solar energy royalties

Report
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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
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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
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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
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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
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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)
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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
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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
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2007-09: Royalty Seller completed early stage work and secured
land by way of a long term lease
April 2010: Royalty Seller sold project to Royalty Payer in return
for cash and future royalty considerations
February 2011: OPA awards Royalty Payer a 20 year PPA
August 2011: OPA waives any rights to terminate the PPA:
http://fit.powerauthority.on.ca/programupdates/newsroom/newsroom-2011/option-waiver-opatermination-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 by Royalty Payer & contractors
December 2013: Commercial Operation Date (COD) royalty
payments commence
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Non-confidential interactive spread sheet
available from the Royalty Exchange (TRE) to
calculate purchase payments and returns
Full file review requires signature of nondisclosure 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

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