Why Solar PV Power Plants Will Fundamentally Change the Way We Power the Planet

– My name is Eric Heikkila I’m a professor here and helping to coordinate the Urban Growth seminar series this semester And this is a session that I’ve really been excited about and looking forward to since last semester actually, when I first met Dr Buttgenbach on a plane, as we were both on our way to Brazil and fell into conversation with him and became fascinated, both by his background, which is quite an extraordinary career, but also his current work in providing solar power here in California Briefly his background, he’s from Germany originally, as is one of our discussants So, and arrived here, did a PhD at Caltech, focusing on physics and astronomy and related topics, then was hired off into McKinsey, where he did consulting, and ended up on Wall Street, doing finance deals, decided he liked things that were more tangible I hope I remember our conversation well, and went into real estate And from that, then moved into producing solar power, which combines all of these elements, right? Combines the physics, the energy, the real estate development, the financial side of it So it’s all coming together, and he does this work both here in the US, especially in California, as well as other places around the world So it’s really fascinating, and I believe this is your first time to speak at the University of Southern California And so it’s our great pleasure to welcome you here And because it’s such a great speaker, we have, we decided we’re gonna have to have two discussants to sort of wrestle him to the ground And one of whom is my colleague, Detlof von Winterfeldt, who also, as I mentioned, hails from Germany and is the professor both here in the Price school and in the Viterbi School of Engineering, and is the founding director and repeat director now of Create, the Center for Risk and Economic Analysis of Terrorist Events And our second discussant, our other discussant is Ms. Bonnie Reiss, who many of as a global director for the Schwarzenegger Institute here at the Price School, and who has been very energetic in bringing the values of the Schwarzenegger Institute and helping to infuse that into many aspects of our activities here at the Price School, and especially as it relates to students and to research and to workshops And she herself, has really focused a lot in addition to energy issues on education and health, the portfolio of Secretary for Education in the state of California under the Schwarzenegger administration So we have a wonderful lineup And so the best thing I can do is get out of the way and let it begin – I just had a conversation about I wanna say four days ago, with a top executive of a large power plant developer in the US, traditional power plants, gas-fired power plants And we also were on an airplane coming back And he said, “We just scrapped all of our plans “to build gas-fired power plants in Texas.” And I’m like, “What’s the reason? He said, “Solar is gonna kill us “We can’t make money anymore.” Now, Texas, unlike California, which you may know, treats environmental perks a little differently to put it mildly California, there’s been a lot of renewable energy A lot of it was, twist my arm We want certain renewable portfolio standards, et cetera So there was a lot of development early on Texas, there’s none of that The renewable energy credits in Texas are near worthless In Texas, we’re competing on price,

and he’s competing on price, and he knows he can’t win anymore What this presentation is about is the energy industry And Detlof may appreciate that, which is a major driver of a lot of stuff that’s going on in the world, from oil, don’t want to say we fight war over oils, but certainly been a major piece of the equation The energy industry in the world is fundamentally changing over the next, call it 20 years What’s fascinating is this is something we can see ahead of us, or at least some of us do Typically, when you hear about these revolutions that happen, they’re always in the rear mirror It’s like you know when the PC came, when Apple came up with a PC and, they had the idea, everybody will have a PC and people wondered what the hell would I need a computer in my home for it, et cetera? So in hindsight, we all say, wow, that was a complete revolution, how fascinating, how that totally changed everything, and nobody really saw it coming Well, this one we see coming So you can be a spectator for the next 20, 30 years to see how the energy markets are fundamentally changing in this world The title is a little boring, talks about power plants and all of that So I wanted to just put that into perspective So one of the key ingredients, and this is rather boring factual, but one of the key ingredients for, what you would call a revolution, which really isn’t, when you talk about 20 or 30 years, this doesn’t happen tomorrow morning Suddenly there’s a new government in place or something This is a slow moving evolution, but very disruptive in its impacts, is that it needs to be a proven technology It needs to be financeable, photovoltaic, and this is what I’m talking about, photovoltaic panels, and maybe just for reference, it’s the panels you see down there, it’s the same stuff you would put on your roof A lot of people ask me, oh, you’re in solar So you guys install rooftop solar systems? This is about large scale power plants, powering the entire economy and industry So it’s very important that the technology is very mature before you can have a revolution that actually really is scalable PV certainly is that It’s estimated that by 2035, there will be about $1.3 trillion invested in photovoltaics It’s a huge number, worldwide Maybe taking a step back where we are kind of globally, if you think about the ages here, there was the age of coal Then we kind of entered the age of oil, where oil is now or used to be, still is, one of the major sources of energy Now we’re in the age of gas, more or less today As I mentioned earlier, that is about to change, but make no mistake, there’s a lot more gas-fired power plants than there are solar power plants today And there will be for quite a while But I think the next thing coming is the age of renewables And they will start taking over in terms of the energy mix Nothing is very quick in this field It’s a very, big investments that take a long time to be, to be built and to be amortized But we are going to transition pretty much completely out of coal in the next 50 years, call it Gas is gonna stay with us for probably quite a while And renewables in various forms are taking over There’s obviously solar, but there’s also other renewables So the United States is in a very unique position for this revolution because this technology, as I said earlier, you have to be able to finance it Financing in the US is very easy It’s a very good country to do large project development in We also happen to be in one of the best places on the planet, in terms of solar radiation, deserts, with very dry air, very predictable weather patterns, et cetera And that dark spot there is somewhere around Kern County This is one of the best places in the world to deploy this technology Just to give you an idea of how powerful the sun is,

