Q.CELLS: NOT ALL MODULES ARE CREATED EQUAL

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1 Q.CELLS: NOT ALL MODULES ARE CREATED EQUAL Worldwide installed solar Photovoltaic (PV) generating capacity has increased from 6GW in 2006 to over 60GW at the end of Since 2006, technology developments and manufacturing efficiencies have reduced the cost of solar modules by 70%, and their share of system cost from 70% to less than 50% 1. Consistent and low-risk cash flows over 20 to 25 years with minimal operating costs and zero fuel costs, solar PV projects are an attractive investment, permitting high levels of debt and fixed price contracts with customers. Predictable returns require system components to perform as expected. Module manufacturers warrant product performance over years and system operators guarantee system performance over 20 years. However, 80% of installed modules have been in the field for less than three years. Conventional quality standards have not kept pace with developments in technology and are insufficient to guarantee performance. High-profile product recalls and failures from some of the largest PV module manufacturers underscore the seriousness of PV module quality issues. The price of low quality is very high. A rate of module degradation just 0.5% higher thanexpected can reduce system output by more than 6% over 25 years 2. The major causes of under-performance are progressive and systemic and extremely difficult to detect and rectify. Warranties and performance guarantees provide investors with some protection against underperformance but they can be expensive to exercise and provide only limited coverage. However, few companies have the operational experience, the comprehensive understanding of the solar PV value chain from cell to system, or control over quality to actually deliver on these guarantees. Conventional approaches to quality and risk mitigation in solar PV module selection need to be reassessed in the light of experience and developments in technology. Confidence in the viability of solar PV cannot be achieved through passive reliance on minimum quality standards and warranties, but through active management of quality and a focus on profit maximization. QUALITY IS THE BEST WARRANTY Q.CELLS is redefining quality in solar PV systems, leading the industry in standards of: PERFORMANCE developing technologies and manufacturing techniques which increase efficiency and eliminate the causes of underperformance and continuous quality monitoring throughout the manufacturing process RELIABILITY developing and implementing robust testing procedures more than double the industry standard to go beyond the standard certifications such as IEC and UL, making it the only manufacturer to carry the VDE Quality Tested mark from Germany s independent VDE Testing & Certification Institute CONSISTENCY 100% testing and tracking from cell to module, continuous monitoring of every step in the manufacturing process and regular repetition of reliability tests 1 Source: Photon Magazine, Navigant Consulting, Greentech Media, Q.CELLS Research 2 Source: Illustrative example of 5MW fixed-tilt system in Southern California

2 page 2 WHY QUALITY MATTERS Modules experience enormous stresses during their 25 years in the field: solar radiation, humidity, temperature, wind, rain and dust take a toll on physical and electrical performance. All modules degrade over time, with most manufacturers warranting a rate of % per year 3. Even microscopic imperfections in a cell, component or manufacturing process can impact performance. Under typical operating stresses these imperfections can progress rapidly into major faults. Inconsistent performance between cells puts strain on other module components and can cause the entire module to underperform. Mismatch between performance of modules can then propagate across the system through the series strings connecting modules. The expansion of small weakness into major faults can cause electrical short-circuits which damage the module and other system components and can cause fires or dangerous electrocution risks. It is extremely difficult to detect and diagnose underperformance, let alone rectify it. Monitoring systems measure only aggregate performance and cannot pinpoint underperformance in specific components or disaggregate the effect of variations in environmental conditions. With as many as 4,000 or more modules per installed Megawatt testing and problem isolation is prohibitively expensive. Module underperformance can be systemic with weaknesses in components or manufacturing processes affecting a supplier s entire batch or product line. QUALITY IS A REAL ISSUE Quality issues have impacted some of the world s largest module manufacturers: FIRST SOLAR 4 Modules sold in 2008 and 2009 were found to degrade by 10-15% within weeks. The cost of replacing modules and compensating customers exceed $250MM to date. In 2012 it increased warranty provisions for module underperformance in high temperatures. REC 5 All of the 420,000 modules sold in 2008 and a quarter of 2007 were repaired or replaced at a cost of over $200MM. SUNTECH 6 In 2012 recalled 100% of its Solar Shingle product due to fire risk. These modules had passed all standard tests, highlighting a potential issue for the solar PV industry. Average degradation of 1% on modules installed since 2006 could result in aggregate underproduction of 100TWh over the life of those modules. This issue will continue to grow with the industry unless module quality is addressed. 3 Source: Manufacturer spec sheets from Tier 1 Module Manufacturers 4 Source: Company Regulatory Filings, PV Magazine, Greentech Media 5 Source: Company Announcements, Dagens Naeringsliv via Greentech Media 6 Source: U.S. Consumer Product Safety Commission

