery and Reinvestment Act includes a “Buy America” requirement that iron, steel,
and other manufactured goods used in infrastructure projects are procured from domestic producers.
On March 31, 2009, the U.S. government issued an “Interim Rule” to implement the “Buy America”
requirements which provides that there is no restriction on the country of origin of components or
subcomponents, nor is there any domestic content requirements imposed on such components or sub‐
components. For manufactured goods, only the final product need be manufactured or produced in the
United States. 8 As such Mexican suppliers can participate in “Buy America” solar manufacturing and
solar projects if the final product is manufactured in the U.S. though there are some restrictions on
steel. The largest PV cell manufacturer in the world is Suntech from China which announced in August
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2009 that it will be adding a factory with 75 to 150 workers in Phoenix or Texas to facilitate “Buy
America” sales.9
4.4 Arizona Renewable Energy Manufacturing Incentives
In July 2009, the State of Arizona created new tax incentives intended to draw renewable energy
product manufacturers to the state. Income tax credits and property tax incentives are now available for
companies choosing to establish or expand their manufacturing facilities and corporate headquarters in
Arizona. To be eligible the business must meet certain minimum requirements for the quantity and
quality of new jobs created. The bill stipulates different incentive levels depending on how many full‐
time jobs are created and the salary for those jobs. These incentives will be available starting January 1,
2010, and will expire on December 31, 2016.10
4.5 Arizona’s Manufacturing Partial Credit for Utility Renewable Requirements
In 2007, a little known provision was added to Arizona’s “Renewable Energy Standard and Tariff”
requirements which allows utilities a “Manufacturing Partial Credit”11 and to receive Renewable Energy
Credits” (REC) in return for investing in solar manufacturing plants or for recruiting solar manufacturers
to Arizona. The text of this provision follows:

“An Affected Utility may acquire Renewable Energy Credits . . . if it owns or makes a significant
investment in any solar electric manufacturing plant located in Arizona or if it provides incentives
to a manufacturer of solar electric products to locate a manufacturing facility in Arizona.”

An example of the effective use of this provision to support solar manufacturing in Arizona is the annual
payment made by Tucson Electric Power (TEP) to Global Solar which has a 40 MW PV manufacturing
plant in Tucson. Global Solar is a major manufacturer of thin‐film photovoltaic (Copper Indium Gallium
DiSelenide ‐ CIGS) solar cells using a flexible substrate. TEP’s plans to pay Global Solar approximately $1
million in 2010 for the cumulative RECs generated in 2010 by Global Solar PV installed in Arizona which
represents 5% of TEP’s required utility‐scale generation 12 with future payments adjusted annually as
new capacity is installed.
4.6 Oregon Renewable Energy Manufacturing Incentives
Oregon's incentives for attracting clean‐tech firms are among the most aggressive in the nation.
Oregon's Tax Credit for Renewable Energy Resource Equipment Manufacturing Facilities was enacted in
July 2007 and provides a tax credit equal to 50% of the construction costs of a facility used to
manufacture renewable energy systems. Eligible costs the building, excavation, machinery and
equipment which are used primarily to manufacture renewable energy systems. The credit may also be
applied to the costs of improving an existing facility which will be used to manufacture renewable
energy systems. The 50% credit is taken over the course of five years, at 10% each year. The original
maximum credit of $10 million was expanded to $20 million (50% of a $40 million facility) in March
2008.13 From 2006 to mid‐2009, Oregon spent $386 million on tax credits for clean‐tech companies,
according to the state Energy Department.14
5 Solar Generation Financing Support Programs
An additional matrix of very attractive financial support programs is now in place in California and
Arizona to support solar generation for Distributed Energy and for the utility‐scale projects. These
financial tools are key drivers on the demand‐side in creating long‐term expanding markets across all
segments of the solar industry.
5.1 Extension of 30% Federal Energy Tax Credit and Accelerated Depreciation
Crucial to the mix of financing and incentive tools is the ability for the owners of solar systems to be able
to apply Federal tax credits to offset the installed costs with Federal tax liability. The Energy Policy Act
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of 2005 provided a 30% tax credit for solar installations for both business and residential owners for a 2‐
year period which was to expire on January 1, 2008. In a companion bill to the American Reinvestment
and Recovery Act of 2009, the U.S. adopted the Emergency Economic Stabilization Act of 2008 which
among a number of provisions extended the 30% “Business Solar Investment Tax Credit” and the
“Residential Renewable Energy Tax Credit” for solar energy property for 8 years through December 31,
2016. The economic impact of the extension of the ITC for solar was estimated to $14.3 billion15 just
upon the PV sector. The extension of these Investment Tax Credits (ITC) are key tools used by financing
enablers to finance both the Distributed Energy as well as utility‐scale solar projects. The extension of
the ITC and the 5‐year accelerated depreciation are most important tools for financing the large‐scale
projects where there is a mix of equity and long‐term debt which require pass‐through net operating
losses and ITCs to offer an attractive rate of turn.
5.2 Mandatory Renewable Portfolio Standards
Renewable Portfolio Standards (RPS) are greatly responsible for the long‐term future growth of solar in
California and Arizona and provide mandatory requirements for utility companies which results in the
direct and indirect financing of solar projects. RPS is a state mandated requirement that public utilities
generate an escalating fixed percentage of electricity generation from renewable energy with a future
cap. RPS requirements are driving utilities to make extraordinary efforts to implement financial
incentive programs to accelerate the development and use of solar energy from residential and
commercial installations to large‐scale grid projects. For California, the RPS requirement is 20%
renewable generation by 2010 and 33% by 2020. Arizona’s RPS ramps up to 15% by 2024 and has a
requirement that 30% of all new renewable generation come from Distributed Energy for residential and
commercial/industrial sectors in which on‐site generation of renewable energy is used for on‐site use.
Utilities and states take diverse approaches to leveraging RPS as a market driver for the financing of
Distributed Energy and for utility‐scale projects.
5.3 Renewable Distributed Energy Generation
State government and electricity utility programs offer an extensive array of upfront rebates, tax credits,
and performance‐based incentives for the generation of solar by residential, commercial, industrial and
public customers. Generally funded by rate‐payers, these financial tools are the enablers for mandatory
compliance with Renewable Portfolio Standards and assist in driving the explosive growth of solar in
California and Arizona. In exchange for financial incentives for customer‐sited solar generation, the
utility company obtains ownership of the Renewable Energy Credits (RECs) generated while the
customer saves money by offsetting electricity provided by the grid with the electricity provided by the
new on‐site solar system.

 California –The California Solar Initiative is part of the Go Solar California campaign and builds on
10 years of state solar rebates offered to customers in California's investor‐owned utility
territories of Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas
& Electric (SDG&E.) The California Solar Initiative is overseen by the California Public Utilities
Commission and has a budget of $2,167 million (2007‐2016)16

 Arizona – In Arizona all responsibility for compliance with RPS requirements is borne by the
regulated utilities and regulated by the Arizona Corporation Commission (ACC). For
commercial/industrial customer‐sited projects, Arizona Public Services (APS) and Tucson Electric
Power (TEP) offers a significant financial payment up to 60% of the project’s capital costs in a
performance‐based incentive that pays over time based upon actual solar production. For
photovoltaic, APS and TEP both offer residential customers a one‐time up‐front payment of $3
per installed DC watt pay which significant with current installed costs at less that $7/watt and
declining.
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5.4 Utility‐Scale Solar Generation
Utilities rely upon Independent Power Producers (IPPs) to produce the renewable energy resources
required to assist the utilities comply with RPS requirements. An IPP is a non‐utility generator which
owns facilities to generate renewable electric power for sale to utilities. Utilities in the California and
Arizona use competitive “Requests For Proposals” (RFPs) for the procurement of IPPs to deliver grid‐
scale generation and large Distributed Energy projects where new smaller generation projects under 20
MW are located near load centers. These RFPs offer 20‐year Power Purchase Agreements (PPAs) which
contract for the electricity and the RECs generated from renewable projects at a guaranteed stipulated
price which the IPP uses to secure long‐term project finance which is usually a combination of equity
and debt. Sometimes solar is stipulated in the RFP and sometimes all renewable sources are encouraged
to submit proposals.

 California –There are currently 13 large‐scale concentrating solar thermal projects under
permitting review by the California Energy Commission. These projects represent a combined
installed capacity of 6.2 GW.17 The U.S. Bureau of Land Management (BLM) currently has 64
applications for the use of public lands in California for large‐scale solar projects with a
combined capacity of 64 GW. The overwhelming majority of these projects would use
concentrating solar thermal technologies with the balance being PV. Some 48 of these projects
use parabolic trough, power tower and Dish‐Stirling technologies with an installed capacity of 48
GW.18 The installed per kW capital costs for utility‐scale solar thermal projects being permitted
in California range from $1520/kW for Dish‐Stirling to $4,000/kW for trough which varies by
wet/dry cooling and by energy storage and site development costs. The typical 250 MW solar
thermal trough project being permitted in California will have capital costs of approximately $1
billion.

 Arizona – In Arizona all responsibility for compliance with RPS requirements is borne by the
regulated utilities and regulated by the Arizona Corporation Commission (ACC). BLM currently
has 33 applications for the use of public lands in Arizona for large‐scale solar projects with a
combined capacity of 20 GW. The overwhelming majority of these projects would use
concentrating solar thermal technologies with the balance being PV. Some 29 of these projects
use parabolic trough and power tower technologies with an installed capacity of 19 GW.19
Based upon a 2007 RFP, APS awarded Abengoa, the global Spanish solar company, a 30‐year
Power Purchase Agreement to construct and operate a 280 MW trough power plant with 6
hours of thermal storage. The “Solana” project is being built near Gila Bend. The capital costs
are $1.5 billion and electricity sales over the project term are expected to be at least $4 billion.
6 Private Investment/Tax Equity Financing
There are fundamental differences in the financial support programs between Europe and the U.S.
related to solar incentives to buy‐down the cost of solar generation. Unlike Europe, where feed‐in‐tariffs
have been the drivers for the explosive growth of solar in German and Spain, U.S. government
incentives for renewable energy largely consists of tax credits for renewable energy manufacturing and
for renewable energy generation projects. Tax‐equity investments are largely driving the growth of the
solar industry in the U.S.20 The basic financial model developed in the U.S. for renewable energy
generation is based upon a combination of tax credits, upfront and performance‐based financial
incentive payments and tax strategies which leverage net operating losses and accelerated depreciation.
This model applies to Distributed Energy for the residential and commercial/industrial markets and to
utility‐scale projects with Independent Power Producers.
6.1 European Feed‐in‐Tariff Financing Model
Feed‐in tariffs require the grid‐operator and primary electricity supplier to purchase electricity from
renewable energy generators at fixed premium prices which are guaranteed over a long‐term
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performance period and are usually market or inflation adjusted. As such, any renewable generator can
structure a project with certainty as to the revenues from power generated which makes conventional
bank financing and private investments very attractive. In Germany, solar PV receives up to €.43/kWh
($.61/kWh) if on a home, or €.32/kWh ($.45/kWh) if on a ground‐mounted site.21
6.2 Investor Syndicates in Spain
During the peak of Spain’s feed‐in‐tariffs for PV from 2005 onward, several different business models
were developed for private investment syndicates to take advantage of the 20‐year guaranteed
payment of approximately $.56 kWh (inflation‐adjusted annually) for projects of 100kW or less with the
tariff price dropping to $.32 kWh for larger projects. Most project developers/solar companies
developed large PV projects and divided the large‐scale systems into 100 kW parcels, or companies, to
qualify the project for the higher tariff. In this single society model, each parcel was set up as a
subsidiary and was owned by several investors. A 2 MW PV plant would require 20 different
investor/owner companies. A variation was a multi‐property model, one or more of the trackers is
owned per investor as part of an overall owners' association. The expected investor return was 10%
with a 10 year pay‐back. It was reported that one installation needed less than four months to attract
investors for its 130 parcels of 100 kW each.22
6.3 Tax Equity Model for Solar
The key tools for tax equity financing of solar projects in the U.S. are third‐party ownership of the
project which leverages receives tax credits, a long‐term performance‐based financial incentive from a
state or a utility, net operating losses and accelerated depreciation distributions along with revenues
from long‐term contracts with parties buying the electricity and the renewable Energy Credits
generated. Tax Investors are targeting returns in the 9% or more range for an Internal Rate of Return for
a 20‐year term for solar third‐party ownership projects in the commercial/industrial sectors. 23

More than 80% of the commercial/industrial solar installations in California are financed through a third‐
party ownership model using a Solar Services Agreements (SSA) which is also referred to as a Power
Purchase Agreement (PPA). The tax equity model for solar typically works as follows:

 A commercial/industrial business wants the benefits from solar for its building but does not
want to make the large upfront capital outlay for the system and/or may not be able to use all
of the available tax credits.

 The business enters into a long‐term SSA with the SSA company which has access to tax equity
investment capital.

 The SSA company comprised of tax equity investors will own, install, and operate the solar
equipment on‐site at the business.

 The SSA company pays for all capital costs for the solar equipment and bears all performance
risk of the solar system.

 The business agrees to pay the SSA company for the solar electricity generated on‐site over a 10
to 20‐year period at most often a fixed‐rate which is at or below the current electricity price.
The business locks‐in a long‐term rate which is less than it would be paying the local utility over
the term of the SSA.

 All financial and tax incentives go to the owner of the solar system which is the SSA company.

 The SSA company then receives a performance‐based incentive over time for the Renewable
Energy Credits generated by the solar project from the local utility company which is used to
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help meet state requirements for its renewable energy generation.

 The SSA receives all Federal and state tax credits which are distributed to the SSA company
shareholders based upon ownership percentage. The tax equity investors also receive net
operating losses for the SSA company which are driven by 5‐year Federal accelerated
depreciation.