if you took a 30 by 30 mile square in the middle of Texas, which Texas is a good solar place, not the greatest, but it’s pretty good That receives enough energy to power the entire United States That 30 by 30 mile square, forget about everything from our oil, gas, coal, nuclear, that square receives enough energy to power the entire United States That’s a pretty small little square Now you’d have to use today’s technology to actually turn that into electricity that we can use And with today’s technology, that would be about a 75 by 75 mile square Think those graphics are a little big That’s actually a lot more than 75 miles on there In an airplane, that would take you 10 minutes to fly over So you’d barely notice it down there, and you go like, well, why aren’t we doing it? Well, the little details like transmission, you need to get the energy out, and we’re probably aren’t going to build one big power plan because Detlof would have a hard time with that But that just shows how incredibly powerful the sun actually is But it also shows we actually don’t use really a lot of energy That’s the good news We always think of ourselves as energy hogs We’re actually using a tiny amount of energy compared to what the sun can provide So that’s really good news This problem is very solvable If you look at energy prices, and I’m not gonna bore you with the details here, solar has been coming down continuously, and this is my favorite slide This is what drove me and my business partner seven years ago, into this business This is the cost to produce electricity from a solar photovoltaic panel That chart starts in 1978 So that’s coming up on nearly 40 years So this is nothing new The cost of photovoltaic power generation has come down for 40 years on a more or less steady curve It’s about 7% per year So you can see this train coming But 20 years ago, nobody cared because it was up there somewhere where it was just not anywhere near competitive with fossil fuels It took until just maybe five, 10 years ago when it started becoming interesting in terms of, Hey, I can start competing with retail rates, which is when you put it on your rooftop and you don’t pay the utility, kind of pay yourself Not a real competition in the sense that, it’s retail versus actual power generation But nevertheless, it started becoming interesting in the power markets Today, we’re below wholesale, natural gas What that means wholesale natural gas means a big gas-fired power plant, we beat them But the trend continues There’s no reason why this curve will stop This is a Moore’s-like law It’s not exactly Moore’s law, but photovoltaics is a chip technology And if you think about your little camera chip, I remember 10 years ago, I bought a 256-megabyte camera chip, and I was amazed I could take like a hundred pictures With that chip today, they give them away for free at trade shows It’s the same principle technology, it’s a Silicon chip They get better, faster, and cheaper all the time There is no stopping This is not a conventional way of producing power like nuclear, which is a bunch of concrete and steel and turbines and stuff That stuff gets more expensive, and they have to pay for security or gas-fired power plants That’s all conventional stuff At the end of the gases, labor, getting the gas out of the ground and equipment to transport it, pipelines, et cetera That’s all conventional stuff This is a computer chip technology, and it’s on a cost curve like computer chips are, they just get better, faster, and cheaper all the time That is why this is a revolution That is what makes this technology very different from any other energy technology, may be, geothermal wind or whatever not This is a totally different ball game You can imagine what that chart does If you were in the business of running or building gas-fired power plants,

and you look at that chart, that’s not pretty How am I gonna compete with that? It’s like the steam engine guys trying to compete with gasoline engines It’s like game over I mean, this is not a question of if, it’s only a question of when This doesn’t stop, and this will completely change the energy industry worldwide If you look at on the left side, you have all the conventional, everything from nuclear to natural gas, coal, diesel, lotta places in the world, smaller island nations, or various places that don’t have the cheap coal They use heavy oils, natural gas is only very cheap In the US it’s still pretty pricey And in Europe, mostly comes from our friend Putin So the Europeans scratched their heads, how much they like that dependency on it All of that stuff over time goes up in cost Now there’s fluctuations, oil is very cheap right now, but five years from now, who knows? But because it is effectively labor and supply and demand-driven, it goes up in cost over time because supplies diminish, or it gets more expensive to get to more reservoirs On the other hand, solar just keeps on getting cheaper So for different countries at different times, depending on what fuels you using, you’re somewhere on that equation where you have the break even Break even doesn’t mean I immediately shut down my coal plant and build a solar plant, I mean, I got the sunk costs I’m gonna run that coal plan for another 20 years, but I’m not going to build a new coal plant So I’m going to replace that And now if you’re in a country like Brazil, that well, Brazil is not a good example Take Bangladesh, Bangladesh, 7% GDP growth a year, had it for the last 10 years So, their economy, half the stuff you buy at the Gap comes out of Bangladesh They need need more energy every day So they’re not thinking about replacing coal plants They’re thinking about, I need more power plants Interestingly enough, places like Columbia, Columbia has very cheap power today So you’d say, ah, that’s probably not a good opportunity Why is that? Well, they have hydro They have a lot of hydro Well, they’re tapped out They’ve built a dam wherever it’s reasonably feasible to build a dam And then Brazil, by the way, the same issue Brazil has 80% of their power comes from hydro Because of climate change they’re now, for the last 10 years, they’ve had declining hydro generation They’re just running out of water And so they’re scrambling to figure out how are we gonna power our country, and how are we going to power our economic growth once government issues are slightly resolved in Brazil? But just because power is really cheap in a country, doesn’t mean that the incremental megawatt hours you wanna add to the grid aren’t very cost competitive Columbia, for example, is burning oil They’re building oil-fired power plants, and you’re like, Jesus Christ, that it’s really bad, really expensive Even at $35 a barrel, it’s still a very expensive way Well, they used to have a deal with Hugo Chavez and they got the oil at a subsidy That deal is over now. So they’re screwed So they’re struggling. What are we doing? They’re all looking at solar, they’re also looking at wind, which is very cheap The other factor that a lot of people ignore is it’s not just about cost, right? This is the cost of a million BTU for natural gas at the Henry Hub, which is one of the big trading trading hubs in the US Today, natural gas is really cheap at about $2, a million BTU That’s not inflation adjusted So inflation adjusted, this is about as cheap as it’s ever been, but it was up at $16 on peak actually Well, it doesn’t show the peaks, but, it’s been in the mid to high teens at times, actually just a winter ago, one year ago, it was at $5 at peak for a week or two, and then came back down The point of this is, it’s not just about cost today It’s about volatility, right? I’m trying to build an economy like in Columbia And I built oil-fired garner power plants, because I have a sweet deal with Hugo, and then Hugo dies and then I’m screwed And now I’m back to world market prices for oil

