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SOLAR ENERGY ROYALTIES: STABLE LONG TERM REVENUES. Solar Electricity: Brief History. 1839 Photo Voltaic (PV) effect first observed: selenium when exposed to UV light produces electricity 1923 Einstein demonstrates PV effect on silicon, wins Nobel Prize

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  2. Solar Electricity: Brief History • 1839 Photo Voltaic (PV) effect first observed: selenium when exposed to UV light produces electricity • 1923 Einstein demonstrates PV effect on silicon, wins Nobel Prize • 1959 First commercial PV panels convert 10% of light to electricity; Explorer 6 launched with large solar array, solar PV electricity becomes the norm in space exploration and satellites • 1960: 14% PV efficiency achieved in commercial panel manufacture • 1960’s: early uses in space, buoys, navigational aids, irrigation pumps • 1973 oil crisis: Petroleum companies invest in solar research • 1970’s; small commercial systems marketed: boats & mobile homes • 1980’s: Research intensifies and manufacturing techniques refined • 1990”s: PV in utilities: Germany starts with 600 kW, now (2013) at 33 GW, 5% of total electricity consumption, 5,000% increase over 20 years • 2000-13: PV efficiencies increase: 17% is norm, 34% is possible • With economies of scale PV costs now compete with coal & nuclear

  3. Solar PV pioneered in space

  4. Components of a solar PV array

  5. Solar PV: How it works: power use on site or fed into the grid (AC mains) -

  6. Solar PV: Power where the sun shines

  7. Solar PV: Power where the sun shines

  8. Solar PV: Power where the sun shines

  9. Solar PV: Power where the sun shines

  10. Solar PV: Panel manufacture, lifespan and efficiency • Main raw material is silicon, one of the most abundant and inexpensive natural resources on the planet • Solar cells are semiconductor devices and share processing and manufacturing techniques with other semiconductor devices such as computer memory chips • Cost decreases with improved manufacturing techniques and economies of scale • Typical warranty is 25 years with rated output decreasing at 0.75% per year • Panels are expected to function for a period of 30 to 35 years • Efficiency norm has increased to 17% conversion of light • Panels are now in production which can achieve 34% efficiency through use of light concentrators

  11. Solar PV and the Power Grid 1

  12. Solar PV and the Power Grid 2 (refer last slide) • Black=Power Generation • Blue = Transmission (high tension lines) • Green = Distribution to customers • Large scale central generation (nuclear, big hydro, coal, gas, big wind) requires transmission lines, high capital investment, high environmental impact • Generation facilities of up to 10 MW can deliver power directly to distribution lines which deliver to users • 10 MW of solar PV panels (optimal size for large solar park) requires 100 acres of land • PV installations from 10 kW (house rooftop) to 10 MW can feed directly into existing distribution lines saving costs • Distributed Generation = energy from diverse sources + lower environmental impacts + improved security of supply

  13. Requirements: Grid connected Solar PV installation • Solar Resource Assessment: With site latitude and longitude it is possible to measure long term output of any given PV panel configuration • Space requirements: rooftop or open space with unimpeded south exposure; prime farm land use not normally permitted • Property must be adjacent to distribution lines with right voltage for feed-in; e.g. 10 MW project requires minimum 26 kV distribution lines • Access to property secured by purchase or long term lease • Permits to feed power into the grid • Long term contract to sell power at guaranteed prices: Power Purchase Agreement (PPA) • Financing for construction costs: +/- $2,500,000 per MW

  14. Solar PV and the Feed-In Tariff (FIT) • A FIT is a standard rate paid to private power producers to feed power into the grid • FIT rates are guaranteed over several years to encourage new suppliers and energy sources • FIT concept pioneered in the USA in the 1970’s and proliferated in Europe in the 1990’s • Canadian Province of Ontario implemented a renewable energy FIT program, 2006-09 and currently leads in North America with this comprehensive renewable energy incentive • Early stage Ontario FIT contracts (2010-11) offered high FIT as incentive to developers • Ontario FIT contract rates guaranteed for contract life (20 years) • Through FIT programs, improved technology and manufacturing improvements, solar PV installed costs are now competitive with coal, nuclear and gas in many countries; this is called Grid Parity • The need for FIT will eventually disappear but it provides guaranteed long term revenues to early stage developers to cover up-front risks • Ontario FIT project sizes from 10 kW (house roof) to 10 MW (100 acre solar park)

  15. Solar PV FIT program, Ontario, CANADA

  16. Solar PV FIT program, Ontario, CANADA • Population 13.5 million, 40% of Canadian total, capital city Toronto, USA border towns: Detroit MI and Buffalo NY • Surface Area = Texas + California combined • One purchaser of electric power in the Province: Ontario Power Authority (OPA) • Power is transmitted and distributed by the major utility, Hydro One and several local utilities • OPA first offered standard fixed price contracts in 2006 for renewable energy: solar, wind, small hydro, biogas, biomass • Full scale FIT program commenced in October, 2009 • Ontario FIT follows German model, aims to replace coal 2016 • Ontario FIT most ambitious renewable energy program in the Americas • Thousands of new jobs created in manufacturing renewable energy equipment • Solar PV is a major component of the Ontario FIT program • Complete information: http://fit.powerauthority.on.ca/fit-program

  17. Ontario solar FIT royalty for sale • Royalty Seller is a developer of solar energy projects • Royalty Payer is a large multinational USA based publicly traded power company • 20 year royalty, estimated start date December 2013 • Royalty estimates are based on third party engineer estimates of power generation over 20 years • FIT rate guaranteed paid by the OPA is $0.443 per kWh • Royalty is 1.85% of gross power sales of Royalty Payer • Estimated average annual royalty payment: $119,300 • Estimated total royalty payments: 20 years: $2,386,000 • Project is fully financed; total cost estimated at $25,000,000; estimated $5,000,000 disbursed to date

  18. Ontario FIT Royalty sale: Timelines • 2007-09: Royalty Sellercompleted early stage work and secured land by way of a long term lease • April 2010: Royalty Sellersold project toRoyalty Payerin return for cash and future royalty considerations • February 2011: OPA awardsRoyalty Payera 20 year PPA • August 2011: OPA waives any rights to terminate the PPA: http://fit.powerauthority.on.ca/program-updates/newsroom/newsroom-2011/option-waiver-opa-termination-rights • November 2012: Permitting complete, final submission made to Ministry of Environment (MOE) • November 2012-May 2013: statutory waiting period before Notice to Proceed (NTP) from the OPA • May – November 2013: construction (installation of PV panels and grid connection) undertaken byRoyalty Payer& contractors • December 2013: Commercial Operation Date (COD) royalty payments commence

  19. Purchase an Ontario solar royalty • Non-confidential interactive spread sheet available from the Royalty Exchange (TRE) to calculate purchase payments and returns • Full file review requires signature of non-disclosure and non-circumvention agreement (NDNCA) available through TRE • On signing NDNCA, you will receive a confidential information package and can submit questions to the seller • Royalty purchase payments can be in 3 disbursements, terminating on COD

  20. Royalties as long as the sun shines !

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