A variation to this model is third‐party leasing of the solar system to a property owner such the Solar
City’s “SolarLease” program24 which is a 20‐year arrangement that allows homeowners to rent a solar
photovoltaic system with no down payment and with fixed monthly fee starting at $55, reducing
homeowners’ electricity costs. For larger utility‐scale projects, a partnership‐flip model modelled after
the US wind industry is often used where the PPA company’s ownership is structured at 99% for the tax
equity partners with this ownership “flipped” by being reduced after the benefits of the tax credits have
been exhausted with substantial ownership then going to the project developer.
6.4 Tax Equity Solar Funds
In the US southwest, large solar system integrators and project developers are vertically integrating with
large tax investors to establish tax equity funds dedicated to financing their project pipelines and to
assure growth in an uncertain financial climate. In 2009 several Solar Equity Funds were established or
recapitalized:

 SolarCity: US Bank and SolarCity established a $100 million solar tax equity fund for PV projects
in the residential, commercial/industrial, schools and government markets. SolarCity is a
national solar provider for homeowners, businesses and government organizations and provides
from one source solar power system design, financing, installation and monitoring services.

 Renewable Ventures has capitalized 5 solar tax equity funds with the latest $200 million fund
being established in August 2009. The new Solar Fund V is structured to include both debt from
John Hancock and equity from Renewable Ventures and Wells Fargo. The fund will enable the
construction and permanent financing of around 35 megawatts in the next year and the
combination of debt and equity enables the fund to seek a broader range of federal government
incentives, improving project economics for prospective customers such as municipalities,
universities, electric utilities and companies. 25 In 2009 MMA Renewable Ventures was acquired
by the Spanish company Fotowatio which is one of the largest solar power companies in the
world and an Independent Renewable Power Producer with 130 megawatts of solar projects in
operation in the United States and Europe. Fotowatio has more than 1,000 megawatts in
development across the United States, Spain and Italy using both PV and CSP technologies. A
global company, Fotowatio is owned by GE Energy Financial Services, Landon Group, and
Qualitas Venture Capital.26
6.5 Institutional Investors
Banks have traditionally used the tax equity markets to fund solar projects by buying the Federal and
state tax credits from project owners. Major banks in the solar tax equity market include AIG, Lehman
Brothers, Wachovia, JP Morgan, Morgan Stanley, Union Bank, Wells Fargo, Electric Finance Group,
Prudential Capital Group, and General Electric Capital. Other large institutional investors include pension
funds, insurance companies and endowments.
6.6 Project Finance for Large‐Scale Solar Projects
“Project finance” is the primary financial structure used globally by Independent Power Producers and
investors to enable the financing of large‐scale renewable projects.27 Tax equity funds and Solar Services
Agreements for Distributed Energy is a form of project finance. Project finance is project‐specific asset
financing which usually involves a combination of equity and debt with investor returns and debt
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repayment only coming from project revenues which are secured by a long‐term contract with a
creditworthy electricity utility. In the U.S., project finance has focused on utilizing existing state and
Federal incentives in the form of tax credits and accelerated depreciation to reduce the overall cost of a
solar energy system to the end user. As such, project financing can be viewed as strategic investments
by tax‐motivated investors to take advantage of the available government subsidies for solar
installations.28 The ultimate goal in IPP projects is to arrange a borrowing for a project which will be
beneficial for the private investor and at the same time be completely non‐recourse to the other
activities of the parent company and in no way affecting their credit standing or balance sheet. Indeed,
project financing is sometimes called off‐balance‐sheet financing.29
6.7 Project Finance and Foreign Direct Investment
The following international solar companies are using project finance for large‐scale utility solar projects
in the Southwest U.S.:
 From Spain – Abengoa, Acciona, Iberdrola
 From Israel – BrightSource/Luz, Solel
 From Germany – Solar Millennium
 Australia – Ausra
6.8 Public Equity
Globally public equity “dwarfed” other types of investment in solar energy as described in a 2008 study
by the National Renewable Energy Laboratory titled “A Historical Analysis of Investment in Solar Energy
Technologies (2000‐2007)”. In 2007, public equity accounted for almost two‐thirds of global non‐
governmental investment in solar energy, and private equity surpassed venture capital investments in
solar energy for the first time. Public markets investment in solar energy companies as corporate equity
stakes are sold on the open market. Companies also raise debt as part of their public offerings and
usually in the form of convertible bonds which are included in the total offering size because they have
the potential to convert into shares of the company at a later date. At the time of the public offering,
however, they are not considered to be equity because, as bonds, they have the expectation of
corporate repayment. 30
7 International Development Financing
7.1 North American Development Bank
In 1993 the North American Free Trade Agreement created the North American Development Bank
(NADB) to facilitate financing for the development, execution and operation of environmental
infrastructure projects located in the U.S.‐México border region and certified by the Border Environment
Cooperation Commission (BECC).31 Under its charter, NADB is authorized to make loans to both public
and private sector borrowers, operating within the United States and México. NADB projects must meet
3 eligibility criteria:

 Project must be located within 100 kilometers (62 miles) north of the international border in
boundary in the four U.S. states of Texas, New México, Arizona and California and within 300
kilometers (about 186 miles) south of the border in the six Mexican states of Tamaulipas, Nuevo
Leon, Coahuila, Chihuahua, Sonora, and Baja California.

 Project must remedy an environmental and/or human health problem. Eligible environmental
sectors include priority sectors such as water supply, water conservation, wastewater treatment
and municipal solid waste.

 Project must be certified by the Border Environmental Cooperation Commission (BECC).

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NADB extended the eligibility for projects through new “Expanded Mandate Sectors which includes
renewable energy projects. Large‐scale solar projects on the U.S./México border can be secured by long‐
term Power Purchase Agreements with utility companies which make very attractive investments for
NADB. No large‐scale solar projects have been certified by BECC or funded by NADB however, the
potential of NADB funding for a 50MW solar thermal power project in southern New México was
identified in a 2005 feasibility study for the State of New México:

NADB may represent the lowest‐cost source of debt for a new large‐scale solar project in
southwest New México. NADB, which funds infrastructure projects within 100 kilometers of the
US‐México border, represents an interesting prospective funding source. Although terms vary
considerably depending upon the project’s credit risk, under the most favorable circumstance,
NADB might be able to offer 25 year debt at a 6 percent interest rate. It should be noted that
NADB cannot accept exposure of more than 50 percent of the total capital costs, which will limit
project debt share to 50 percent unless other debt sources are tapped. 32
7.2 International Finance Corporation
The International Finance Corporation (IFC) promotes sustainable private sector investment in
developing countries as a way to reduce poverty and improve people's lives. IFC is a member of the
World Bank Group and is headquartered in Washington, DC. It shares the primary objective of all World
Bank Group institutions: to improve the quality of the lives of people in its developing member
countries. Established in 1956, IFC has 182 member countries which provide its authorized share capital
of $2.4 billion and is the largest multilateral source of loan and equity financing for private sector
projects in the developing world. It promotes sustainable private sector development primarily by:

 Financing private sector projects and companies located in the developing world
 Helping private companies in the developing world mobilize financing in international financial
markets
 Providing advice and technical assistance to businesses and governments
 International finance Corporation33 is the largest multilateral source of loans and equity finance
for private enterprises in emerging markets

IFC is supporting the entire value chain in solar power to promote rapid scaling‐up and cost reductions
in the global solar sector. Recently IFC’s made its first investment in solar photovoltaics manufacturing in
China, which now supplies roughly 25 percent of the global market.34

 $100 Million Loan to Suntech: In July 2009, IFC approved a convertible loan of up to $100 million
to support Suntech for capital expenditure and debt refinancing. Suntech Power Holdings Co.,
Ltd, headquartered in Wuxi, Jiangsu Province, China is a global leader in photovoltaic solar cells
and modules. Suntech designs, develops, manufactures, and markets various PV cells and
modules to provide electric power for residential, commercial, industrial, and public utility
applications worldwide. Suntech’s key markets worldwide include Germany, Spain, the United
States, China, Japan, Italy and South Korea. IFC’s convertible loan will act as an anchor for the
Company to finance its capital expenditure program and lengthen the duration of its debt. The
proposed IFC financing is also expected to enable Suntech to attract further long‐term capital
providers.35

 $75 million loan to SunPower Corporation: The US‐owned SunPower Corporation generated
$1.45 billion in revenues in 2008 and is waiting for final approval of a $75 million IFC loan for a
second solar cell fabrication facility in the Philippines. The project will result in the completion
of twelve solar cell manufacturing lines with an aggregate nameplate capacity of 466 MW.36
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8 Carbon Finance
Carbon finance and the selling of greenhouse gas emission reductions are likely to become major drivers
in the mix of financial tools to support the solar generation demand side of the solar industry. As a party
to the Kyoto Protocols, México has benefited from carbon financing of renewable projects but no solar
at this time. There are many expectations that the current U.S. Congress will voluntarily adopt “cap‐and‐
trade” legislation to regulate greenhouse emissions which would provide further stimulate the U.S. solar
market.
8.1 Carbon Funds
“Carbon Funds” are an investment vehicle that seeks either to repay investors in carbon credits, or to
use income from selling such credits to generate or enhance investment returns. Such funds can buy
credits or invest in carbon‐offset projects such as solar energy generation and claim ownership of the
emission reductions generated by these projects.
8.2 Kyoto Protocol
The 2005 Kyoto Protocol established the market for carbon funds by creating a financial mechanism to
reduce greenhouse gas (GHG) emissions which are attributed to causing global warming. The Kyoto
Protocol is an international treaty that established a “cap and trade” system which imposes national
caps on the emissions for 37 industrialized countries and the European community for reducing
greenhouse gas (GHG) emissions. These reductions amount to an average of five per cent against 1990
levels over the five‐year period 2008‐2012.37 The United States is not a party to this agreement but
México is and as such has access to carbon finance. On average, this cap requires countries to reduce
their emissions 5.2% below their 1990 baseline over the 2008 to 2012 period. Carbon markets have
grown rapidly and have reached over $100 billion dollars of annual transactional value and have created
a new mechanism to assist in financing renewable energy generation projects while delivering billions of
tons of reductions in carbon emissions.38
8.3 World Bank Carbon Finance Unit
Initiatives at the World Bank Carbon Finance Unit's (CFU) 39are part of the larger global effort to combat
climate change, and go hand in hand with the World Bank and its Environment Department's mission to
reduce poverty and improve living standards in the developing world. The CFU uses money contributed
by governments and companies in OECD (Organization for Economic Co‐operation and Development)
countries to purchase project‐based greenhouse gas emission reductions in developing countries and
countries with economies in transition. The emission reductions are purchased through one of the CFU's
carbon funds on behalf of the contributor, and within the framework of the Kyoto Protocol's Clean
Development Mechanism (CDM) or Joint Implementation (JI).

Unlike other World Bank development products, the CFU does not lend or grant resources to projects,
but rather contracts to purchase emission reductions similar to a commercial transaction, paying for
them annually or periodically once they have been verified by a third party auditor. Carbon finance is
the selling of emission reductions to increase the bankability of projects by adding an additional revenue
stream in hard currency which reduces the risks of commercial lending or grant finance. As such, carbon
finance provides a means of leveraging new private and public investment into projects that reduce
greenhouse gas emissions, thereby mitigating climate change while contributing to sustainable
development.
8.4 Clean Development Mechanism
In addition to the market‐based emissions trading, the Kyoto Protocol also established the Clean
Development Mechanism (CDM) which allows emission‐reduction projects in developing countries to
earn certified emission reduction (CER) credits with each equivalent to one ton of CO2. These CERs can
be traded, sold and used by industrialized countries to a meet a part of their emission reduction targets
under the Kyoto Protocol. The mechanism stimulates sustainable development and emission reductions,
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while giving industrialized countries some flexibility in how they meet their emission reduction
limitation targets. The projects must qualify through a rigorous and public registration and issuance
process designed to ensure real, measurable and verifiable emission reductions that are additional to
what would have occurred without the project.40 There are currently 1842 CDM projects registered with
an expected 2.9 billion tons of carbon offsets until the end of 2012.41
8.5 CDM Projects in México
Through September 2009, there have been 118 approved CDM projects in México consisting mainly of
projects involved in greenhouse gas mitigation and methane recovery at landfills, confined animal
operations such as dairies and pig farms dairy, and wastewater ponds. There are no solar CDM projects
in México at this time but there were 7 wind projects in Oaxaca approved for CDM registration since
2006 consisting of 970 MW of combined installed capacity. The structure of these wind projects offer
business models for how Mexican companies can form alliances with global solar project developers and
use carbon funds for project financing42:

 2 wind projects comprising 364 MW were funded by Spain and developed by the Spanish giant
Gamesa Energia S.A. which has installed more than 16,000 MW of its wind turbines in 20
countries and over 4 continents.

 A 249 MW wind project was also funded by Spain through CEMEX International Finance
Company (CIFCO) and also by the United Kingdom of Great Britain and Northern Ireland through
CO2 Global Solutions International S.A. and Gazprom Marketing and Trading Limited.

 The Spanish Carbon Fund (SCF) funded an 83 MW wind project which was managed through the
International Bank for Reconstruction and Development (IBRD) as Trustee.