Then I can’t afford it Same as true in the US Utilities are still right now thinking about, oh, we should build more gas-fired power plants because stuff is so damn cheap Well, 10 years it’s not, we just signed and got approval last week for a power contract with Los Angeles Department of Water, our third one with ’em, for 5.20 cents a kilowatt hour fixed for 30 years, inflation adjusted, that’s 3 1/2 cents per kilowatt hour That is coal prices, 3 1/2 cents in today’s dollars And I can guarantee that price for 30 years Gas guy can’t do that Gas guy goes, oh, no idea, in five years, wherever there’s a big gas accident, and then a bunch of EPA requirements, and it’s gonna drive prices up right now Gas supply’s actually diminishing because less drilling And then the non-shale gas is reducing about 5% per year In the US, we’re slowly running out of non-shale gas And then there’s all this shale gas that costs about three bucks to get the shale gas out of the ground So none of these guys are making money right now They’re all hurting, which is why nobody’s investing in gas right now So gas supplies diminishing So gas prices will go up That’s the expectation 20 years from now, they have no idea what gas prices will be I mean, it’s completely unknown So volatility in terms of, if you build an economy or grow your economy, or even, have a steady state economy is a huge factor in terms of planning I don’t want to build a data center, which by the way, data centers now, we start writing big contracts with companies that run big data centers They want that 20, 30 year forward visibility of not having any shops because they use a lot of electricity They’re starting to settle in desert areas where there’s a lot of solar because the solar guys are the only ones that can give them a steady contract I can sign a 30 year contract My fuel costs are zero, right? I’m not subject to any of these volatilities I can do that All I have to do is pay back the bank, and weather patterns are certainly in desert areas, extremely predictable So now for the rest of the world, if you look at this, about 80% of the world’s population live in Sunbelt countries, it’s not a surprise because that’s where food grows, right Who wants to live in the Arctic? So where the sun shines is Where the sunshine is where the population is So, and look at that, the US is not even considered a solar sunbelt country So solar, while it may not be a great solution in Alaska, certainly is a good solution for most of the world’s population You can see the growth, which countries, where it’s growing up Investments, I’m not gonna go into that This is more investments This is more technical, the duck charts You guys probably could care less about, this is some of the worries that folks have, which is there going to be over generation of solar? And what do you do with that? And how much storage? The sun doesn’t shine at night So, is that gonna work? All kinds of good questions, and there’s good answers for that This is the answer here for storage Storage technology too, is getting cheaper It’s not quite a Moore’s law, but for storage, it’s mostly just because of scale And I mean, Tesla battery today is $500 per kilowatt hour, which is, I still don’t know why they’re actually still relatively inexpensive, but still relatively speaking, too expensive Tesla is building the Gigafactory in Nevada I’m sure you heard about that, to build batteries at a huge scale And just the scale will drive the costs of battery technology down We’re right now, designing power plants with storage that will come on line in 2018 to 2020 And our costs, including storage is competitive with gas-fired power plants at that point The solar PV is much cheaper The storage is an adder-on The beauty, and that’s important to understand, wind, for example, is very cheap, but you may have three weeks of no wind How do you store that? That becomes ridiculously expensive The sun comes up every morning Your iPhone will tell you exactly when There may be some clouds Because the technology is getting so cheap, you can overbuild it So you can power the entire grid, even with clouds And then on sunny days, you store the energy

You can do things like desalination There’s now plans to look into that So the whole thinking is starting to change in the grid, as opposed to, how do I build enough generation to meet my load? It’s like, I’ll just build a lot of generation, and then I figure out what kind of load can I all throw in there? Like desalination, it’s really cheap to store water, So, whenever I have really sunny days, and my load is very low, I just make a lot of fresh water Cost is zero, because for the energy, and that is the biggest cost today, for a desalination plan, it’s all about energy, is because I’ve overbuilt it for my grid, it’s excess energy that it would normally just, just not use Now I’m putting it to good use Interestingly enough, sunshine, countries usually water problems Well, there’s a perfect solution So there’s a lot of places where, where this comes in as a very important equation How do I solve the problem of providing clean, good drinking water? Not that big a problem in the US, but certainly a huge problem in Africa and in Central America, et cetera So there’s a lot of side benefits This is just one little side I don’t want to like kick them, but a lot of folks love rooftop solar They think distributed generation is wonderful, and everybody should have a solar panel on their roof It’s like asking you to assemble your own iPhone at home You got a kit with 200 pieces, and it’s just like, it doesn’t make sense It’s just very, very expensive I can give you a free solar panels, and it’ll cost you more to hire a guy to put them and install them on your roof It’s just ridiculously expensive to put a tiny little system I mean, our power plants, we’ve developed the world’s largest power plant It’s on 6,000 acres of land It’s eight miles long Today, we power about a million people in San Diego And by the time it’ll be fully completed, it’ll be 2 million people The power plant that we’re building right now, just north of Mojave