Michael EckhartManaging Director

Global Head of Environmental FinanceCorporate & Investment Banking

Citigroup Capital Markets, Inc.michael.eckhart@citi.com

Past, Present and Future of Solar FinancePresented to:

Intersolar Solar Finance and Asset Symposium IVJuly 7, 2014

San Francisco

PERSPECTIVE

1839-1959: Invention of PV

1839: • Photovoltaic effect first observed in science by Edmond Becquerel, Paris

1888:• Edward Weston receives first US patent for "solar cell"

1922: • Nobel Prize awarded to Albert Einstein for his 1905 mathematical explanation

of the photovoltaic effect 1954: • Bell Labs produced the first functioning solar cell 1959: • NASA launched Vanguard 1, the first spacecraft using solar PV (still in orbit!)

1973-1976: Oil Crisis and OECD Reply1973:• Ford Foundation Study: “solar and efficiency” by David Freeman• “Solar Energy in the Service of Mankind”, Paris: Wolfgang Palz• Solarex founded by Peter Varadi and Joe Lindmeyer• Arab oil embargo 1974 -1976: • International Energy Agency IEA)• Federal Energy Administration (FEA) • Energy Research & Development Administration (ERDA)• Congressional Solar Coalition, Scott Sklar• Oil industry begins investing in solar PV development:

– ARCO -- Texaco -- Chevron– Exxon -- Shell -- Mobil

1977-1979: U.S. Government Action1977: • DOE founded by merger of agencies: FEA, ERDA, NASA Solar, Coal research • Solar Energy Research Institute (SERI) established in Golden, CO• DOE sets PV cost goal = 50¢/Wp ($1976)

1978: • PURPA enacted: creating Qualifying Facilities (QFs)• Energy Tax Act created the first business tax incentives for solar, leading to

first leasing structures –Keith Martin, Chadbourne & Parke• BAH study for the White House: “Assessment of Solar PV Technology,

Industry and Policy”: Eckhart et al

1979:• ARCO Solar produces 1 MW of PV in one year

1979-1989: The Lost Decade 1979:• Iranian hostage crisis and oil price increase

1980: • Ronald Reagan elected; beginning of major cutbacks in Federal funding 1983:• Solarex acquired by Amoco, commercial applications for PV 1985:• Solar tax credits allowed to lapse

1986• Oil and gas prices collapse

1990-1996: Rebirth of Renewables1990:• SERI renamed NREL

1992: • EPAct1992: EWGs and wind PTC• Aachen Model, Germany – precursor to the FIT• SELF founded by Neville Williams

1995: • Founding of Nth Power, first VC in renewables, by Nancy Floyd• Founding of E+Co, the Rockefeller-funded finance fund for SMEs 1996: • World Bank-Rockefeller joint task force on Solar Financing

1997-1999: Kyoto and EU White Paper 1997: • Kyoto Protocol• European “White Paper on Renewable Energy” by Wolfgang Palz• World Bank hosts “Village Power” conference

1998• SolarBank Initiative in South Africa, Mike Eckhart, Reinhold Viljoen, Sake Kotse et al• SolarBank Initiative in India: training 1,000 bankers by Mike Eckhart, Griff Thompson,

Harish Hande, KM Udupa, Rahul Arora, Aesha Grewal• German 100,000 roofs program, Hermann Scheer• California AB 32 solar subsidy 1999: • First RPS in Texas for 2,000 MW of wind power• Founding of the Shell-Eskom Solar Energy Co. in South Africa using pre-payment • Siemens Solar achieves 100 MW produced – announces 25-year warranty

2000-2001: Stage-Setting2000:• German FIT for solar PV plus KfW solar loan program – Hermann Scheer• EU Publishes “Take-Off for Renewable Energy”• Net Metering• PowerLight hires Greg Rosen, first full-time financier of solar 2001: • ACORE founded, Mike Eckhart, Scott Sklar, Dan Reicher, Michael Ware, John

Mullen, Mark Riedy, Hank Habicht and many others.• 9/11• Enron bankruptcy - ending of utility restructuring 2002: • Solar leasing offered by Stella Group – Scott Sklar• Rio+10 meeting in Johannesburg: renewables blocked

2003-2005: Policy for Financing2003: • First REFF-Wall Street – repeated annually since then by Mike Eckhart, Ken Locklin, Dan

Reicher, Michael Ware et al• New Energy Finance founded, Michael Liebreich• SunEdison founded – PPA model for rooftop solar, Jigar Shah

2003-2004:• German 20-year FIT for all renewables, Hans Josef Fell et al 2004: • Bonn Renewables 2004 – Gerhard Schroeder, Jurgen Trittin, Hermann Scheer• Increasing RPS in the US 2005: • Increased VC investment: John Doerr at KPCB, Stephan Dolezalek at VPCP, Raj Atluru at