 3 other wind projects comprising 274 MW were developed by 2 Mexican companies under the
“Self‐Consumption scheme” included in the Public Electric Service Act or Ley del Servicio Público
de Energía Eléctrica. The project developers and operators, Eoliatec del Istmo S.A.P.I. DE C.V.
and Fuerza Eolica del Istmo S.A de C.V, would provide the generated power to its consuming
partners.
8.6 World Bank’s Clean Technology Fund
The Clean Technology Fund (CTF) seeks to promote scaled‐up financing for demonstration, deployment
and transfer of low carbon programs and projects with a significant potential for long‐term Greenhouse
Gas (GHGs) emissions. The CFT promotes the realization of environmental and social co‐benefits thus
demonstrating the potential of low‐carbon technologies to contribute to sustainable development and
the achievement of the Millennium Development Goals (MDBs). The Clean Technology Fund includes
program in the Power Sector to promote renewable energy technologies to reduce carbon intensity.43
8.6.1 Clean Technology Fund’s Investment Plan for México
In 2009 the World Bank announced that México, Egypt and Turkey are the first three countries to tap
the new $5.2 billion Clean Technology Fund managed by the Bank‐ $250 million for Turkey, $300 million
for Egypt and $500 million for México. The three countries will combine the soft loans from the Fund
with loans from other sources in order to implement low carbon projects in the sectors of renewable
energy and transportation.44 Clean Technology Fund Investment Plan for México45 is a “business plan”
agreed among, and owned, by the Government of México for the International Bank for Reconstruction
and Development (IBRD), the Inter‐American Development Bank (IADB) and the International Finance
Corporation (IFC) to provide support for the low‐carbon objectives contained in México's 2007‐2012
national development plan, its national climate change strategy and special climate change program.
This IP builds on the three development banks' experience, gained through their long‐standing and
comprehensive environmental programs in México.
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8.7 Post‐2012 Carbon Credit Fund
Negotiations have commenced on continuing the Kyoto Protocol from the “first commitment period”
(2008‐2012) into the “second commitment period” (post‐2012). Negotiations will take place on the post‐
2012 commitment period in Copenhagen in December 2009 which is expected to produce a mandate
that will include a comprehensive negotiating agenda and timetable for a single, effective global
agreement that builds on the strengths of the Kyoto Protocol and takes it further.46 In 2007, 5 leading
European Banks established a EUR 150 million “Post‐2012 Carbon Credit Fund”, which is the first of its
kind, will exclusively purchase and trade “carbon credits” generated after the Kyoto Protocol expires in
2012. The aim is to support the market value of environmentally worthwhile projects amid uncertainty
over the actual form that the carbon credit trading regime will take after 2012.47 Contributor banks
include KfW Bankengruppe, Caisse des Dépôt, European Investment Bank, Instituto de Crédito Oficial
and Nordic Investment Bank48
9 Foreign Direct Investment
Global companies making “Foreign Direct Investments” (FDI) in the U.S. and in México49 are the
“financial enablers” which offer the greatest potential for investments the solar sector. FDI is inward
direct investment into an organization, equipment, plants, and facilities in a country at a level that is
considered significant to exercise managerial control. Direct foreign investment enterprises comprise
those entities that are identified as:

 Subsidiaries where investor owns more than 50 per cent

 Associates where investor owns 50 per cent or less and

 Branches which are wholly or jointly owned unincorporated enterprises either directly or
indirectly owned by the investor.50
9.1 Major Gains in 2009 Foreign Direct Investment in US Renewable Energy Sector
FDI projects in the renewable energy sector in the US have seen a 3‐fold increase in 2009 with investors
encouraged by new regulation in the sector brought in by the Obama administration, which guarantees
federal‐level tax credits for renewable energy investors until 2013. According to figures from fDi
Intelligence, the sector has seen a 336% jump in the first four months of 2009 compared with the same
period in 200851.
9.2 Chinese Foreign Direct Investment in U.S. Manufacturing
Suntech Power Holdings Co., Ltd., of China is the world's largest crystalline silicon photovoltaic (PV)
module manufacturer by volume. In May 2009 Suntech announced plans to establish a long‐term
presence in the U.S. and is considering several states for the optimal, cost‐effective location for a
production and distribution center.52 The favourable business climate along with extensive incentives
available nationally and at the state level appears to be the decision to locate in the U.S. rather than
México. In a Suntech Press Release, Shi Zhengrong, Suntech's CEO, "We believe in the outstanding long‐
term prospects of the solar energy market in the United States . . . a number of favourable
developments have led us to this decision, including the dramatic growth in utility demand for large‐
scale wholesale solar projects, the increasing number of states with incentive programs for customer‐
owned systems and the federal government's recent stimulus package."53

* * *

1
http://www.seia.org/galleries/pdf/Jan_09_Solar_Manufacturing_OnePager.pdf
2
http://www.ausra.com/news/releases/080630.html
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3
“China Racing Ahead of U.S. in the Drive to Go Solar”, New York Times, August 24, 2009
4
“Solel Awarded $2.6 Million Grant From Spanish Government for Solar Manufacturing Facility”, Solel Solar
Systems, Ltd, Press Release September 23, 2009
5
http://www.executivetravelmagazine.com/page/Europe's+appeal+for+foreign+direct+investment
6
http://www.exim.gov/products/policies/environment/index.cfm
7
http://www.energy.gov/recovery/48C.htm
8
http://www.canadainternational.gc.ca/sell2usgov‐
vendreaugouvusa/assets/pdfs/sell2usgov/BAAInterimRule_eng.pdf
9
“China Racing Ahead of U.S. in Drive to Go Solar”, China Environmental News, August 25, 2009
10
http://www.dsireusa.org/
11
Arizona Administrative Code R14‐2‐1807 “Manufacturing Partial Credit”
12
“2010 Renewable Energy Standards and Tariff Implementation Plan”, Tucson Electric Power, July 1, 2009
13
http://www.oregon.gov/ENERGY/CONS/BUS/docs/Renew.doc
14
http://www.timesfirst.com/trade‐news/203536/Oregon‐Looks‐to‐Clean‐Tech‐for‐Revival.html
15
“Economic Impacts of the Tax Credit Expiration, Final report,” Navigant Consulting, February 13, 2008,
http://www.seia.org/galleries/default‐file/Navigant_Tax_Credit_Impact.pdf
16
http://www.gosolarcalifornia.org/csi/index.html
17
http://www.energy.ca.gov/siting/solar/index.html
18
http://www.blm.gov/pgdata/etc/medialib/blm/ca/pdf/pa/energy/solar.Par.45875.File.dat/
Renew_Energy_2_09_solar.pdf
19
http://www.blm.gov/pgdata/etc/medialib/blm/ca/pdf/pa/energy/solar.Par.45875.File.dat/
Renew_Energy_2_09_solar.pdf
20
“Solar firms lament loss of ‘tax‐equity’ buyers”, San Francisco Business Times, October 6, 2009
21
http://www.renewableenergyworld.com/rea/news/article/2009/09/feed‐in‐tariffs‐go‐global‐policy‐in‐practice
22
“Survey Shows Spanish Market for Large‐Scale PV Set to Grow”, Photon International, October 2005
23
“Financing Non‐Residential Photovoltaic Projects: Options and Implications”, Mark Bolinger, Lawrence Berkeley
National Laboratory, Environmental Energy Technologies Division, January 2009
24
http://www.solarcity.com/
25
http://www.renewableventures.com/
26
http://www.renewableventures.com/news/20090803‐pressrelease‐solarfundv.html
27
“Financing Solar Thermal Power Plants”, National Renewable Energy Laboratory, NREL/CP‐550‐25901, April 1999
28
“A Historical Analysis of Investment in Solar Energy Technologies (2000‐2007)”, National Renewable Energy
Laboratory, Technical Report, NREL/TP‐6A2‐43602,December 2008
29
“Financing Solar Thermal Power Plants”, National Renewable Energy Laboratory, NREL/CP‐550‐25901, April 1999
30
http://www.nrel.gov/docs/fy09osti/43602.pdf
31
http://www.nadb.org/programs/descriptions/loan_guaranty.html
32
“New México Concentrating Solar Plant Feasibility Study, Draft Final Report”, February 9, 2005, Prepared for
New México Energy, Minerals and Natural Resources Department, Black & Veatch
33
http://www.ifc.org/ifcext/gms.nsf/Content/EEM_Renewable_Energy
34
“FY09 is Year of Renewables for IFC, With Renewable Projects Dominating Power Sector”, International Finance Corporation
Press Release, 07‐22‐09
35
“Project Number 27874‐ Summary”, http://www.ifc.org/
36
“Project Number 27807‐ Summary”, http://www.ifc.org/
37
https://unfccc.int/kyoto_protocol/items/2830.php
38
http://www.parc.com/event/723/emissions‐trading‐and‐carbon‐finance.html
39
http://go.worldbank.org/9IGUMTMED0
40
http://cdm.unfccc.int/index.html
41
http://cdm.unfccc.int/Statistics/index.html
42
http://cdm.unfccc.int/index.html
43
http://go.worldbank.org/SG8NYY3DK0
44
“Turkey, Egypt and México Eye Low Carbon Future”, World Bank, Press Release May 29, 2009
45
http://www.iadb.org/intal/intalcdi/PE/2009/03479.pdf
46
http://www.cana.net.au/kyoto/template.php?id=5
47
http://www.euractiv.com/en/climate‐change/european‐fund‐support‐post‐2012‐climate‐projects/
article‐172007
48
http://www.kfw‐foerderbank.de/DE_Home/Klimaschutzfonds/PDF_Dokumente_Klimaschutzfonds/
Post_2012_Carbon_Credit_Fund_brochure_Nov08.pdf
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49
See “Section 4” for a listing recent FDI investments into México’s solar industry
50
http://stats.oecd.org/glossary/detail.asp?ID=621
51
“Huge leap for US alternative energy FDI”, Foreign Direct Investment Magazine, August 18,2009
52
“Suntech to Manufacture Products in the U.S.”, Suntech Power Holdings Co., Ltd., Press Release, May 11, 2009
53
http://www.renewableenergyfocus.com/view/1900/suntech‐plans‐pv‐module‐manufacturing‐in‐the‐usa/
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Section 6
Policy Recommendations

This section provides several policy recommendations for consideration as tools to accelerate the
development of an export solar industry in México. To a great extent the solar sector plays a part of a
larger, fast‐changing global “carbon market” in which the dominate drivers will be greenhouse gas
(GHG) reductions and reduced “carbon footprints”. Many steps can be taken to further build the
capacity of México’s emerging solar sector to compete in a dynamic global and national marketplace
while also meeting goals to reduce greenhouse gas emissions.
1 Sector Development
1.1 Enhance Competitiveness of the SME “Gazelles" in the New Carbon Market
The changing “low‐carbon” economy will affect all sectors and segments of TechBA’s portfolio of
companies.

 Assist TechBA portfolio companies understand the impact and opportunities of new mandates
for GHG reductions; Provide technical support on how companies can take proactive steps to
become more energy efficient, to incorporate more renewable energy technologies and to
reduce the carbon footprint of companies.
1.2 Form New Linkages to the European Solar Industry
Germany is the world’s leader in the design, engineering and installation of renewable energy systems,
components and products. As such there are some 15,000 companies in Germany involved in the solar
manufacturing industry. Most of these German companies are SMEs with little export experience and
are key candidates for partnerships with Mexican SMEs.

German Solar Industry 20081
Manufacturing companies of
Installation cells, modules, collectors
and supply storage units and other
Companies components
PV Industry 100 10,000
Solar Thermal Industry 100 5,000
Total 200 15,000

 Establish TechBA‐Germany to accelerate linkages between German and Mexican SMEs for
design, engineering, manufacturing and distribution partnerships; Following the lead of large‐
scale Foreign Direct Investments, exploit opportunities for German SMEs to establish Mexican
manufacturing and distribution relationships for export of solar products and components to
North and South Americas.
1.3 Export Renewable Electricity to U.S.
Recent studies and assessments by the California Energy Commission and California Public Utilities refer
to the potential of wind and geothermal from México to supply California as part of its Renewable
Portfolio Standards. There is a noticeable absence of any reference to the solar thermal potential of Baja
which is greater than wind in terms of renewable resources.

 Commission a short‐term study to define the solar thermal potential of Northern México for the
export trade of renewable electricity to the U.S. with particular focus upon California and
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Arizona. The study could include: quantifying solar resources; identifying optimal areas for solar
plants and realistic solar thermal generation capacities; identifying transmission and regulatory
constraints; interviewing Independent Power Producers and solar thermal technology
companies to assess opportunities and barriers; etc.

 Establish a governmental affairs initiative to track issues related to: the export of renewable
energy from México to the U.S.; cross‐border transmission capacity development; Inform U.S.
stakeholders on the role that México’s renewables can play in cross‐border electricity trade and
inform entities such as the California Energy Commission, the California Public Utilities, the
California Independent System Operators, and the Arizona Corporation Commission.

 Initiate efforts to identify and designate the best solar zones for utility‐scale solar power plants
and begin land assembly, permitting and infrastructure planning and development so that the
best sites will be pre‐permitted and available for dedicated solar energy generation parks; utilize
the mapping and analytic data on Baja California being developed as part of the Western
Renewable Energy Zones project of the Western Governors Association.
1.4 Targeted Analysis
The following studies would be instrumental in leveraging near‐term opportunities for Mexican solar
companies:

 Develop turn‐key cost estimates for representative utility‐scale and Distributed generation solar
thermal electric projects located in Northern México which maximize the use of domestic
engineering, construction companies, supply chain and operations.

 Prepare a comparative assessment of project siting, permitting, construction and operational
costs between a representative 250 MW parabolic trough project in Southern California and an
identical installation in Northern México.

 Compare the energy and financial performance of large‐solar thermal electric scenarios for self‐
generation power projects by a large industrial customer and compare to a representative wind
project now dominating México’s self‐generation market; Compare advantages and
disadvantages related to transmission, proximity of generation to point‐of‐use, capacity factors,
the load profile and value of solar thermal with energy storage for intermediate and peak versus
intermittency of wind, the value of solar offering heat and power for industrial processes; etc.