will power about a million people here in Los Angeles, by the end of this year Construction is gonna be completed in October So that’s a million people That’s real numbers, that’s real scale And you can see that the cost of building a rooftop system, also sometimes called distributed generation because it’s all over the place It’s all in the balance of system and the roof retrofitting installation costs, labor cost The panels today are irrelevant Five, 10 years ago, that wasn’t true Panels were really expensive And it didn’t really matter where you put them Today, it really does matter We build about two megawatts per day right now, up in Mojave, two megawatts That’s 2000 kilowatts Your typical rooftop system is four to 10 We build 2000 every day of that This is just cost of electricity, large distributed versus large-scale power plants This is economic impacts Obviously, all this power plant technology we’re building, it’s a lot better than shipping money to States that have coal or oil or gas Stays at home, so to speak This is some of the pictures here of our power plants In the last seven years, we’ve now become the largest independent power plant developer We focus only on one technology, only on one segment And that is the large scale, large scale, what we call utility scale power plants For us, a small power plant is 300 acres That’s a small power plant Good sized power plant is about a thousand acres That’s a decent size We have offices now in Brazil and in India, and just opening one in Bangladesh and in Singapore Projects, this is a picture of our Mount Signal solar farm It’s not completely built out yet That is in Imperial Valley For those of you have ever been there, It’s kind of like Mexico, except it’s still part of the US It’s L-central about a hundred miles east of San Diego Great location, great place You can see the border You can see where the US ends and then Mexico starts

It’s literally right on the border Thanks to the federal government, we didn’t have to pay for the fence on one side of our power plant Redwood project That’s what it looks closer up Springbok project, that’s the one on the construction Mojave And these are really boring I mean, the technology is really simple It’s just, panels, panels, panels on trackers, little inverter houses Our reliability is higher than a gas-fired power plant Also something that people don’t think about, they always say like, well, you’re intermittent because of the way the sun shines or it doesn’t Our reliability, I can tell you on July 4th of this year, within 2%, exactly how much power we will produce Gas-fired power plant can’t do that because if they have a turbine down for maintenance, they may lose 200 megawatts on their power plant I may have an inverter blow up, I lose 1%, but I can predict the solar radiation within about 1%, in the summer month, spring when the clouds, but the grid is at max capacity in the summer when all the air conditioners are running So typically on cloudy days, the grid is pretty relaxed That’s it I don’t know how I did on time, not too bad (audience applauds) – So I was the director of the international Institute for Applied Systems Analysis for three years, from 2009 to 2012 This is the institute located in a castle south of a size of Vienna, 14 kilometers South of Vienna And the institute has these three major themes This is from our strategic plan that we developed On the left is Peter Lemke from Germany, who was the chair of the board of directors, of the council and myself We developed a strategic plan that focuses on three major themes, energy, and climate change, which is of course exactly, what we’re talking about here, food and water also related in many ways I didn’t really see the desalination connection, but I found that very fascinating, and equity and inequality So the part that I want to talk about very much complements your talk on the global scale, how are energy systems evolving? And this is our report that was published in 2012, The Global Energy Assessment The director of the report was Nebojsa Nakicenovic, who’s here, pictured here You can download this report from the IIASA website, www.IIASA.at.eac., no ac.at AC for academic and AT for Austria Just as an aside, because you were talking about predicting things, and we had an energy assessment at IIASA in 1980, and we predicted not solar, but we predicted fracking It was just a matter of price And we knew that second, well we call it secondary, recovery of oil and gas, and we knew that it would come We didn’t know whether it was in 20 years or 30 years, but it would come when the price curves overlap So you can make these predictions in the longterm And the Global Energy Assessment has done a whole bunch of predictions This is a prediction of primary energy demand, supply, sorry, in the United States, North America and Canada, for a high demand scenario And this looks pretty ugly This looks very ugly This is kind of like, we let it all go, and we’ll supply it with whatever we can supply it with We didn’t consider the, well, there’s a little bit of renewable up on top, the green stuff that includes the PV I would probably go back and ask my folks, why isn’t this growing as fast as Dr. Buttgenbach is telling it should grow? And I don’t know if they would have an answer to that, but I will ask them that Now the next picture looks a little prettier, more renewables, and this is driven primarily by the 2 degree Celsius constraint of global climate change And as you can see, if you compare these two, there’s a huge amount of conservation built in Now the United States wastes a lot of energy We’re per capita or per household, we’re probably using twice the energy as a European household, Germany, Japan So we’re wasting a lot, so we can cut this by 30, 40% without any great sweat And then we crank up renewables, which is the green part on top, maybe a little nuclear, gas and oil and coal will disappear

I mean, that we clearly agree on that, oil and coal will and should disappear Here’s the picture for the Global Primary Energy for the Global Energy Assessment for up to 2008 We’re still growing in coal We’re still growing in oil The one comment I would have, go to China Go to China, sell them PV, because they’re building coal plants like once, once, once, every week or something like that They need to transition for all sorts of reasons, not to mention pollution So this is until 2008 This is a curve that shows that it is possible to supply the global energy demand for, even a high demand-scenario If you put in a lot of solar, and that’s on top, that’s solar Renewables, a biomass at the bottom, a lot of CCS, carbon capture and storage because you can’t let the coal continue to emit carbon dioxide And you see coal disappearing and you see oil disappearing, gas hangs in there for a while Again, this is a high demand scenario where you don’t put too much restriction on growth and demand Here is a more pleasant scenario where you go to the 2 degrees C situation, again, on top, you see solar, now taken over a fairly significant share And so the