3 page 3 THE VALUE OF Q.CELLS QUALITY The higher performance, reliability, and consistency of Q.CELLS modules offer project investors and operators higher outputs at lower risk. Q.CELLS modules have performed better than key competitors in extended testing in the harshest of environments including the dry heat of the Australian outback. This performance advantage has been demonstrated in the field where actual output from systems built using Q.CELLS modules exceeds standard performance benchmarks consistently. Q.CELLS PV PLANT PROVEN IN-FIELD PERFORMANCE 7 Q.CELLS Proven Performance Against competitors 8 PV Plant Performance Ratio January December % 90% 85% 80% 75% 70% Expected Actual Average daily energy yield (kwh/kwp) March June Q.CELLS Poly-Si % 4.68 CdTe -8.30% 4.79 a-si -7.60% 4.84 Mono-Si -1.90% -4.70% % % Poly-Si 4.65 Mono-Si Mono-Si Poly-Si -5.10% 4.94 Mono-Si Q.CELLS Advantage 9 A system which maintains the 7.0% output advantage over standard systems demonstrated by Q.CELLS in testing and in-field experience could achieve a pre-tax IRR increase of up to 0.7%. The advantage over systems experiencing degradation rates of % is an increase in output of 14-23% and of % IRR. 9 25% 20% 15% 10% + 0.7% IRR + 1.4% IRR % YIELD + 2.0% IRR % YIELD 5% + 7.0% YIELD 0% Standard 1.0% 1.5% Degradation Rate 7 Source: Q.CELLS Power Plant Monitoring 8 Source: DKA Solar Center, Alice Springs, Australia 9 Illustrative Example: 5MW fixed-tilt system in Southern California with 30% ITC; 20 year PPA $0.12/kWh; Unlevered, pre-tax IRR

4 page 4 YIELD SECURITY THROUGH INNOVATION Q.CELLS has the largest R&D center in the industry, employing some 200 engineers and scientists. Q.CELLS advanced designs build Triple Yield Security protection into every Q.CELLS module, eliminating key failure points and ensuring 100% consistency and traceability. ANTI PID TECHNOLOGY (APT) POTENTIAL INDUCED DEGRADATION (PID) Tiny voltage differences between cells within the module and the module frame allow current to leak out, decreasing output by up to 20% 10, even in the first few months of operation ANTI-PID TECHNOLOGY PID is eliminated at the cell level during manufacturing Modules from leading competitors tested by Fraunhofer ISE experienced performance losses of 5-90% HOT SPOT PROTECTION (HSP) HOT-SPOTS Manufacturing and handling stresses create very small material defects within cells. Partial shading of a module creates strong reverse currents which channel through the Hot-Spot area. The Hot-Spot can reach 250C causing irreversible damage, module failure and potentially leading to fires and electrocution risks. Approximately 1% all cells have a Hot-Spot (almost 1 per module) Most manufacturers simply reduce cell performance to mitigate the effect of Hot-Spots. Q.CELLS HOT-SPOT PROTECT 100% of cells are tested for Hot-Spots during final inspection. Any cells which fail are recycled Automated cell handling and optimized packaging minimize damage TRA.Q TRACEABLE QUALITY FROM WAFER TO MODULE Every genuine Q.CELLS cell is laser marked with a unique identifier containing detailed information including its source, the date of production and even the material used. The cells are traced through every step in the manufacturing and quality assurance processes. This allows even the smallest faults to be traced all the way back to the original wafer, allowing every component and manufacturing processes to be improved continuously. 10 Source: Photon Report October 2010