 Assess “low‐carbon” industrial development opportunities through economic, energy and
carbon analysis of promising opportunities such as: moving future energy demand for industrial
development to areas with high potential for wind and solar which can reduce transmission
investments and GHG emissions; and establishing renewable electric/thermal micro‐grids for
low‐carbon industrial development.

 Assess the value of U.S.‐type “tax credit” financial incentives for Distributed and self‐generation
renewable energy development or for “low‐carbon” energy generation; Review the role that
“tax equity financing” could play in leveraging investment in México’s renewable energy
industry.
1.5 Developing Export Markets
 Expand exports of manufactured solar goods by Mexican companies to U.S. by assisting with
product‐ and component‐level certification requirements in the U.S. as required for installation
codes and for projects funded by Federal and state incentives; Products include solar hot water
systems, PV modules, balance‐of‐systems components, solar lighting, etc.
6‐2

o The explosive growth in national and international renewable energy programs has lead
to the development of standards in product and system design, performance
measurement, system durability and installation practices.

o To accelerate the export of national solar components, products and systems,
companies need assistance with certifications of their products for U.S. markets. Such
assistance is needed for companies new to the export market and for experienced
exporters bringing a new product class to the market.

 Encourage Mexican independent test laboratories to include testing and certifications on
relevant protocols and standards for solar components for export markets to provide industry
with technical support during product design and to accelerate approval time requirements.

 Develop a specialized solar export trade assistance program that is knowledgeable of U.S.
industrial standards and product certifications with particular expertise in qualifying products
for Federal and state incentive programs.

 Conduct government‐to‐government and business‐to‐business trade missions to Germany and
Spain in order to: educate European counterparts of the opportunities of “Asian cost structure”
for market expansion to North American markets; recruit large, medium and small‐sized solar‐
component companies to México and leverage Foreign Direct Investments in manufacturing;
and build business relationships by and between the SMEs of the countries.
2 Alternative Energies and Sustainable Technologies
Many of the market drivers for solar also apply to other well established renewable energy sectors in
México. The global wind industry will continue to expand with much of the industry focus on larger and
larger turbines for off‐shore wind farms. There will be new opportunities to design, develop and
manufacture “Distributed wind” turbines, towers, blades and balance‐of‐plant equipment for units in
the 100 kW to 1.5 MW range for “self‐generation projects” and in the 500 W to 100 kW range for
residential, small commercial and off‐grid applications. México’s wind resources are excellent and are
distributed throughout the country in Baja California, Veracruz and Oaxaca. México’s is the world’s 3rd
largest geothermal producer and has “massive amounts” of reservoir temperatures in the 60–180°C
range, with a mean of 111°C.2 These massive amounts of recoverable energy and the associated
temperatures are there are opportunities to further develop the potential of lower‐ temperature
geothermal resources and turbines such as Organic Rankine Cycle (ORC) and Kalina Cycle turbines which
can also be used for renewable application to generate electricity from medium‐temperature solar
thermal, from biomass and from industrial waste heat.

 Develop sector initiatives in wind, geothermal and biomass to assist México’s SMEs expand into
the numerous market niches of these growing national and global markets.

 Leverage interest by European ORC and Kalina Cycle turbine manufacturers in México’s
geothermal, medium‐temperature solar and industrial heat markets.
3 Leverage Recent Climate Change Agreements
3.1 US‐México Bilateral Framework on Clean Energy and Climate Change
In April 2009, México's President Felipe Calderón and U.S. President Barrack Obama agreed to
collaborate in a new association to promote renewable energy and low‐ carbon generation through the
"US‐México Bilateral Framework on Clean Energy and Climate Change". This Bilateral Framework
6‐3

establishes a mechanism for political and technical cooperation and information exchange, and to
facilitate common efforts to develop clean energy economies. It will also complement and reinforce
existing work between the two countries. The objectives of the collaboration are3:

 To promote the development of renewable energy, energy efficiency and green jobs, market
mechanisms, forestry and land use, green jobs, low‐carbon energy technology development and
capacity building.

 To strengthen the reliability of cross border electricity grids.

 To expand extensive bilateral collaboration on clean energy technologies

 To facilitate renewable power generation by addressing transmission and distribution obstacles
between the two countries;

 To foster Energy Service Company market development

 To highlight existing and proposed areas for cooperation on clean energy and energy efficiency
under the North American Energy Working Group
3.2 “Low‐Carbon North America”
In August 2009, México, Canada and the United States signed a “Declaration on Climate Change and
Clean Energy” which included the following objectives:

 Develop comparable approaches to measuring, reporting, and verifying greenhouse gas
emissions reductions

 Cooperate in implementing facility‐level greenhouse gas reporting throughout the region

 Share climate‐friendly and low‐carbon technologies

 Take a regional approach to carbon capture and storage
3.3 Copenhagen and Post‐2012
Negotiations have commenced on continuing the Kyoto Protocol from the “first commitment period”
(2008‐2012) into the “second commitment period” (post‐2012). Further negotiations will take place in
Copenhagen in December 2009 which is expected to produce a mandate for a comprehensive
negotiating agenda and timetable for a single, effective global agreement that builds on the strengths of
the Kyoto Protocol and takes it further.4 If successful, the Copenhagen meeting of 192 member
countries of the UN Framework Convention on Climate Change (UNFCCC) will send a clear signal to
business and industry, governments and citizens around the world. It is expected that together the
commitments made and mechanisms agreed upon will signal that the future will be driven by a low‐
carbon economy and that significant advantages go to those that invest in clean energy solutions.5
3.4 Leveraging Climate Change Agreements

 Opportunities exist fro TechBA to leverage recent agreements between the U.S. and México to
facilitate collaborative climate changes initiatives involving cross‐border trade of renewable
energy, the acceleration of strategic partnerships between U.S. and Mexican SMEs in solar
sector development, technology transfer, demonstration and deployment of solar R&D between
university and industry research institutions, etc.

6‐4

 Leverage the new U.S./México Bilateral Framework as basis for the development of renewable
power plants and the export of renewable electricity to U.S. border states by resolving
transmission issues and building new transmission capacity; Justify renewable energy
development in context with specific objectives of the Bilateral Framework which includes
strengthening the reliability and flow of cross border electricity grids, facilitating the ability of
neighboring border states to work together to strengthen energy trade, and facilitating
renewable power generation including by addressing transmission and distribution obstacles
between our countries.

 Track the agreements and mandates resulting from the Copenhagen meetings and keep
TechBA’s portfolio of companies informed with competitive intelligence on opportunities,
carbon reduction and “greening” strategies, financial incentives, life cycle carbon analysis, etc.
3.5 Focus on Financing Carbon SMEs
The world is moving nearer to consensus on climate change actions, governmental mandates and
massive international “low‐carbon” development programs. It will be the private sector which will
implement the new climate change mandates. Current climate change financing mechanisms are almost
universally‐focused on multi‐year, project‐based financing which is administratively burdensome and
rarely pay in a timely manner. SMEs will be playing an expanded role in implementing climate change
initiatives through intra‐company GHG reductions and through the provision of goods and services
which will assist other companies achieve emission reductions. The development needs of such SMEs
merits increased attention by business development intermediaries to support this emerging class of
“carbon market entrepreneurs

 Accelerate the expansion of the SMEs in order to enhance their potential to lead national and
global climate change initiatives with targeted assistance.

 Conduct a financing needs assessment of México’s clean tech SMEs in order to understand the
barriers to public and private investment capital; identify access to capital and cost of capital
needs; identify types of investments and financing required to accelerate business development
in the emerging and diverse carbon market; etc.
4 Leverage New R&D Relationships
 Establish a solar test platform in México in cooperation with U.S. and European solar labs in
order to test, evaluate and develop operating experience with all forms of promising solar
technologies.

 Form industry partnerships with German, Spanish and U.S. solar technology providers to
demonstrate their equipment in México as a platform to launch deployment and market entry;
Recruit demonstrations of the most promising solar technologies such as Distributed
concentrating solar, cooling, and desalination.

 Expand existing, and form new, research partnerships between Mexican institutions and Sandia
National Laboratory, the National Renewable Energy Laboratory, German’s DLR and Spain’s
Platforma de Solar Almería.

 Increase participation of Mexican research institutions and SMEs in European solar R&D
initiatives such as: the European Union’s Seventh Framework Programme which strongly
encourages participation of non‐European partners; the European Commission’s Mediterranean
6‐5

and Concentrating Solar Desalination Project (MED‐CSD); and continue México’s work with the
International Energy Agency in initiatives such as Concentrating PV, PV‐thermal, solar thermal
cooling, solar industrial heat, etc.

 Establish new initiatives with border research institutions such as:

o Global Institute of Sustainability, Arizona State University: ASU is a leader in the PV
industry with core capabilities in solar PV testing, advanced PV materials and devices,
building‐integrated PV, power electronics and power systems, etc.

o Arizona Research Institute for Solar Energy, University of Arizona: AzRISE is conducting
applied research in energy storage, smart‐grids, PV, optics and concentrators, solar
housing, etc.

o Institute for Energy and the Environment, New Mexico State University: The IEE is
conducting much work that would be of interest to México such as: the use of solar
energy to power desalination which operates the Brackish Groundwater National
Desalination Research Facility located in the Tularosa Basin, in Alamogordo, NM; a
recent demonstration of a 105 kW (30 Ton) commercial solar cooling project; and
provides technical support to the U.S. Department of Energy PV inverters and standards.
5 Increase Awareness of Solar Thermal Capabilities with High‐Profile
Demonstrations
In addition to R&D, there are numerous opportunities for high profile D&D (demonstration and
deployment) of commercially‐available technology which can replace fossil fuel‐based electricity and
industrial combustion processes. A common need for all sectors of renewable energy is to increase
awareness of the role that existing and emerging renewable technologies can play in enhancing the
competitiveness of SMEs through reduced energy costs and GHG emissions.

Investments in high profile demonstration projects pay‐off in increased awareness of the role that
renewable energies and sustainable technologies can play among policy‐makers, government officials,
carbon project developers, “self‐generators”, architects and engineers, industry leaders, the investment
community and SMEs. Such demonstrations have great potential to accelerate industry acceptance by
showing technical and economic performance.

Recommended demonstrations include:

 Solar Cooling
o Large industrial solar cooling “big‐box” demonstration with roof‐mounted, medium‐
temperature parabolic trough collector driving a double effect absorption chiller
o Small commercial demonstrations with flat‐plate collector with an absorption chiller and
with evacuated tube collectors to drive a single‐effect adsorption chiller

 Industrial Process Water
o Large‐scale bottle washing with solar hot water
o Low‐ and medium‐temperature for chemical processes

 Industrial Process Heat
o Pre‐heating natural gas boilers
o Agricultural drying
o Applications using different heat exchangers and temperatures
6‐6

 Distributed Solar Thermal Electricity
o Industrial “self‐generation” project using medium‐temperature parabolic trough
collectors and an organic Rankine Cycle power block to generate electricity and usable
heat from the waste heat

 Energy Storage
o Incorporate low‐cost thermal storage solutions to low‐ and medium‐temperature
applications by adding 1‐6 hours of useful heat

* * *

1
http://en.solarwirtschaft.de/home/photovoltaic‐market/german‐market.html
2
Iglesias, E.R. and Torres, R.J. (2003) “Low‐ to medium‐temperature geothermal reserves in Mexico: a first
assessment”, Geothermics, Volume 32, Issues 4‐6, August‐December 2003, Pages 711‐719, Selected Papers from
the European Geothermal Conference 2003
3
“Obama, Calderon agree on US‐México framework on clean energy”, International Business Times, April 16, 2009
4
http://www.cana.net.au/kyoto/template.php?id=5
5
http://www.wri.org/stories/2009/11/foundation‐low‐carbon‐future‐essential‐elements‐copenhagen‐agreement
6‐7

Section 7
Company Screening Process and Company Profiles

TechBA used the following methodology to develop a final screen of 24 Mexican companies as
candidates for the “Solar Energy Sector” business acceleration program:

 A database was developed which identified 485 Mexican companies which focused on solar
energy;
 These companies were statistically analyzed by region and sub‐sector
 Company information and websites were reviewed and a “Filter 1” screen of companies was
made;
 A “Filter 2”‐level screen was then made with staff conducting phone interviews of “Filter 1”
companies to confirm and gather additional information such as:
o Annual revenue
o Number of employees
o Main products/services
o Main clients
o Competitors
o Competitive advantage

 A “Filter 3”‐level screen was conducted with a second round of phone interviews with the
company CEO or with senior decision‐making staff. These interviews were used to analyze the
capacities of the company and the company’s interest in exporting;

 Based upon company interest and export potential, the initial list of site visits to 10 companies
was expanded to 24. Face‐to‐face interviews were then conducted with these companies by
TechBA staff and the solar sector consultant during November 2009.

The following tables provide details on the companies interviewed during site visits.