bottom line story is demand management is a big deal You can get down by 30% Renewables, solar, biomass, wind can contribute a lot, and we can get rid of coal, and maybe even a good chunk of oil This is a curve that I wanted to show you, overlaying your cost curve, completely consistent with your cost curve The yellow line is a photovoltaic tag price And I think this is per kilowatt installed, not kilowatt hour, going down by a factor of 15 over the last Well, the x-axis is gigawatt installed, cumulative gigawatt installed So the more you install, the more you learn, this is called learning curves, and very consistent with your story about the reduced prices of producing solar And interestingly, though, if you look at wind, it stays pretty flat There were some scale benefits from building larger windmills, but not a lot And the most interesting thing to me is nuclear power, which is the red stuff, actually has been going up So nuclear power from a price perspective, isn’t the answer And if we extrapolate the yellow line, we’re having exactly the story that you’re telling us The only quibble I have, and maybe this is not even a quibble, this is the other idea, this is the solar heating systems that are contemplating particularly for the Sahara And there are two parts of that I don’t think this is photovoltaic I think this is heating system, 10 square miles This is newer one, what eventually will be a 560 megawatt system in Morocco So kind of the scales that you’re talking about, but a different system, right? So if you know solar heating, it’s essentially like working like a regular power plant, heating the water with solar panels, and then steam develops, and you want steam engines, I suppose And again, this other picture here on the right, that’s the scale of land that you need, to supply the world, which is the big square, Europe, which is the medium square, and then Germany, which is the little square So similar story, the land requirements aren’t all that huge And it’s Sahara, who cares? I suppose now, how do you get the electricity from there to Europe is a question, but there are companies that work on DC systems to transmit And so the only other quibble I would have is against storage I mean, if you add the five to six cents on top of the electricity production costs for solar, storage can still be a bit of a problem, but otherwise I’m in violent agreement with my previous speaker So thank you very much (audience applauds) – Thanks, Eric It’s always an honor to be able to share my perspective here at USC And I’m particularly grateful to have been asked to provide the perspective from a political point of view For me, that is having served a senior advisor to governor Arnold Schwarzenegger, and what that means in relation to the solar, the growth of solar electricity, and solar power in California, which then impacts the country and the world We like to say at the Schwarzenegger Institute, that public policy is always best formed when it’s guided by facts and research and data

As we all know, unfortunately, very often in politics, facts and research and data are not the prevailing things that guide public policy And I’m gonna share just some of those issues that come up When Arnold became governor of California, fortunately, we live in a state California, that has a long, long history of environmental leadership in general, and in energy efficiency and renewable energy in particular, and more recently in addressing climate change The other thing that’s fortunate about California is Arnold Schwarzenegger, while a Republican governor, is not typical for what you see in Congress in the Republican party in not wanting to address the growth of renewable energy or address climate change But in California, that’s never been true When Ronald Reagan was governor, he passed the California Environmental Quality Act, and we’ve seen consistency in California’s leadership on this issue So the couple of things I want to bring out is like Arnold becomes governor, and he says, “What kinds of smart policies can we pass “through the legislature that’ll support the growth “of renewable energy in California?” Now, this is separate from the fact that obviously the more we move off of fossil fuels and on to renewable energy, the more we’re potentially able to address the concerns almost every major scientist in the world has, about climate change and the impact of climate change But even if, like, let’s say you’re arguing with someone that holds views that well, we don’t believe in climate change, and you stack up a mile of scientific reports on it If someone doesn’t believe in it, you don’t need to even address it as to why moving into developing renewable energy is just the smart way to go So you don’t even need to bother butting heads on that argument, when you’re looking at creating energy, that can’t be imported from the middle East, but it’s created here, that creates jobs And I wanna say that because it’s very important because those that are in politics nationally, that are maybe saying well, okay, maybe there is climate change, but we can’t afford to create laws that address it because it’ll kill jobs in the economy In California in the past six years, California has created more jobs in renewable energy in just the state of California, than exist in coal in the entire United States So this is a very important argument that Arnold used and Jerry Brown used that was made in Paris at the COP talks, about how we are a living laboratory, about how you can by with smart policies, address climate change in a way that supports economic growth and job growth And that’s a very important argument to make So let’s look at these large scale solar projects that we saw Tom present and what his company is doing And he recently said he got another contract with LA DWP In California, he also mentioned the renewable portfolio standard I’m gonna go back to that, because that’s government policy that was put in place that allows companies like Tom’s and other companies that are able to produce to produce large scale solar power for regions in our state and in the nation and the world, to come in and have a market to sell it to So a governor comes in and he says, okay, we want to pass a law that creates a timeline and mandates the utilities throughout the state of California, to say that by a certain date, 20% of all the electricity you’re providing your customers must come from renewable A few years later, 25% must And then at another date, 50% of all electricity you’re providing your customers must come from renewable sources So a governor, smart leaders will sit down, they’ll go, ’cause everything’s interconnected So the research you’re hearing about and battery technology and the chips of the PV’s, much of that, even though Tesla and other private companies and Tom’s company is doing some of that A lot of that also happens at universities And in California, we have some of the greatest research universities that are doing work in this area that are impacting the world than anywhere else on the planet So some of that is, well, do we say, ideally, we’d like 100% of all electricity to come from renewables, but can you pass along, say in the next five, in five years from now, 100% will come from Well, if it’s not at all possible, humanely possible, you can’t do that So you want to find out what is feasible, what companies are out there, where’s the state of technology? And then push the envelope a little bit So if it’s feasible that maybe 15% can come, maybe you push it and say 20%, because then you’re pushing the envelope Now, when that happens, so when smart policies are put in place like that, not just LA DWP, but Pacific Gas and Electric, Southern California Edison, San Diego, every utility in the state is putting out bids