DFJ, Erik Strasser at Mohr Davidow, Nancy Floyd at Nth Power, plus NEA, others

2006-2007: China and California2006: • China enacts Renewable Energy Law: Li junfeng• California Solar initiative: $3 billion over 10 years

2007: • SolarCity, SunRun, Sungevity founded• Sale-leaseback financing of a utility-scale PV project for SunEdison, Keith

Martin, Chadbourne & Parke• Inverted Lease for resi-rooftop created by US Bank and Morgan Stanley:

Marshal Salant and Jason Cavaliere• First solar set-aside established in the Colorado RPS

2008-2009: Financial Crisis/Incentives

2008: • WIREC 2008 world meeting by ACORE, Mike Eckhart, Jim Connaughton, Reno

Harnish, many others• Partnership flip financing by SunEdison• Financial crisis: Lehman Bros bankruptcy• ERRA: 30% ITC for 8 years, Rhone Resch; beginning of the new era of tax equity for

solar

2009: • IRENA founded• $*9 Billion ARRA with cash grant, loan guarantees and R&D funding• EU enacts 20/20/20 by 2020• CPF Founded: Nat Kreamer

2010-2011: Loan Guarantees2010: • China has 523 companies manufacturing solar PV, begins dropping

prices• RBF convenes off-site to advance FITs to the US: Michael Northrop,

Craig Lewis

2011:• Fukushima nuclear power accident in Japan • ARRA loan guarantees awarded for CSP to BrightSource,

SolarReserve and Abengoa• ARRA loan guarantees awarded for PV to First Solar, SunPower,

Cogentrix• $2.3 billion Desert Sunlight financing with first solar project bonds

by Citi, Stuart Murray et al

2012-2014: Capital Markets2012: • Japanese FIT enacted• China PV installation program enacted• SolarCity IPO: Lyndon Rive, Bob Kelly, Ben Cook et al • Solar Mosaic founded creating first crowd funding: Daniel Rosen and Billy Parish • SAPC founded by NREL: Michael Mendelsohn• Birth of Community Solar – cooperative financing

2013: • First REIT: Hannon Armstrong Sustainable Investment IPO: Jeff Eckel• First solar securitization by SolarCity: Credit Suisse• First Yieldco by NRG, David Crane working with Citi• TruSolar founded by Distributed Sun: Chase Weir, Jeff Weiss, Doug Payne• “Banking on Solar” founded

2014: • Green Bond Principles developed by Citi and BAML and adopted by over 50 banks,

investors and issuers: $20.5 Billion issued YTD.

Summary: Phases of Innovation1970 - 2020

1970 1980 1990 2000 2010 2020

Technology Innovation

RE Policy Innovation

Financial Innovation

ERDA / USDOE ARRA RD&D Funding

PURPA EPAct 1992

FIT, Net Metering, RPS, tax credits

LG, CG, ITC, Interest Rates

Market Structure Innovation

Environmental Policy Innovation

Clean Air Act Kyoto EPA

Global Solar PV Global Installations 2007-2015

(GW/Year)

2.86.6 7.7

18.2

30 30.5

36.3

46.3

2007 2008 2009 2010 2011 2012 2013 2014 2015

Western Europe Eastern Europe Japan US China India Rest of World

Source; BNEF 2013

ROWIndia

China

US

Japan

EU

U.S. Solar PV Installations 2006-2013(S Millions)

Utility-Scale

Small-Scale

Future of Solar Finance: Near-Term Drivers

Drivers trending towards solar:• Global markets driving down hardware costs• Interconnection and permitting• Grid and distribution system upgrades • Storage• Continued PV technology advancement and cost reduction

Drivers trending away from solar:• ITC and other direct supports• Net metering and resolution of utility rates• Interest rates

Future of Solar Financing: Long-Term Drivers

Drivers trending towards solar:• Global market pull on PV success• Power economics with environmental and climate costs• Public attitudes on climate and environment• Public acceptance of solar• Infusion of climate policy in utility decision making

Drivers trending away from solar:• None

Future of Solar Finance Continued innovation:• Easy credit for residential rooftop• Credit backstop mechanisms for C&I financing• Portfolio financings for substation-level projects• Risk mitigation and credit enhancement

M&A and consolidation:• Solar installation companies• Solar financing companies

Scale-up of issuances to the capital markets:• Solar securitizations• Yieldcos – Carve-outs, Newcos, REITs, and maybe MLPs• Green bonds and the return of balance sheets

Michael EckhartManaging Director

Global Head of Environmental FinanceCorporate & Investment Banking

Citigroup Capital Markets, Inc.

michael.eckhart@citi.com

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