7‐1

Value Chain Map of TechBA Solar Companies
14. Generadores 18. Merry Tech

Mexicanos I t
Internacional
i l
>250
4. Comercializadora
50 3. CAPTASOL
General Solar
Millions MXP)
1. Alesco Energía y Agua
40 13. ERDM
2008 Sales (M
20. SEI Automation

30 10. Energisol
20 2 C
2. Calentadores
alentadores
9. Newen Energías
g Alternas
Solares de 22. Thermosol
16. Grupo Desmex
México
7. Ecoturismo
y Nuevas 19. RespaSolar
6. Ecosistemas
10 Tecnologías
15. Global Solare
17. Mexión 12. ERdC
21. Sunway de México
5. Cryplant Energias Renovables
8. EFISOL
11. Enerthi
Confidential Business Information

7-2
Company Details
Company Details
Company 1. Alesco Energía y Agua 2. Calentadores Solares de
México, SA de CV
City México DF Zapopan
State México DF Jalisco
Sales 2008 (MXP) $40,000,000 $5,750,000
Sales 2009 (P) (MXP) $20,000,000 $10,800,000
Employees 25 10
Value Chain Solar System Operation & Solar System Components
Management
Primary Sector Power Project Engineering Assembly
Secondary Sector Project Development of Large Components Manufacturing
Self-Generation Projects
T h l
Technology T
Type V i
Various S l H
Solar Hott Water
W t Systems
S t

7-3
Company 3. CAPTASOL ((Solex
Solex)) 4. Comercializadora General
Solar (Módulo Solar)
City Celaya Cuernavaca
State Guanajuato Morelos
Sales 2008 (MXP) $9 000 000
$9,000,000 $50 000 000
$50,000,000
Sales 2009 (P) (MXP) $20,000,000 $100,000,000
Employees 50 100
Value Chain Proprietary Equipment Proprietary Equipment
Primary Sector Solar System Manufacturing Solar System Manufacturing and
and Distribution Distribution
Secondary Sector System Integration System Integration
Technology Type Solar Hot Water Systems Solar Hot Water Systems

7-4
Company 5. Cryplant Energias 6. Ecosistemas
Renovables
City Cuernavaca México DF
State Morelos México DF
Sales 2008 (MXP) $5,000,000 $8,000,000
Sales 2009 (P) (MXP) $8,000,000 $28,000,000
Employees 5 40
Value Chain Solar System Integration Proprietary Equipment
Pi
Primary Sector
S t I t ll ti / Construction
Installation C t ti C
Component
t Manufacturing
M f t i
Secondary Sector Maintenance Installation
Technology Type Various Photovoltaic (PV)

7-5
Company 7. Ecoturismo y Nuevas 8. EFISOL / Intelux
Tecnologías
City Zaragoza Monterrey
State Edo. De México Nuevo Leon
Sales 2008 (MXP) $2 070 000
$2,070,000 $2 300 000
$2,300,000
Sales 2009 (P) (MXP) $2,700,000 $20,250,000
Employees 10 10
Value Chain y
Solar System Operation
p & Equipment
q p
Management
Primary Sector System Integration and Component Manufacturing
Engineering
Secondary Sector
Technology Type Various Other

7-6
Company 9. Newen Energías Alternas 10. Energisol
City Mexicali México DF
State Baja California México DF
Sales 2008 (MXP) $20,700,000 $23,000,000
S l 2009 (P) (MXP)
Sales $27 000 000
$27,000,000 $33 750 000
$33,750,000
Employees 15 18
Value Chain Solar System Integration Solar System Integration
Primary Sector Installation / Construction Import and Distribution of Solar
Thermal Equipment
Secondary Sector Component Manufacturing
Technology Type Photovoltaic (PV) Solar Hot Water Systems

7-7
Company 11. Enerthi México 12. ERdC Energía Renovable
de
del Ce
Centro
to
City Miguel El Marques
State Hidalgo Queretaro
Sales 2008 (MXP) $0 $10,000,000
Sales 2009 (P) (MXP) $67,500,000 $20,000,000
Employees 12 15
Value Chain Project Development of Large Solar Cell Manufacturing
Renewable Projects
Primary Sector System Integration / Carbon Installation / Construction
Finance
Secondary Sector Installation / Construction Components Manufacturing
Technology Type Various Various

7-8
Company 13. ERDM Solar 14. Generadores Mexicanos
(Genermex
Genermex))
City San Andres Tuxtla Monterrey
State Veracruz Nuevo Leon
Sales 2008 (MXP) $34,500,000 $287,500,000
Sales 2009 (P) (MXP) $67,500,000 $405,000,000
Employees 35 300
Value Chain Solar Panel Manufacturing Solar System Components
Pi
Primary Sector
S t S l System
Solar S t M
Manufacturing
f t i C
Components
t Manufacturing
M f t i
Secondary Sector Rural Electrification System
Integrator
Technology Type Photovoltaic (PV) - Generators for Utilty-Scale Solar

Polycrystaline (poly-Si, mc-Si) Power Blocks
and Monocrystaline (c-Si)

7-9
Company 15. Global Solare 16. Grupo Desmex
City Guadalajara Leon
State Jalisco Guanajuato
Sales 2008 (MXP) $9,200,000 $17,250,000
Sales 2009 (P) (MXP) $13,500,000 $135,000,000
Employees 8 15
Value Chain Solar System Integration Solar System Integration
Primary Sector Installation / Construction Installation / Construction
Secondary Sector Consulting & Other Services Consulting & Other Services
Technology Type Solar Hot Water Photovoltaic (PV)

7-10
Company 17. Mexión 18. Merry Tech Internacional,
S.A. de C.V.
City México DF Tijuana
State México DF Baja California
Sales 2008 (MXP) $7,245,000 $628,427,209
Sales 2009 (P) (MXP) $16,200,000 $653,407,754
Employees 15 417
Value Chain Project Development Solar System Components
Pi
Primary Sector
S t System
S t I t
Integrator
t / Carbon
C b Product
P d t and
d Component
C t
Finance Manufacturing
Secondary Sector Installation, Construction and
operation of Large Self-
Generation Renewable
Projects
Technology Type Various

7-11
Company 19. RespaSolar 20. SEI Automation S.A. de C.V.
City Merida Guaycura
State Yucatan Baja California
Sales 2008 (MXP) $14,950,000 $28,750,000
S l 2009 (P) (MXP)
Sales $13 500 000
$13,500,000 $27 000 000
$27,000,000
Employees 18 30
Value Chain Solar System Integration Equipment
Primary Sector Retail Components Manufacturing
Secondary Sector Installation / Construction
Technology
gy Type
yp Various PV Manufacturing
g Equipment
q p

7-12
Company 21. Sunway de México 22. Thermosol
City México DF Guadalajara
State México DF Jalisco
Sales 2008 (MXP) $8,625,000 $18,000,000
Sales 2009 (P) (MXP) $13,500,000 $24,000,000
Employees 4 13
Value Chain Proprietary Equipment Equipment
Primary Sector Solar System Manufacturing Import and Distribution of Solar
and Distribution Thermal Equipment
Secondary Sector System Integration
gy Type
Technology yp Solar Hot Water Systems
y Solar Hot Water Systems
y
***
7-13
Appendix 1
Solar Technology Value Chain
Appendix 1‐1

1 Photovoltaic Value Chain
Appendix 1‐2

Appendix 1‐3

Appendix 1‐4

Appendix 1‐5

Appendix 1‐6

Appendix 1‐7

Appendix 1‐8

Appendix 1‐9

2 Concentrating Solar Thermal Value Chain
Appendix 1‐10

Appendix 1‐11

Appendix 1‐12

Appendix 1‐13

Appendix 1‐14

Appendix 1‐15

Appendix 1‐16

Appendix 1‐17

* * *

Appendix 1‐18

Appendix 2
Solar Policies and Incentives Overview
1 Study Overview
1.1 Purpose
The following study presents an overview of how policy can be used as a driver for promoting renewable
energy development, investment and market penetration.

The purpose of the study is to provide information that will help answer two fundamental questions.
First, where do international business opportunities exist for small and medium‐size Mexican businesses
SMEs. Secondly, what can Mexico learn from the policy strategies of global leaders in order to promote
internal development and investment in renewable energy technology?
1.2 Scope and Methodology
The scope of this study includes two sections. The first presents an overview of the Policy including the
rationale behind policy, relevant stakeholders, policy drivers and policy approaches. The second section
analyzes the policy strategies of three countries and one state specifically highlighting policies that
uniquely address photovoltaic (PV) solar energy, concentrated solar power (CSP) and biodiesel.

The study began by taking a broad survey of various policy strategies across several different countries
and regions—similarly highlighting policies that specifically addressed PV solar, CSP and biodiesel.
Subsequently, the scope of the study was narrowed to focus on the following regions.

 Germany: Due to its global leadership in renewable energy technologies

 Spain: Due to its recent global leadership in PV and CSP technology and its cultural and language
similarities with Mexico

 US: Due to its diverse renewable energy opportunities, its proximity to Mexico and its significant
business potential for Mexican companies.

 California: Due to its renewable energy technology leadership, its proximity to Mexico and its
significant business potential for Mexican companies.
2 Policy and Renewable Energy Technologies
2.1 Rationale for Policy Drivers
Even though Renewable Energy has experienced worldwide interest, impressive technological
developments and some impressive market penetration successes, Renewable Energy has continued to
penetrate the energy market

Although there is general consensus that renewable energy technologies should make up a greater
portion of the world’s overall energy production, actual market penetration has been difficult and slow.
Both the legitimacy of market barriers and the limited strength of natural market drivers can result in
Appendix 2‐1

limited investment and implementation of renewable energy technologies. In order to alter this
situation, public policy has proven to be one mechanism by which countries can promote and foster
renewable energy growth. In fact, there are a variety of factors that help illustrate the need for policy as
a driver of renewable energy.

Due to market‐entry barriers, the current level of renewable energy implementation and production is
less than what would be efficient at today’s market prices.

 Many analysts believe that fossil fuel prices are not adequately adjusted to reflect the true
resource scarcity of fossil fuels. If price levels were more commensurate with the long‐term
scarcity of fossil fuels, renewable energies would become more competitive.

 One inherent risk involved with fossil fuels is their notorious price fluctuations and volatility. As
such renewable energies are a means of diversifying a countries energy portfolio this reducing
risk and creating a greater level of security and energy independence.

 Widespread use of fossil fuels has a damaging effect on both human health and the
environment. Properly accounting for these costs and including them into the overall cost of
fossil fuels helps demonstrate the relative cost effectiveness of renewable energies.

 Renewable energy technology is still a young and growing industry. Consequently, countries
that promote internal development and investment in renewable energy technology will likely
experience economic and employment growth as this sector expands.

 In rural areas, renewable energy technologies allow communities to leverage local natural (and
labor) resources in order to generate energy.
2.2 Stakeholders1
Successfully chartering renewable energy policies involves the cooperation (or, at least, the
consideration) of several groups of stakeholders. In general, national governments are the primary
entities that create renewable energy initiatives and policies. In some cases (such as the United States)
states and/or local governments also have considerable freedom to develop their own renewable
energy policies as well. However, local governments are typically the ones that implement and enforce
renewable energy policies that have been previously defined and established at a national level.

Additionally, national governments may opt to participate in multinational renewable energy initiatives
such as those established by the European Union. These agreements allow countries to make a united
effort towards the promotion of renewable energy technology.

In the commercial sector, energy supply and service companies are naturally significant stakeholders in
matters concerning renewable energy policy. Historically, energy companies have approached
renewable energy technology defensively; however, many are now adopting a much more favorable
disposition. That said, governments need to ensure that the energy sector is a level playing field for
established providers and market entrants to compete fairly.

Further up the value chain, equipment suppliers and financial service entities are industry players that
have commercial and financial interests in the renewable energies market. Ensuring that these players
are considered in policy decisions is important.
Appendix 2‐2

Citizens are stakeholders that can become a source political support (or, conversely, opposition) in
matters of renewable energy policy. Providing citizens with the opportunity to participate and support
policy decisions will greatly increase political support.

Non‐Government Organizations (NGOs) play a unique role in the promotion of renewable energy in
comparison with other players in the stakeholder network. In fact, these organizations are often the
main supporters of renewable energies. Due to their unique interests in renewable energy, they actively
strive to minimize the challenges and obstacles involved with introducing renewable energy. Acting as
early promoters and global advocates, NGOs continue to present renewable energy as a benign energy
technology that can legitimately benefit society as a whole.
2.3 Policy Drivers2
Over the past several years, countries across the world have begun implementing various policies in
order to promote renewable energies. Because of differences in political ideologies, government
structure and resource capabilities there are a broad range of renewable energy policies being
implemented. However, these categories can be categorized into half a dozen categories.
2.3.1 Mandated Market Policies
This is the most direct and forceful approach to promote the adoption of renewable energy technology.
The purpose of these policies is to give the renewable energy industries a large enough foothold in the
energy market, so that they can become well established and self‐sustaining. Mandated market policies
take several different forms, but one of the most common types include Renewable Portfolio Standards
(RPS), renewable energy targets requirements. These mandates require countries, states and/or energy
producers to meet renewable energy quotas (percentages and/or specific quantities). Another common
example of a mandated policy is a Feed‐in Tariff, which essentially establishes above market energy
prices for an extended period of time (20‐25 years). This allows renewable energy producers (and their
investors) to recover their invested capital. Lastly, policies such as competitive bidding concessions and
tradable renewable energy certificates also are forms of mandated market policies.
2.3.2 Financial Incentives
Financial Incentives are another policy strategy for promoting renewable energies. The purpose of
financial incentives is to decrease the costs of renewable energy and in turn increase their
competitiveness relative to established non‐renewable energies. There are several different types of
financial incentives including (but not limited to), capital grants, third‐party financing, investment tax
credits, property tax credits, production tax credits, sales tax rebates and excise tax exemptions.
Additionally, taxes on fossil fuels also help increase the competitiveness of renewable energy, while
simultaneously internalizing some of the external costs involved with fossil fuels (environmental damage
and energy security).
2.3.3 Public Investment
This policy involves giving preference to renewable energy in government procurement, infrastructure
projects and the use of public benefit funds. These policies can also be combined with development
programs.
Appendix 2‐3

2.3.4 Integration and Standards
Another fundamentally important category of policies are the policies that further the establishment of
industry standards, permits, building codes and environmental guidelines. This is especially important
because most renewable energy technologies are relatively new technologies.
2.3.5 Awareness and Education
Another important driver of renewable energy is public and industry information. Thus policies that
disseminate information, generate awareness, provide educational resources and facilitate capacity
expansion make up a distinct policy category.
2.3.6 Research and Development
Because renewable energy technology is generally newer technology it depends heavily on research and
development funding. Policy that provides direct funding or incentives for research and development
make up the final policy category.
3 Policy Approaches3
Over the past several years, there are a handful of general policy approaches that have been observed.
These general approaches will be highlighted below:

 In general, all countries have renewable energy policies at some level. Countries that do not
have polices that specifically address renewable energy often include renewable energy
technology in policies relating to rural energy, electricity sector expansion, etc. However, based
on experience, countries with scattered, non‐aligned and non‐coherent renewable energy
programs have not proven successful in promoting renewable energy—even with international
cooperation.