5 page 5 VERIFYING QUALITY The testing processes for assessing performance and reliability of PV modules focus on compliance with safety standards and verification of manufacturers statements about initial performance. These tests incorporate some performance and durability testing but only on a limited sample of complete modules and are repeated rarely. Testing standards have become self-reinforcing as manufacturers achieving the required standard for white listing gain the most experience with project developers and investors. Test standards have not evolved with changes in technology, field experience or testing capabilities. Current test standards offer very limited confidence for investors, or reliable quality differentiation and performance guides for developers. There have been a number of high-profile failures in recent years after short operating periods from modules produced by some of the largest manufacturers that have passed these standard tests. 200% Quality tested Q.CELLS has partnered with the independent VDE Institute to develop the VDE Quality Tested testing program, the most comprehensive in the industry. This program includes 2-3 times the standard environmental tests with limits 35% higher and adds continuous assessment of quality control to tests of the product itself. Safety Initial Quality Ongoing quality Certification UL 1703 IEC 61215/61730 vde certified seal Number of tested Modules Maximum allowed Degradation 8% 8% 5% Damp-Heat Test Hours none Thermal Cycles Humidity Freeze Cycles after dynamic load Wet Leakage Yes none Yes Periodic Verification Flash Test, Hi-Pot, Process Parameters Yes Yes Yes Continuous In Line Quality Control Climate Chamber none none Quarterly verification of monthly control samples Electroluminescence Hot-Spot Test none none 100% Wet Leakage none none 1% Reverse Current PID Test none none Yes

6 page 6 In addition, Q.CELLS robustness in tough environmental conditions has been verified through testing for: Corrosion resistance from ammonia vapors in the countryside, acid rain in the city and salty air by the coast to the exacting DIN EN standard High wind resistance: Q.CELLS modules are the only ones to have passed the Category D cyclonic pressure tests administered by James Cook University in Australia Thanks to its rigorous quality testing program Q.CELLS enjoys one of the lowest return rates in the industry, equivalent to one module per 10MWp sold. CONSISTENCY Lower quality materials, manufacturing processes and limited inspection testing can lead to inconsistencies in the quality of each module produced. Q.CELLS 100% QUALITY ASSURANCE TESTING Q.CELLS Quality Assurance processes and teams are involved from design to delivery. Every cell is tracked through each carefully monitored quality testing process from wafer to module using Tra.Q. In addition, every 50th module goes through additional quality controls and every month a sample of modules is put through rigorous performance testing. OPTICAL DEFECTS Cells and other module components can become misaligned or damaged during module assembly due to manual processing, poor controls and sorting criteria Q.CELLS QUALITY Defects can cause modules to underperform or fail, creating safety risks Fully automated production Comprehensive sorting of cells and modules 100% inspection and testing ENCAPSULANT DEGRADATION Low quality encapsulant material and process weaknesses in application can cause: Browning which reduces the light reaching cells Delamination and destabilization of the module Q.CELLS QUALITY High quality encapsulant from regularly audited suppliers Continuous process monitoring Extended climate testing including ammonia and salt fog SOLDERING TECHNIQUE Manual cell layout, stringing and soldering add thermal stress, damage internal module components and result in inconsistent connection quality Q.CELLS QUALITY Fully automated process with 100% machine inspection of cell geometry, ribbon alignment, string length and cell gaps Cross-connectors soldered to a beam not directly onto glass, increasing durability