for companies like Tom’s to come forth and bid to get large scale, renewable energy projects That creates market That also creates certainty, which is what the investment community, and not just businesses like Tom, but what the investment community wants So when a startup technology innovator that thinks they’re gonna create a better trip, a better battery storage technology So in the night time, there really is remarkable, large scale battery storage, that’s able of storing solar energy, that allows venture capitalists to have more certainty and private equity investors to have more certainty, to invest in some of these innovative companies that are exploring these new technologies So that’s how it all interconnects with the research going on, whether it’s in the private sector, at our great universities, with businesses like Tom, and with the market is with smart policies get put in place And the renewable portfolio standard, in a major way has impacted companies like Tom’s to be able to create markets, which then also you hear cost, cost, cost brings the cost down So it starts with a smart political leader Like Tom says in Texas, they’re not looking at renewable portfolio standards because if you’re a political leader that just wants to make sure that coal and oil, and the traditional energy sources are that, that your constituents or your special interests are making a lot of money off of, you’re not gonna wanna change that So it starts with if making sure that visionary leaders that understand this, that come in to do the right thing, come in so that they put these smart policies in place, understanding how the market works and what’s needed to achieve these goals So I also completely support what Tom said and the work he’s doing I will take slight issue with the rooftop solar part when he went into, understandable as a large scale, a solar person, yeah If every utility, if we can get all, if every utility is providing renewable energy to its customers, we don’t need individual homeowners or businesses to put solar panels on their rooftop But when a governor like Arnold Schwarzenegger comes in and he’s looking at the landscape, and he’s seeing that we’re a long way from let alone 100%, 50% of renewable energy coming from our utilities, he’s trying to work, you wanna do everything that’s possible to encourage more renewable energy, which of course makes the air quality better, impacts climate change, and grows the solar industry, including spurs innovation So he put forth the Million Solar Roof Act And that was also cost-based So he sat down with economists and business leaders that did a model to say, what would it take for new developments and homeowners to be able to make putting rooftop solar panels, ’cause then it was very expensive and not competitive, putting rooftop solar panels on their home So they came up with 50, a rebate of about 50% in year one of the cost of the rooftop solar system Year two 40%, year, three 30% And then it goes away, because the economic model showed that after year three, that if you have that many more people buying solar panels, it will, the scale alone will drive the cost down, and it worked, but on the political side of it, I just wanna say how sometimes, whether it’s passing renewable portfolio standard or doing the million solar roofs, competing special interests that are at play with our legislators, right? So the Million Solar Roofs all sounds fine Why not give a rebate, help offset the higher cost? And by the way, just so we all know, in the early days of the oil industry, a ton of federal dollars go to help support the growth of the oil industry, which they still get by the way So there’s long precedent when it’s smart to support the growth of a new industry that’s in the benefit of your citizens to do that So but in California, we all know you’ve heard like there’s powerful, special interest The gun lobby is a big, special interest The oil lobby is a big, special interest On the democratic side in the state like California, the public employee unions are a big, special interest In California there’s about 1.6 million people, our state worked for the state of California An additional 350,000 people are K through 12 public school teachers That’s another union in itself, and they have separate power, but I’m gonna talk about the public employee unions And within there, the very powerful State Engineering Union, and because of their power,

the leaders in the legislature, count on their support to get elected or get reelected, and further, they count on their support to get elected within the legislature to be leaders So Fabian Nunez who was speaker of the assembly and an important leader, and a good guy and a friend, and did a lot of forward thinking things, but was influenced by these special interests, was the youngest person to get elected speaker in the assembly And when you’re in a leadership position, as you all understand, there’s a lot of power that goes with that So even, and separate from getting elected in LA to the assembly, they helped lobby his democratic caucus members to get him elected speaker of the assembly So Arnold has him come down, Arnold had like a smoking tent So we figured it was good for deal-making in the courtyard, at the Capitol, in the state Capitol, where he’d smoke cigars, he’d bring the leaders down, and I’m sitting there during the negotiation, and honest to God, speaker Nunez had to go and say, “Can I use your phone, governor,” to call the head of this union, to see how far he felt he could go? ‘Cause he didn’t wanna risk They were very open about this in our political system They wanna do good, but they all they say, if we don’t get, if we’re out of it office, we can’t do any good That’s their thinking on it So what they want to do, again, here’s what this union, understandably, it’s a democratic interest against a democratic interest, public employee, unions, wages, and benefits versus environmentalists, two democratic constituencies, within the same party So the unions, their whole focus, the leadership of the unions, is really a good benefits and wages to their workers So in California, the public employee unions, they try to keep passing what’s called Prevailing Wage and Benefits, which is a package of salary, a minimum salary and a health and pension benefits Obviously good, whatever you think, even if you think