 Another common approach that has been adopted by several countries including Egypt, Pakistan
and Uganda is to embed several policy measures into a single renewable energy project. For
example, countries have focused on generating awareness, building capacity and promoting
research and development around a single renewable energy development project. Often these
projects are publicly funded, although private partnerships are becoming increasingly common.
In general, these projects are seen as a promising first step towards a large, fully‐scoped
renewable energy policy program.

 In the past, industrialized nations have adopted commonly adopted a technology development
perspective where the country develops policy drivers that support research and development,
generate awareness, disseminate information and build capacity. These policy drivers in turn
promote research and development in renewable energy technologies with the expectation that
developers would bring the technology to appropriate markets for commercialization.
However, this has proved largely unsuccessful and has highlighted the significant barriers
involved with commercialization.

In order to address these commercialization barriers countries have generally adopted two different
approaches.

Appendix 2‐4

 The first strategy aims to improve the competitiveness of renewable energy technologies
relative to fossil fuels. This is achieved by using a variety of financial incentives, which reduce
the costs of renewable energy. Taxes are also sometimes placed on fossil fuels in order to
better adjust for environmental damages and energy security costs. This approach has proven
most successful in countries where market barriers have already been significantly reduced.

 The second strategy is a more forceful approach and focuses on market transformation. As
such, policies help provide renewable energy technologies with both access to energy markets
as well as support in order to ensure that the renewable energy achieves a significant market
share. Specific policy strategies include mandated market policies such as price guarantees,
feed‐in tariffs, public bidding, renewable energy certificates and quotas in Renewable Portfolio
Standards (RPS).

In general, the strategies that have achieved the most success are those that utilize a demand‐pull
approach for driving renewable energy development and investment. Interestingly, adopting a demand‐
pull approach both increases market share while simultaneously laying the foundation for long‐term
competitiveness. In fact, this generally initiates private investment in research and development, which
allows the renewable energy to reach economies of scale.
4 Policy Analysis & Benchmark
4.1 Overview
4.1.1 Targets and Renewables Portfolio Standard
Indicative Mandatory
Renewable Renewable
Electricity Electricity Target
Region Target by 2010 by 2020
Germany 12.50% 18%

Spain 30.30% 20%
USA None None
California 20% 33%

4.1.2 Feed‐in Tariff Rates
Feed‐in Tariff Rates (eurocents/kWh)
Germany Spain USA California
Solar PV 35‐49 18‐44 * **
Solar Thermal N/A 22‐27 * **
Biomass 8‐17 5‐16 * **
Geothermal 7‐15 7‐8 * **
Wind 4‐9 6‐7 * **
Hydro 4‐10 7+ * **

* The US has no Federal‐level feed‐in tariffs
Appendix 2‐5

** Variable feed‐in tariff based on time of day and contract dated.
4.2 Germany
As a global leader in renewable energy, Germany has arguably established the most effective blend of
policies directed at promoting renewable energy technology. Germany’s chief renewable energy
policy—the Renewable Energy Source Act (EEG)—essentially utilizes feed‐in tariffs in order to guarantee
pricing and grid connection to renewable energy producers. The EEG supports several different
renewable technologies including wind, water, solar, biomass, sewage gas combustion and geothermal
energy. Because of Germany’s success in promoting renewable energy, feed‐in laws have been adopted
in several European countries and proposed all across the world.
4.2.1 Feed‐in Tariffs
Under Germany’s Renewable Energy Source Act, feed‐in tariffs provide renewable energy providers (and
their investors) with both guaranteed energy prices and grid connections. Without feed‐in tariffs,
renewable energy projects are simply too high risk to be worth investing in. However, the combination
of guaranteed grid‐connection and above‐market energy prices for 20‐years have allowed several
renewable energy projects to secure investment financing. Additionally, in order to promote a rapid
market response feed‐in rates decrease each year thus allowing projects that begin earlier to lock in
higher rates.

Germany’s 2008 Feed‐in Tariff Rates (Eurocents/kWh)

Photovoltaic solar 35.48 ‐ 48.98
Biomass energy 7.91 ‐ 16.83

Geothermal 7.16 – 15.00

Sewage gas 6.16 – 7.22

Offshore wind energy 8.92
Onshore wind energy 5.07 – 8.03
Water energy 3.54 – 9.67
Source: “Renewable Policy Report: Germany” EREC
4.2.2 Renewable Energy Targets
Additionally, Germany also has a variety of renewable energy targets. Some of these targets are
voluntary while others are mandated by law.

Mandatory targets set by the (EU) Directive on the Promotion of the use of energy from renewable
sources
 18% renewable share of final energy consumption by 2020
 At least 10% renewable share of total transport fuel usage by 2020

Indicative Target set under the RES‐ Electricity European Directive from 2003
 12.5% renewable share of gross electricity consumption by 2010

Appendix 2‐6

National Renewable Energy Targets
 25% to 30% renewable share of the electricity sector by 2020
 14% renewable share in the heat sector by 2020

Germany’s Renewable Energy Targets
Indicative Renewable Electricity Target by 2010 12.50%
Mandatory Renewable Electricity Target by 2020 18%
4.2.3 Tax and Credit Incentives for PV Solar
Germany also has some additional tax and credit incentives for investments in PV solar.

 Investment costs for commercial systems (including planning and installation) can be
depreciated over 20 years
 In exceptional cases when a commercial system is installed near a manufacturing facility, 12.5‐
27.5% of the investment cost can be claimed as a tax credit

 Commercial Solar systems are VAT exempt (VAT is 19% in Germany)

 The KfW Program “Solarstrom Ergeugen” is a credit incentive for private investors (100% of
investment, max of 50,000 euros) which offers them financing for up to 10 years with 1‐2 years
free of redemption or up to 20 years with up to 3 years at nominal interest rates between 4.15‐
4.45% depending on duration.

 The KfW “ERP‐Umwelt‐ und Energiesparprogramm” is a credit incentive for commercial
investors (50% for Small and Medium Enterprises and 35% for other companies of investment is
eligible) up to 500,000 euros of investment (in old federal states) and 1,000,000 euros (in new
federal states) for a duration of 10 years with 2 years free of redemption (in old federal states)
and 15 years with 5 years free of redemption (in new federal states) at nominal interest rates
between 4‐7%.

 “KFW Umweltprogramm” is a program for commercial investors that offers credit incentives for
75% of invested funds up to a maximum of 1,000,000 euros per installation, 96% net payment,
durations of up to 20 years, 3 years free of redemption and nominal interest rates between 4‐
7.72%.

 There are also some regional investment grants for PV
4.2.4 Support for Renewable Energy Heating
In January 2009 the Renewable Energies Heat Act was enacted. The act makes the following provisions:

 First, the act provides market incentives in the form of subsidies for solar thermal and small‐
scale biomass heat generation. It is expected that the program will provide 500 million euro
worth of support between 2009 and 2012 to support renewable energy in existing buildings.
Appendix 2‐7

 Second, the act mandates that new homes must fulfill a portion of their heating needs by
utilizing renewable energies. Homeowners can use any type or combination of multiple
renewable energy sources. The share of renewable energy portion must comply with the
following standards:

o At least 15% for solar radiation

o At least 30% for biogas

o At least 50% for all other renewable energy technologies

4.2.5 Investment Subsidies
Resource Technology Support Level Start Year
Solar Thermal Solar Collectors < 40 Investment Subsidies (Primary private
m2 households and SMEs)
Solar Thermal Solar Collectors > 40 Repayment bonuses of up to 30% of 2007
m2 investment cost
Geothermal Max 1 Million euro per drilling; Max 2007
550,000 euro per community heating
system
RES‐Community Max 550,000 euro per community
Heating systems heating system

4.2.6 Financial Subsidies
Resource Support Level Start Year
Solar Thermal Low‐interest loans with partial debt waiver (commercial
and public sector applicants)
Solid Biomass Reduced interest KWF loans 2007

Appendix 2‐8

4.3 Spain
4.3.1 Tariffs and Market Premiums
Like Germany, Spain has also implemented a feed‐in policy strategy in order to promote renewable
energy development. However unlike Germany, Spain has two separate feed‐in options for renewable
energy producers. The first is a standard fixed feed‐in tariff for producers that supply energy through
the transport or distribution grid. However, producers may alternatively choose to sell their energy on
the wholesale electricity market at the current market price plus a feed‐in premium, which varies based
on the state of the market. This allows renewable energy generators to receive above market prices up
to a pre‐established limit. Feed‐in premiums are reevaluated every year and fixed feed‐in tariffs every
four years; however, changes to feed‐in tariffs rates do not affect plants that are already in production.
Available research data did not specify whether changes to feed‐in premiums would affect operating
renewable energy plants.

Spain’s Feed‐in Tariff Rates
Feed in Tariff Feed‐in Premium (eurocents/kWh)
(eurocents/kWh)
Capacity Life Feed in Tariff Reference Upper limit Lower
(MW) (y) feed‐in limit
premium
0‐25 44.0381
< 0.1
> 25 35.2305
0‐25 41.7500
Solar PV 0.1‐10
> 25 33.4000
0‐25 22.9764
> 10
> 25 18.3811
0‐25 26.9375 25.4000
Solar Thermal 34.398 25.404
> 25 21.5498 20.3200
0‐20 7.3228 2.9291 8.4944 7.1275
Wind Onshore
> 20 6.1200 0.0000
Geothermal, 0‐20 6.9800 3.8444

tide, ocean > 20 6.5100 3.0600
0‐25 7.8000 2.5044
< 10
> 25 7.0200 1.3444
6.60 +1.20*[(50 ‐
Hydro 0‐25 2.1044
capacity)/40]
10‐50 8.000 6.1200
5.94+1.08*[(50‐
> 25 1.3444
capacity)/40]
Biomass*
*Spain has over 19 different Biomass classifications and corresponding rate structures.
Source: “Renewable Policy Report: Spain” EREC

Appendix 2‐9

4.4 Renewable Energy Targets
Mandatory Targets set by the (EU) Directive on the Promotion of the use of energy from renewable
sources
 20% of final energy consumption by 2020
 At least 10% of total transport fuel usage by 2020

Indicative Target set under the RES‐ Electricity European Directive from 2001
 30.3% share of RE on gross electricity consumption by 2010

National Targets
 12.1% share of RE in Primary Energy Consumption by 2010

Spain’s Renewable Energy Targets

Indicative Renewable Electricity
30.3%
Target by 2010
Mandatory Renewable Electricity
20%
Target by 2020

Source: “Renewable Policy Report: Spain” EREC

4.5 Support for Renewable Energy Heating and Cooling
Like other countries in the EU, Spain has a series of policies and incentives that specifically promote the
use of renewable energy for heating buildings.

The most direct and forceful policy addressing renewable energy heating is the CTE (Codigo tecnico de la
edification) policy, which mandates that all buildings must derive 30‐70% of their water heating energy
from solar thermal energy. This mandate applies to all new and remodeled buildings.

In order to support the CTE mandate, Spain also offers investment subsidies to all individuals, companies
and organizations investing in solar thermal energy systems. The subsidy pays for 37% of the total costs
of the project.

Additionally, Spain has established a few different programs that help provide financing for renewable
energy projects. One program aims at providing 100% financing for projects involving:
 Solar thermal systems with capacity greater than or equal to 20kW
 Co‐generation systems with capacity up to 20MW
 Biomass thermal energy systems up to 3MW power capacity

A second program provides loans to individuals and small and medium size enterprises (SMEs) for solar
thermal projects. These loans can range from 10,000‐300,000 Euros and begin accruing interest after
the completion of the project at an interest rate of 7%.

Appendix 2‐10

4.6 United States of America
The landscape of US renewable energy policy is much more complex than many of the European policy
strategies. Instead of a few Federal‐level policies, the U.S. policy landscape is marked by several Federal
tax incentives. On the federal level, the U.S. primarily provides tax incentives, grants and loans that to
support renewable energy. The following is a list of Federal financial incentives:

Policy Type of Support
Incentive
Renewable Energy Personal Tax Rebates from utilities for energy conservation
Conservation Subsidy Exemption measures (i.e. solar energy systems) are nontaxable
Exclusion (proposed)
Residential Renewable Personal Tax Tax credit equal to 30% of investment in renewable
Energy Tax Credit Credit energy system up to $2000
Modified Accelerated Cost‐ Corporate Renewable energy systems receive additional 50%
Recovery System plus Depreciation bonus depreciation above standard depreciation
Bonus Incentive
Renewable Energy Corporate Tax Rebates from utilities for energy conservation
Conservation Subsidy Exemption measures (i.e. solar energy systems) are nontaxable
Exclusion (proposed)
Business Energy Corporate Tax Tax credit equal to 10‐30% of investment in
Investment tax Credit (ITC) Credit renewable energy systems
Qualifying Advanced Corporate Tax Tax credit equal to 30% of investment toward an
Energy Manufacturing Credit advanced renewable energy project in the
Investment Tax Credit renewable energy manufacturing sector ($2.3B)
Renewable electricity Production Tax Renewable energy production tax credit of 1.1‐
Production Tax Credit (PCT) Credit 2¢/kWh
Renewable Energy Production Renewable energy production incentive payments
Production Incentive (REPI) Incentive of 2.1¢/kWh
Renewable Energy Grant Grant Grant equal to 10‐30% of investment in renewable
energy systems
Rural Renewable Energy Grant Grant of up to 25% of total project cost for rural
Grant small business and agricultural producers
Tribal Energy Grant Grant Provides financial assistance, technical assistance
and education to tribes for the development of
renewable energy
Clean Renewable Energy Loan Essentially an interest free loan. Interest is paid in
Bonds (CREBs) the form of tax credits to the bondholder. ($2.4B)
Energy‐Efficient Mortgages Loan Provides energy‐efficiency mortgages for energy
improvements including investments in renewable
energy systems

Qualified Energy Loan Essentially an interest free loan. Interest is paid in
Conservation Bonds the form of tax credits to the bondholder. ($3.2B)
(QECBs)
Loan Guarantee Program Loan Provides Loan guarantees that support the
commercial use of renewable energy technologies
($750M)
Appendix 2‐11

Additionally, there are a few Federal regulatory policies that exist as indicated in the table below.