7 page 7 Modules from leading manufacturers tested to Q.CELLS standards have failed one or more failure and underperformance tests: MODULE INSPECTION China China Germany China Germany Q.CELLS Optical Defects Fail Fail Fail Pass Pass Pass Encapsulant Test Soldering Technique Pass Fail Pass Pass Fail Fully Automated Manual Manual Automated Automated Manual Fully Automated QUALITY IS PREVENTATIVE, INSURANCE is REACTIVE Manufacturers warranties and output guarantees from system operators offer investors some protection but can be complex to structure and enforce. Manufacturers offer limited product warranties of up to 10 years, and performance warranties over years. However, recourse is limited to replacement or a partial refund for underperformance, but not lost revenue or the cost of locating and replacing faulty modules, more than the original cost in most cases. Moreover, few companies can fully support these warranties with operational experience, comprehensive understanding of the solar PV value chain from cell to system, or quality control. System operator performance guarantees assume product underperformance risk with unlimited downside, significant factors in contract pricing which will increase with further evidence of underperformance. The guarantee trails actual performance by up to 4 years and is based on a margin below expected output, while its value relies on the system operator s financial strength. The trailing and margin effects mean that module deterioration 1.0% per year will not breach the guarantee until the seventh year and could cost the investor 2.0% of pre-tax cashflow and 0.4% IRR. 11 QUALITY IS THE BEST WARRANTY Confidence in the quality of PV modules reduces risk for investors and system operators, the requirement for cash reserves for repairs and the financing risk premium for solar PV projects. Q.CELLS commitment to quality provides security of maximum output at minimum risk. Q.CELLS North America is confident in its quality so offers a market-leading warranty guaranteeing aggregate output 0.7% higher than the best competitor and 7.2% higher than industry standard. 11 Illustrative Example: 5MW fixed-tilt system in Southern California with 30% ITC; 20 year PPA $0.12/kWh; Unlevered, pre-tax IRR; Guarantee margin 4% Years 1-4, 2% trailing by 4 years thereafter

8 page 8 NOT ALL MODULES ARE CREATED EQUAL LOW QUALITY TODAY IS EXPENSIVE TOMORROW Any weakness in product design, manufacturing or testing can have a significant impact on the performance and reliability of PV modules, and on investor returns These weaknesses are hard to identify, difficult to rectify and tend to be progressive and systemic, undermining confidence in the viability of solar PV Standard testing regimes employed by most solar PV manufacturers do not address the issues of underperformance adequately and underperformance is a very real and rapidly growing issue Downside coverage is limited and adds to the cost of developing projects QUALITY IS THE BEST WARRANTY Q.CELLS is redefining quality in solar PV systems, leading the industry in standards of: PERFORMANCE developing technologies and manufacturing techniques which increase efficiency and eliminate the causes of underperformance and continuous quality monitoring throughout the manufacturing process RELIABILITY developing and implementing robust testing procedures more than double the industry standard to go beyond the standard certifications such as IEC and UL, making it the only manufacturer to carry the VDE Quality Tested mark from Germany s VDE Testing & Certification Institute CONSISTENCY 100% testing and tracking from cell to module, continuous monitoring of every step in the manufacturing chain and regular repetition of reliability tests ABOUT Q-CELLS North america Q.CELLS North America, part of Q.CELLS SE, designs, builds and manages financially sustainable solar photovoltaic (PV) solutions. The company brings a decade of global leadership in solar PV to North America, combining best-ofworld technology, processes and partnerships to deliver utility-grade solar PV solutions customized for local energy markets. Q.CELLS North America offers the full spectrum of PV solutions--from the core technology of cells and modules to power plant development, design, construction, operations and maintenance. With proven capabilities across the solar value chain, Q.CELLS North America minimizes uncertainty and risk, and helps customers achieve a higher return on their investment in solar energy. For more information about Q.CELLS North America, please visit CONTACT Q-CELLS 95 Federal Street San Francisco, CA TEL FAX infona@q-cells.com WEB