that’s a good cause, let’s get our workers better benefits and salary, and that’s what they’re supposed to do But they use this as an opportunity to say, well, wait a second If we’re going to pass this, this is an opportunity now, to extend these prevailing wage and benefits, to even day workers that are working on any of these projects, because if the state is gonna give any rebate, it becomes a state project for the solar power So we’re gonna say any worker in any part of that housing division that comes in, even if they’re not working on the roof, even if they’re not the solar panel installer, we’re gonna now increase We’re going to say that the you’re required to pay them prevailing wage and these benefits Well, the economist modeled this whole rebate thing to make it affordable over the year one, year two, and year three, if you then add in the tremendously added cost of these prevailing wages and benefits, we’re not saying cut anyone, but they wanted to increase it, to extend this It would have made it not pencil out And it wouldn’t have been able to incentivize the homeowners to be able to come in, and the business model wouldn’t have worked It didn’t go anywhere Fortunately, because we have the Public Utilities Commission, and they have their own power Arnold then went to the Public Utilities Commission, and that through a public goods charge, they were able to do a rebate program, at which point, the following year, the democratic legislature wanting to look good to the environmental community, said, You know what? We’re gonna now make a law and codify what the PUC has done And they then did add prevailing wage, but only to the people that were installing the solar panel, not to everyone that was working on that project But that’s the kind of politics you see On the large scale solar, the other, one final anecdote I’ll give to show what you’re up against And again, sometimes it’s within the same party competing interests So Tom talks about, California, we have the desert We do What a fabulous opportunity for solar panel, for solar power But you’ve gotta then build transmission lines to get that solar to the customers where they are, and connect the, to get it into the grid So in our desert, and of course we have the CEQA and all these regulations in the process that you have to go through So in the desert where they had slated one of the biggest projects, there was a desert tortoise that was on the endangered species list So the groups that had, their whole focus is protecting endangered species and good for them And we want them to be doing that, but they came forward because that’s all they care about and said, no, no, you can’t build that here So those are just a few of the examples I wanted to bring forth, to show how, even something that seems to make such sense,

like, when Tom shows what a small area, the sun could power the whole country, even getting the ability to build it in that small area, to get the transmission lines and what you’re up against with the regulations and the public comments And if it said endangered species involved or cost analysis, the different issues that could come up, to potentially make it challenging to get there But the good news is that the cost has come down, and it’s very promising, not just for continued economic and job growth in a place like California, and proof to others that you can do it But one of the most important things we could do to reduce climate change and the interconnected things is the other thing you hear about, is that Detlof brought up, is energy efficiency, because what is your demand? I mean, if the utilities are having to supply to meet customers’ demand, and the demand is higher So another, other bills that went into effect, created that required all our appliances to be energy smart Now, you see, when you go and buy it, it says Energy Star So these are some examples of how it’s all interconnected, and how smart government policies are so important to help support this kind of growth (audience applauds) – I’d like to know what type of storage technology are you using now? Is there a reason to solar farms you’re building? – We’re using both lithium ion battery technology, as well as flow batteries It again, it comes down to cost, and flow batteries are looking very promising, in terms of driving the costs down for large scale installation For smaller ones the lithium-ion is easier to handle I did wanna make one comment So, first of all, I wasn’t trying to knock the solar rooftop stuff I think that played an incredibly important role in multiple areas Number one, public awareness I think the fact that generally the population says solar is a good thing We love it, and is based on solar rooftop It has nothing to do with our big power plants in the desert It’s because people could see it, touch it, and it made sense So I think there was a tremendous educational value Second of all, at the time it was implemented, like you said, the cost was still very high, so it really helped the economy, or the industry grow Germany took a leadership there, with feeding tariffs and indirectly supporting it And that created the big factories making panels, and then California stepped in And so it was tremendously important And lastly, Governor Schwarzenegger really was a visionary I mean, it was amazing what he did for the environment, in terms of actual, tangible solutions He implemented the Renewable Portfolio Standard, and he then upped once with an executive order, because there were some issues Your friend Nunez was probably talking to Mark Joseph at the time, why he didn’t want to make it, pass it as a law, but, but he did have an executive order to increase it to 33% So really an environmentalist at heart, but also then turning it into real policy that helped the industry grow We don’t really need that as much anymore, which is a thing that policy should do It should give birth, but then kind of step away, and I think that’s exactly what happened in California, really is a great role model – What about the solar heating systems? What do you see as the pros and cons between PV and solar heating? – When you say solar heating, you mean concentrated solar, very simple They just don’t come down in cost It’s not a, today they are about a factor of two more expensive in terms of levelized cost of energy Five years ago, they were on par 10 years ago, they were cheaper It’s just, they’re getting killed by the chip – [Man in Audience] Yeah so you blew through the duck herd slide So it’s– – Duck is dead – 2020, 2018 when we don’t have infinity solar panels Talk to me about what this means for the duck curve and for ancillary services and things like that, because I’m thinking, you were using a 7% discount factor And if we have increased prices because of duck curve now, 7% discount factor, that’s gonna matter, right? So what does this – Well, his could be a very long discussion