Policy Type of Details
Regulation
Interconnection Interconnection Federal interconnections standards for
Standards for Small small generators up to 20 MW
Generators
Energy Goals and Construction Sets renewable energy targets for new and
Standards for Federal Targets renovated federal buildings
Construction

At the state level there are a variety of different strategies that are being employed including Renewable
Portfolio Standards (RPS), renewable energy specific targets, tax incentives, rebate programs, grant
programs, loan programs, interconnection standards, net metering and public benefit funds.

The following maps illustrate the current policy strategies of each state. Additional maps illustrating
state policy frameworks are included in the Appendices section.

Source: www.dsireusa.org

Appendix 2‐12



Appendix 2‐13

4.7 California
4.7.1 Feed‐in Tariffs
In 2009, California established a new feed‐in tariff system allowing small renewable energy generators
(<3MW) to sell energy at established, above‐market prices. Contract periods range from 10‐20 years
with adjustable rates based on time of contract initiation and time of day. All types of renewable energy
technologies are eligible to receive feed‐in tariffs; however, solar technologies are eligible for higher
rates.4
4.7.2 Renewable Portfolio Standards
In 2002 California established its first legislated Renewable Portfolio Standard; however, since then the
state has increased its commitment to renewable energy by setting increasingly aggressive targets.
Based on California’s current standards, the state must achieve a 20% renewable energy share by 2010
and a 33% share by 2020.5
4.7.3 Property Tax Incentives
Although most renewable energy systems increase a property’s market value, California has enacted a
law in 1999 that excludes solar systems from being included in property tax assessments. Thus, an
investment in a solar system does not result in increased property taxes.6 Alternatively, a different
program allows property owners to receive “property tax financing,” which allows them to receive
government financing in order to fund renewable energy projects. In return, the money used to fund
the project is repaid through increased property taxes over a period of years.7
Appendix 2‐14

4.7.4 Solar Rebate Programs
In order to specifically promote solar energy production, California has developed several different
rebate programs. A summary of the various programs is provided in the tables below.
4.7.5 California Solar Initiative
(For solar PV systems, unless otherwise noted)

Incentive Type System Size Target Incentive
$2.50/W‐AC one
Expected Residential & Commercial time rebate or opt
<50kW for PBI*
Performance‐Based

Buydown $3.25/W‐AC one
Government & Nonprofit
time rebate*
$0.39/kWh for 5
Taxable Entities
Performance‐Based years*
>50kW
Incentive (PBI) $0.50/kWh for 5
Government & Nonprofit
years*
Low‐Income Multi‐ $3.30/W‐AC one
‐ Common Area Loads
Family Affordable time rebate*
Solar Housing $4.00/W‐AC one
‐ Systems that offset tenant loads
Program time rebate*
Low‐Income Single‐ Households <50% of Area Fully Subsidized
1‐1.2kW
Family Affordable median Income System
Solar Housing Households 50% ‐ 80% of area
Program ‐ $4.75‐7.00/W‐AC
median Income
Pilot Solar Water ‐ Residential/Small Commercial $1,500

Heating Program
‐ Larger Commercial Up to $75,000
* Initial rates; Rates decrease as system capacity increases.
Source: http://www.dsireusa.org/incentives/

CEC – New Solar Homes Partnership (For Solar PV Systems)
Incentive Type Target Incentive
Custom homes, select housing
Base Incentive $2.50/W*
developments
Solar as a Standard Feature
Select housing developments $2.60/W*
Incentive
Residential Areas of Affordable
Affordable Housing Projects $3.50/W*
Housing Projects
Common Areas of Affordable Common Areas of Affordable Housing
$3.30/W*
Housing Projects Projects

Appendix 2‐15

Emerging Renewables Program*
Energy Technology System Capacity Incentive
Wind First 7.5 kW $2.50/W
7.5 – 30 kW $1.50/W
Fuel Cells <30 kW $3.00/W
* Additional Incentives for systems installed in Affordable Housing projects

Self‐Generation Incentive Program*
Energy Technology System Capacity Incentive
Wind Turbines 30kW ‐ 3MW $1.50/W
Fuel Cells 30kW ‐ 3MW $4.50/W
Advanced Energy Storage ‐ $2.00/W
*Program also includes provisions for non‐renewable energy sources

4.7.6 Interconnection and Net Metering
California’s “Rule 21” addresses the specific elements of interconnection including the operating and
metering requirements for energy generating systems up to 10MW. Once the energy generating system
is approved by the local utility, the generator is connected to the grid and can begin selling energy under
a standard tariff schedule.

Although the differences between feed‐in tariffs and net metering are largely theoretical, they are
definitely distinct from a policy perspective. In 1996, California created a policy that mandates utilities
to guarantee net metering for up to 1MW for renewable energy (solar and wind) systems.
4.7.7 Local Government and Utility Programs
In addition to the state‐level programs and incentives, California has a variety of incentives at the local
government level as well.

These programs include incentives such as:
 Fee Waivers
 Expedited Permitting
 Leasing Incentives
 Production Incentives Rebates
 Loans
 Grants
 Financing
Appendix 2‐16

5 Recommended Resources
Thematic Background Papers (12)
International Conference for Renewable Energies, Bonn, Germany 2004
Available online at: http://www.renewables2004.de/en/cd/default.asp.

Policy Recommendations for Renewable Energies (Conference Outcome)
International Conference for Renewable Energies, Bonn, Germany 2004
Available online at: http://www.renewables2004.de/en/2004/outcome_recommendations.asp

Global Renewable Energy and Measures (online) Database
http://renewables.iea.org

Renewable Energy Country Attractiveness Index
Ernst & Young, August 2009
http://www.ey.com/Publication/vwLUAssets/Renewable_energy_country_attractiveness_indices_Augu
st_2009/$FILE/Renewable_energy_country_attractiveness_indices_August%202009.pdf

EU Renewable Policy Reviews (Including Germany & Spain)
EREC | European Renewable Energy Council
http://www.erec.org/policy‐actions/national‐policies.html

Database of State Incentives for Renewables and Efficiency
http://www.dsireusa.org

Stimulus Package
http://www.energy.gov/additionaltaxbreaks.htm
http://www.energy.ca.gov/2008publications/CEC‐100‐2008‐008/CEC‐100‐2008‐008‐CMF.PDF
http://www.erec.org/fileadmin/erec_docs/Projcet_Documents/RES2020/GERMANY_RES_Policy_Review
_09_Final.pdf
http://www.erec.org/policy‐actions/national‐policies.html
http://www.wind‐works.org/FeedLaws/USA/Feed‐in_Tariffs_and_Renewable_Energy_in_the_USA_‐
_a_Policy_Update.pdf
http://www.cmslegal.com/newsmedia/publications/publicationdetail/pages/default.aspx?PublicationG
uid=5d8f51c6‐8c00‐4df5‐b579‐05cb29814fe6
http://eetd.lbl.gov/ea/ems/reports/lbnl‐154e‐revised.pdf
http://www.boell.de/downloads/ecology/FIT_in_America_web.pdf
http://www.energyblueprint.info/fileadmin/media/documents/national/2009/e_r__national_usa_lr‐
Final.pdf
http://www.boell.de/downloads/ecology/FIT_in_America_web.pdf
http://eetd.lbl.gov/ea/ems/reports/lbnl‐154e‐revised.pdf
Appendix 2‐17

Attachment 1: Additional Tables and Figures

Ernst & Young Renewable Energy Country Attractiveness Index
All Wind Wind Wind Biomass/ Regulatory

Rank Country Renewables Index Onshore Offshore Solar Other Geothermal Infrastructure
1 US 70 71 75 59 73 64 67 68
2 Germany 66 67 66 71 65 64 60 64
3 China 66 69 73 59 54 56 60 69
4 India 62 63 70 42 61 56 43 60
5 Spain 60 61 66 46 66 53 35 63
6 Italy 59 59 64 46 64 55 65 64
7 UK 57 61 59 66 37 55 34 60
8 France 57 59 60 54 53 57 28 58
9 Canada 55 60 64 46 33 48 31 59
10 Portugal 54 56 61 43 51 45 33 58
11 Ireland 52 57 58 57 28 47 27 60
12 Greece 51 53 57 42 56 42 33 55
13 Australia 50 51 54 42 54 46 59 53
14 Sweden 50 52 52 51 35 55 34 52
15 Netherlands 46 49 50 49 37 40 21 42
16 Poland 46 49 53 39 34 41 22 46
17 Denmark 45 48 45 54 32 45 32 50
18 Belgium 45 50 48 55 28 35 26 47
19 Norway 45 48 49 45 24 44 30 49
20 Brazil 44 44 48 34 40 46 20 41
21 New Zealand 42 46 50 36 25 33 43 41
22 Japan 42 44 46 38 43 33 38 45
23 Turkey 42 43 46 36 40 36 42 44
24 Austria 34 31 41 0 43 47 35 48
25 Finland 33 33 32 35 20 47 22 33
Source: Renewable Energy County Attractiveness Index, Ernst & Young, August 2009
http://www.ey.com/Publication/vwLUAssets/Renewable_energy_country_attractiveness_indices_August_2009/$
FILE/Renewable_energy_country_attractiveness_indices_August%202009.pdf

See original source for index ranking methodology and analysis.

Appendix 2‐18

Appendix 2‐19

Source: www. dsireusa.org

Appendix 2‐20



Appendix 2‐21


Appendix 2‐22

* * *

1
"Renewable Energy Actors and Stakeholders." http://www.ren21.net/REPolicies/policy/actors.asp (accessed
10/7/09).
2
"Instruments of Renewable Energy Policies." http://www.ren21.net/REPolicies/policy/instruments.asp (accessed
10/7/09).
3
"Concepts of Renewable Energy Policies." http://www.ren21.net/REPolicies/policy/concepts.asp (accessed
10/7/09).
4
http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=CA167F&re=1&ee=0
5
Senate bill 107, Schwarzenegger 2008 Executive Order; http://www.energy.ca.gov/renewables/index.html
6
7
Appendix 2‐23

Appendix 3
Solar Sector Market Opportunities

Presentation

Solar Sector Study
Overview of Market Opportunities
pp
December 2009
1
Summary of export opportunities for U.S. solar market
1. Develop and export proprietary Mexican solar systems, equipment and products
2. Recruit European solar technology companies to manufacture solar products and systems in
México for export and national markets
p
3. Provide the Supply Chain base for key “high‐value” components required for utility‐scale solar
in California and Arizona
4. Export lower‐cost energy engineering services to support the design and development of solar
projects in southwest U.S.
5 Export solar electricity to U.S. by Mexican Independent Power Producers
5. E t l l t i it t U S b M i I d d tP P d
6. Develop and export to U.S. the expertise of Mexican system integrators with multi‐disciplined
engineering and installation experience gained in “distributed” solar thermal applications such
as space cooling and industrial process heat
7. Develop and export to the world the expertise of Mexican system integrators gained in
international development projects for the design and installation of rural electrification and
p p j g
off‐grid projects using solar and other renewables
2
California and Arizona: Market Demand for Solar
– Target Market is California (CA), Arizona (AZ) and Southwest U.S.
– CA needs 24 GW of renewables to meet 33% renewable energy requirements in 2020
• This is almost half of México’s installed capacity in 2007
• Solar is expected to provide more than 50% of CA and AZ’s renewable generation
• Demand‐side calls for $60.3 billion of utility‐scale solar energy capacity needed by 2020
– CA will remain the global leader in utility‐scale solar thermal electric (388 MW of
parabolic trough was installed in 1989)
• October
October 2009
2009 ‐ 10 GW in near
10 GW in near‐term
term solar power plants are now being permitting in CA with
solar power plants are now being permitting in CA with
$40.6 Billion in Project Costs
• Another 60 GW of utility‐scale solar projects are in the “pipeline” and have applied for
permits to build on public lands in California, Arizona, Nevada and New Mexico
– CA and AZ have 70% of the U.S. PV market share and are new global PV “hot‐spot”
– New CA program requires 200,000 new solar hot water systems installed by 2017
N CA i 200 000 l h t t t i t ll d b 2017
3
Size of CA and AZ solar market to 2020 –
Size of CA and AZ solar market to 2020 – A diversified
market worth ~USD 92 Billion
Demand‐Side to Solar Market: Estimated Market Value of Needed Solar Capacity for Existing
Programs and Policies to 2020 for California and Arizona
Installed
sta ed Market Value of Solar
a et a ue o So a
$=USD Costs Projects Leveraged by
MW $/MW Incentives
CA RPS Utility‐PV 3,235 $7,000 $22,645,000,000
California Solar Initiative ‐ Distributed
CA PV 3,300
3 300 $7,800
$7 800 $25,740,000,000
$25 740 000 000
CA Total 15,103 ‐‐ $83,377,000,000

AZ Total 1,869 ‐‐ $9,261,003,088
CA+AZ Total Projected Demand‐Side

Total Projected Demand Side Market
Market 16,972 ‐‐ $92,638,003,088
$92,638,003,088
RPS = Renewable Portfolio Requirements
bl f l
4
1. Solar systems, equipment and products
• Design, develop, manufacture and export proprietary solar products
– Solar Hot Water Systems
– Solar Street Lights
g
– PV Panels
– PV Manufacturing Equipment
– PV balance‐of‐system components
y p
• Re‐design and manufacture solar‐powered DC equipment, appliances, and
accessories to meet off‐grid requirements for costs, durability and basic
features
– Appliances such as refrigerators and freezers
– Interior and exterior lighting systems
– Electronics and electrical equipment such as TVs, radios, battery chargers, PCs,
ect o cs a d e ect ca equ p e t suc as s, ad os, batte y c a ge s, Cs,
etc.
– Cooling equipment such as fans, air conditioners, and evaporative coolers
– Tools and equipment, etc.
5
1. Solar Products
1. Solar Products –– Proprietary to Mexican SMEs
Flat--Plate Collectors for

Flat
Solar Hot at Walmart Solar Street Lighting
Evacuated Tube Collector for Solar

Hot Water 70–
70–90
90°°C
6
1. Solar Products
1. Solar Products ‐‐ Types of DC products
Fluorescent T-T-8 fixture

with high
high--efficiency DC
ballast powered by roof-
roof- 800W/18,000 Btu DC Air Conditioner
top PV 70W Solar refrigerator/freezer
12” 2
2--speed
42” “Vari
“Vari--Fan”
12v DC fan
12v or 24v DC
60W 13.3” LED TV/DVD Player
7
2. Leverage solar product manufacturing to México
• Leverage European solar technology and product providers to
manufacture in México for export sales/distribution and for the emerging
national solar sector
– Product Lines
• Medium‐temperature parabolic trough collectors
• Solar cooling equipment such as adsorption chillers and absorption chillers (single‐
effect and double‐effect)
ff d d bl ff )
• “Distributed” thermal power blocks such as Organic Rankine Cycle Turbines, Kalina
Cycle Turbines, Stirling Engines, "small steam", etc.
• PV balance‐of‐system equipment such as inverters, charge controllers, trackers,
y q p , g , ,
mounting systems, etc.
• PV‐powered DC equipment for grid‐connected “low carbon” applications –
– Lighting for energy‐efficient commercial/industrial "green buildings“
– DC appliances, equipment, accessories and tools
DC appliances equipment accessories and tools
– Approaches
• Develop partnerships between Mexican and European SMEs
• Recruit Foreign Direct Investment
g
8
2. Solar Products
2. Solar Products ‐‐ Medium
Medium‐‐Temperature Collectors
Solarlite (Germany)
Solitem (Germany)
Abengoa (Spain)
9
2. Solar Products - Medium
Medium‐‐Temperature Collectors
Solera Sunpower (Germany)
PolyTrough (Australia)
Ab
Abengoa (Spain)
(S i )
10
2. Solar Products
2. Solar Products ‐‐ “Distributed” Thermal Power Blocks for
Medium‐
Medium‐Temperature Solar
Kalina Cycle Power Plant
Thermal Input ~100
Thermal Input ~100°
h l °C
200 kW Turboden Organic Rankine Cycle Turbine
Thermal Input ~100‐
Thermal Input ~100‐310°
310°C
10kW sbp EuroDish
10kW sbp
with SOLO Stirling
E i
Engine
11
2. Solar Products
2. Solar Products ‐‐ Small Solar Chillers from Europe
8kW + 15kW Adsorption Chillers
8kW + 15kW Adsorption
from SorTech AG (Germany
AG (Germany)
)
Input at 55‐‐95
Input at 55 95°°C 10kW Absorption
10kW Absorption Cooling
Cooling, ,
Heating and Hot
and Hot Water
Water from
Climatewell (Sweden
Climatewell ( Sweden) )
Input at 70‐‐100°
Input at 70 100°C
9kW Absorption
9kW Absorption Cooling
from SolarNext (Germany
SolarNext (Germany) )
Input at 65‐‐95
Input at 65 95°°C
12
2. Solar Products
2. Solar Products ‐‐ PV‐
PV‐Thermal Systems
Net solar
solar--to-
to-energy conversion efficiencies
>50% with 2- 2-4 kWh thermal generated for
everyy 1 kW p produced
Absolicon Solar Concentrator AB
Power‐‐Spar/Menova
Power Spar/Menova HD Solar/HelioDynamics
HD Solar/HelioDynamics
HD Solar/
Solar/HelioDynamics
13
3. Scale of Supply Chain Needed for Utility
3. Scale of Supply Chain Needed for Utility‐‐Scale Solar
Announced Utility‐Scale Solar Projects in California and Arizona ‐
Utility Scale Solar Projects in California and Arizona October 2009
October 2009
Capital
Costs Total
Near-Term CA
Near-
Projects per kW MW Capital Investment
and AZ Projects CSP Parabolic Trough 12 $4,000 4,536 $18,025,200,000
with Announced CSP Power Tower
Power Tower 14 $3 000
$3,000 2 547
2,547 $7 641 000 000
$7,641,000,000
Power Purchase CSP Dish‐Stirling 2 $2,000 1,600 $3,200,000,000
Agreements CSP Compact Linear Fresnel 1 $2,825 177 $500,025,000
PV Thin‐Film 5 $5,000 1,153 $5,762,500,000
PV 1‐Axis Tracking Silicon 2 $7,000 440 $3,080,000,000
Totals 36 ‐‐ 10,453 $38,208,725,000
Projected Volume of Parabolic Trough Mirrors, Receivers and Structural Supports
for Concentrating Solar Thermal Electric Projects in California, Arizona, Nevada
and New Mexico to 2015
Supply Chain Number Number Space Frame
MW Collector Area
Collector Area Mirrors Receivers Metal
N d d ffor
Needed
Trough 12,753 73,969,140 m² 30,607,920 3,101,603 539,915 mT
Southwest U.S. 7,400 Hectares 12,406 km
Trough Projects
Unit Basis per MW of Trough
5,800 m²
, Mirror surface area
2,400 Mirrors ‐ number
243 Receivers ‐ number
4 m Receiver ‐ length
122 Spaces frames
42.3 Aluminum ‐ metric Tons
14
3. Major Components for Utility‐Scale Solar
Parabolic Trough -
Structural Supports
Solargenix/Acciona LUZ
Solar Millennium SENER
15
P
Power T
Tower Brightsource
Heliostats
Abengoa
16
Parabolic Trough Receivers
Schott PTR 70 Receiver
17
Dish--Stirling - Reflectors
Dish
Stirling Energy Systems –
Stirling Energy Systems – 750 MW Project, El Centro, California
30,000 x 25kW units
18
Parabolic Trough –
Steam Power Blocks
Nevada Solar One 64 MW Parabolic Trough Plant
Solargenix/Acciona
19
Parabolic Trough - Power Block

Solana 280 MW Parabolic Trough Plant
Gila Bend, Arizona
Abengoa
20
4. U.S. solar project developers outsourcing energy
engineering services to Mexican companies
• Several Mexican full‐service energy engineering companies have extensive
experience in project development, project engineering and transmission
interconnections for large renewable “self‐generation”/carbon projects in México
• Many of these companies have worked with large Spanish system integrators (i.e.
Acciona, Abengoa, Iberdrola) on wind projects in México; these are the same
companies who are now developing many of the utility‐scale solar thermal
p p g y y
projects in the U.S.
• There are great opportunities for U.S. solar project developers to achieve
considerable cost savings by outsourcing engineering services to Mexican
companies in the fields of mechanical, structural, electrical, power plant and civil
engineering
• As the U.S. begins to adopt mandatory greenhouse gas emission reductions,
opportunities also exist for Mexican SMEs to export expertise in “carbon” project
development, in project qualification for “certified
development, in project qualification for certified emission reductions
emission reductions” and in
and in
structuring and leveraging carbon finance
21
5. Export of Solar Electricity to U.S.
• CA anticipates renewable electricity imports from México
– Upgrades to transmission in Southern California expect wind, geothermal and
solar electricity from Baja California
– First large Power Purchase Agreement for sale of wind energy to CA
utility has been completed (1250 MW at La Rumorosa)
• 5 GW of solar thermal potential in northern México
5 GW of solar thermal potential in northern México
– More solar potential than wind
– No known solar Independent Power Producer (IPP) projects being planned
• Great opportunities for Mexican IPP to sell solar electricity to CA and AZ
Great opportunities for Mexican IPP to sell solar electricity to CA and AZ
utilities and to large industrial customers
– Short cross‐border interconnections to California utility sub‐stations
– Complex permitting and public land acquisition processes creates
Complex permitting and public land acquisition processes creates
uncertainties and delays
– Staging utility‐scale solar plants along northern border offers large German
and Spanish system integrators low‐cost alternatives to CA and AZ
22
5. Export of Solar Electricity to U.S.
Southwest U.S.
Transmission
Lines and Key
Load Centers
Load Centers
Solar Resources
Baja California
23
6. Export technical know‐how of System Integrators
6. Export technical know‐
experienced in solar thermal applications
• Low‐ and medium‐temperature solar thermal (< 250°C) energy has perhaps greater potential
than PV and utility‐scale solar electricity to off‐set greenhouse gas emissions and to reduce
energy costs
• Greatest gap in “Distributed” solar thermal value chain is shortage of experienced system
integrators, project developers and multi‐disciplined energy engineers who can package turn‐
key solar industrial process heat, solar cooling, solar desalination and small thermal electric
projects
• Such commercial/industrial projects require extensive site‐specific engineering and
integrated technical design at a level far beyond that required for PV or solar hot water. The
key technical challenge is the integration of the solar collector field and the closed‐loop
hydraulics of the heat transfer fluid (usually water) with a conversion process or equipment
heat exchanger
24
experienced in “Distributed’ solar thermal applications
• This new field of system integrators requires competencies in a wide‐range of engineering
disciplines such as electrical, mechanical, hydraulic/plumbing, industrial processes,
environmental civil and structural as well as competencies in energy efficiency analysis and
environmental, civil and structural as well as competencies in energy efficiency, analysis and
management
• There are significant opportunities for energy project developers, energy services companies,
engineers and turn‐key energy or industrial equipment installation companies to enter this
space by scaling‐up existing capabilities
• Several Mexican solar companies have been involved with the use of flat‐plate and evacuated
p p
tube solar collectors for industrial applications such as pre‐heating natural gas fired boilers
for process heat and for hot water for bottle washing; Some of these companies have also
used solar collectors for low‐temperature solar cooling
• The lack of technical expertise in CA and AZ in solar thermal applications presents great
opportunities for Mexican system integrators to enter this market with a subsidiary or in
partnership with U.S. companies
25
experienced in rural electrification and off‐
experienced in rural electrification and off‐grid projects
• Global “Off‐grid” Market:
– 1.6 Billion people world‐wide are without electricity
– 6.5 Million people in México live "off‐grid
– 38% of U.S. PV installations are "off‐grid“
38% f U S PV i t ll ti " ff id“
– 7 GWp of new “off‐grid” global PV capacity predicted by 2020
• System integration for remote off
System integration for remote off‐grid
grid requires unique multi
requires unique multi‐disciplined
disciplined project
project
development, design, installation and system training skills
• There is a growing number of Mexican system integrators working in international
d l
development projects involving installations of PV, solar hot water, small wind, biomass,
t j t i l i i t ll ti f PV l h t t ll i d bi
micro‐hydro energy generators and equipment such as lighting, cooling, battery charging, etc.
• There are significant opportunities for México’s small and medium‐sized system integrators to
leverage their national experience and expertise to become major players in the emerging
global off‐grid market. Secondary opportunities also exist to develop and redesign existing
renewable products for the unique requirements of remote off‐grid applications
26

Solar Sector Study TechBA AZ FV Jan 2010

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Solar Energy Sector Study

Solar Energy Sector Study

Renewable Resource MW Share

Projects MW Project Costs

PV Thin Power Dish Not Known/

AZ RPS Utility‐Scale Solar Thermal 1,529 $4,500 $6,880,282,500

CA+AZ Total Projected Demand‐Side Market 16,972 ‐‐ $92,638,003,088

MW Collector Area Share

Number Number Space Frame

Chemical industry boiling 95 105

All sectors pre‐heating of boiler feed water 30 100

14. Generadores 18. Merry Tech

1. Alesco Energía y Agua

20. SEI Automation

Confidential Business Information

Confidential Business Information

Confidential Business Information

Technology Type Various Photovoltaic (PV)

Confidential Business Information

Confidential Business Information

Technology Type Photovoltaic (PV) Solar Hot Water Systems

Confidential Business Information

Confidential Business Information

Technology Type Photovoltaic (PV) - Generators for Utilty-Scale Solar

Confidential Business Information

Confidential Business Information

Confidential Business Information

Confidential Business Information

Germany 12.50% 18%

Pilot Solar Water ‐ Residential/Small Commercial $1,500

All Wind Wind Wind Biomass/ Regulatory

AZ RPS Utility‐Scale Solar Thermal 1,529 $4,500 $6,880,282,500

CA+AZ Total Projected Demand‐Side

Flat--Plate Collectors for

Evacuated Tube Collector for Solar

Fluorescent T-T-8 fixture

Parabolic Trough Receivers

Parabolic Trough - Power Block

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