So I’m gonna try to cut it very short The duck curve is a projection that was made on March 30th of a year, which is a very particular day because it’s spring It’s neither hot nor cold The load is very low, but the solar radiation is actually pretty good So one could extrapolate that and say, gee, if everything linearly just continues the way it is, then we will have a huge over-generation problem where we will just produce too much power from solar photovoltaics And then it suddenly drops off and we need to ramp up conventional energy sources at back, call it four or 5:00 PM in the afternoon when the sun comes down And that ram curve is not manageable for conventional Give you an idea, an efficient gas-fired power plant, takes several hours to spool up basically and come online You can’t just turn them on However, this is, in my mind, it’s a simplification that a lot of folks do They kind of look at state of the art, and then they extrapolate all the trends and say, that’s what the future will look like Well, Southern California, Edison, for example, today, will pay you a premium if you orient your rooftop system to the west It’ll produce less kilowatt hours, but they’ll pay you a premium because it will combat the duck curve, because now you produce less in the morning, but much more in the afternoon So it’ll soften the duck curve Battery storage companies love the duck curve because you can make a lot of money out of storing power when there’s over-generation and then selling it until the afternoon Also industry will adjust Today, what’s called Time of Delivery factors, I get paid not for kilowatt hour, but for kilowatt hour at a certain time of day, those just shifted Five years ago, I got paid based on conventional energy sources Today I get paid in the late afternoon, a lot more that used to be during the daytime peak Well, now everybody says, well there are gonna be a lot of solar So, I’ll pay you So we start thinking about how do I optimize my power plan for these new TOD factors? So all of these economic drivers actually will take care of that The simple extrapolation, isn’t gonna be the fact, because we react, we try to make more money I orient my power plan slightly to the west, I make more money, I’ll do that – [Man in Audience] You see it coming, you conduct – Yeah, I conduct So I think it’s, this is the favorite slide of the fossil fuel industry, to say, oh, if you just keep on going with those renewables, there gonna be a disaster The grid will blow up Well, Schwarzenegger had to fight a lot of that, where people said, oh, 33%, that’s impossible The grid not deal with that It’s too much renewable, blah, blah, blah, all turn out not to be true So – So as a solar company, I’m just wondering what policies are ready for a change, and do you like to see, your state level, or the federal level issues that could be resolved with that policy? – Well, first of all, I’d like for the Clean Power Plan not to get killed – [Man in Audience] Which? – The one, the Supreme court, the Obama order – Yeah That that’s a major tool to get, at a federal level, to get us moving in the right direction It’s complicated plans, and not saying I even understand all the details of it, but generally I think that that is a step in the right direction We would love to have a level playing field Folks always say, well, you get subsidies, and for the large scale power plants, you don’t get any subsidies other than the investment tax credit, which is a federal 33% – But doesn’t that sunset every few years? – Yeah, and it dies off down to 10% level by 2019, however, oil and gas industry last year, got $222 billion in subsidies – Right, with no sunset – Yeah, with no sunset, and they have mass umlimited partnerships which– – [Man in Audience] You call it sunset (indistinct) – Yeah, yeah, good one – Mass unlimited partnerships are significant cost savings due to tax structuring you can do around MLPs that we can’t do renewable energy So there’s a lot of benefits

that the fossil fuel industry gets And not to forget, our federal government makes a lot of money off oil and gas in royalty So if we have a level playing field, we would be much better off in the long run And right now it’s very tilted Our lobby is a joke in terms of our power, the oil and gas lobby, they got billions of dollars I mean, we’re barely a grassroots organization by comparison But lastly, I think what our country really needs, we talked, touched on that a little bit It’s kind of what Eisenhower did with the freeway system, where he said, let’s just build it because that infrastructure will pay off in spades Because if you can start transporting goods efficiently, that grows the economy tremendously We need to do the same and have policies for that in place to build more transmission And that transmission needs to be focused on where it makes sense to bring renewables in Solar from the south, wind from the north, northwest, and really build out a strong grid I had a discussion with a delegation from Brazil last night, the grid in Brazil is stronger than the grid in California It’s scary, but our grid is, it’s 40 years out of age (indistinct) – Yeah, exactly – But this is an infrastructure that is in my opinion, yeah, and I’m slightly biased here, but it’s really– – Comes right after bridges, right – It’s really important to invest in because it’s the solution – Well, unless you’re in Flint, and the pipes of your infrastructure is showing your poison water, but it’s all over the country, the infrastructure issue – So maybe kind of a big infrastructure policy direction I think that would really help the country move forward The DC lines, Los Angeles has a DC line that goes into Utah It’s amazing what the technology will do – [Man in Audience] DC? – Direct current – [Man in Audience] Yeah – 1% loss on the thousand kilometers, that’s 600 miles 1% loss, from that little transformer to your house, you’re losing more power than they lose bringing it in from Utah to Los Angeles So the technology is there. We can do it – But the real question I have is how much maintenance does one of these plants require once it’s built, and how many jobs and how many people are you employing? Once you’re not in a construction phase but within the main and sort of energy production phase? – Okay 8minute energy comes from, it takes eight minutes for the sunlight to travel from the sun to the earth After that we’ll take care of it How many jobs, what’s the maintenance costs? The good news and the bad news for jobs is that it takes very, very little maintenance These panels have a life of about 35, 40 years Our independent engineers will certify the life, the useful life to 35 years of a facility You need to wash them once in a while Once in a while you have a bad panel and you change it out We have less than 3% of our revenue in operation and maintenance expense It’s very low That also means we have very few people there, which is why I can predict my cost for 30 years and sign a contract for 30 years, because I have very little surprises happening So we employ typically on a good size facility, maybe a dozen people full time – As we’ve come to the close a close of time Can we give another expression of gratitude to our speaker? (audience applauds)