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Guest Article: How to Tune Your German Green Energy Asset Without Getting Sun Burnt in the Attempt

How can the returns on green energy assets be amplified without refinancing? What can be done to eliminate those “love handles” on wind or solar parks? For some readers, what follows will probably be a review of the basics of managing a renewable energy asset in general, however, I will highlight a few focus areas  that can generate further value, considering nuances of the German renewable energy regime (Erneuerbare Energien Gesetz – EEG). Perhaps as a backdrop, I have been focusing on the photovoltaic (PV) business (particularly large parks), yet, the EEG itself covers a much broader spectrum of technologies from hydropower and different types of biogases, to biomass, geothermal as well as wind (onshore, offshore, repowering), the tactics below, a priori, being applicable to all of them.

Martin Supancic writing about how to Tune Your German Green Energy Asset Without Getting Sun Burnt in the Attempt

German renewable energy assets are quite appealing due to the stable regulatory framework, although costs are mounting for German households. As a consequence, the pressure is growing for painful political decisions to be taken in order to curb this phenomenon. The surge of German renewable investments over the past few years has led to a gradual adjustment of the corresponding Feed-in-Tariffs (FiTs) in an attempt to disincentivise the amount of newly built capacity, especially in the form of large ground-mounted projects going forward. Thus, investors who were lucky enough to fetch a park in recent months have had to conform themselves to ever lower returns.

Finding strategies to lift the relatively low equity IRRs (5% to 6%) is challenging but not impossible. Buyers of PV parks prior to Jan. 2012 will probably find it easier to uncover hidden value – during the heydays of investment frenzy, project developers, EPCs and O&M contractors could easily turn a quick buck while dictating the transaction terms. Demand was gleaming hot and projects quickly sold in competitive bidding processes, even before being completed, to ensure the highest possible FiTs. As the tariffs dropped, all stakeholders adjusted to the circumstances: PV module prices fell substantially (e.g. global glut, new manufacturing capacity being added in China…), EPC and O&M costs came down to permit attractive prices perMWp, while project developers reined in their margins. As a result, both project costs (EUR/MWp) and O&M prices are quite different today compared to those two or more years ago, opening the door to optimisation potentials.

When we examine options allowing investors to extract further value from their existing assets, we can differentiate between pure financial (e.g. refinancing) and operational measures – I will focus on the latter. The typical “P&L” of a PV park is a good starting point:

– Sales
– Maintenance
– Insurance
– Miscellaneous Expenses: Accounting, Electricity…

Sales: Since the first of January2012 the revised EEG 2012 offers under §33b the opportunity to directly market renewable energy via the so-called “Market Bonus Scheme”, a limited-time opportunity. Provided the park is equipped with remote control devices, allowing it to be decoupled from the grid (e.g. negative market prices), the owners may earn two small margins (total approximately 1.4-1.7%) on top of the FiTs. Sounds like peanuts but for parks upwards of 20 MW, this can easily mean some EUR +100,000 over 18 months.

Maintenance: This is a more complex issue, where risk, covered/non-covered expenses and legal contracts must careful be considered. The result will depend on the existing supplieragreements, options to premature rescissions, and particularly bank consent, assuming the assets are debt financed. Its weight in overall operating costs is significant, thus, even a 1 or 2 EUR/kWp reduction positively impacts the recurring cash flow.

Insurance: As a percentage of operating costs, this is a relatively small item but it too, can be optimized, although absolute savings will be more limited.

Miscellaneous Expenses: This is a bit of a rag bag, with limited potential for a “hair cut”.

Stay tuned as subsequent blog posts shed additional light on the revenue-enhancing and cost cutting potential available to German green asset owners. Looking forward to your comments and particularly for your experiences in executing the mentioned optimization measures.

About the Author

Martin Supancic (37) is external financial advisor to Sojitz Europe plc, the European operations of Japanese trading company Sojitz Corp., with offices on all continents and in major European business capitals. He analyzes photovoltaic investments in Europe and Latin America, and has closed transactions worth 27 MW (more than EUR 65 mill.). In addition, he scouts for innovative cleantech start-ups, helping them grow their sales and arrange venture capital financing. Prior to advising Sojitz Europe plc, Martin advised companies in their internationalization efforts, headed international corporate development at now defunct Spanish biodiesel start-up Green Fuel Corporacion, SA, (shareholders included Endesa, Tecnicas Reunidas, Grupo TSK) and worked on multi sector deals, incl. wind and solar parks, at Deloitte Corporate Finance/Transaction Advisory Services in Madrid, Spain.

Interview with Cofounder of Canadian Clean Energy Conferences Andrew Slavin

In 2009, Canadian Clean Energy Conferences was established in order to support the development of the Canadian renewable energy industry. It is a Quebec-based company that organizes renewable energy and climate events across Canada. Through business-to-business conferences, CEO think tanks, and training workshops, Canadian Clean promotes the advancement of renewable energies in efforts to mitigate anthropogenic climate change.

One of their recent and most prominent events includes the annual Ontario Feed-in-Tariff Forum that took place 3-4 April 2013. This event has previously attracted over 1200 attendees from around the world. It focuses on the opportunities provided by Ontario’s Feed-in-Tariff program for the renewable energy sector.

Milk the Sun is interviewing Andrew Slavin, the co-founder and director of Canadian Clean for stimulating opinions on moving towards renewable energy and a low-carbon economy

Canada PV Solar, Andrew Slavin

Andrew Slavin

Milk the Sun: Mr. Slavin, what are the main goals and achievements of Canadian Clean Energy Conferences and its events?

Slavin:  Our aim is to provide innovative and stimulating events that support the development of renewable energy projects across Canada. We are very proud of our “headline” event which is the Ontario Feed-In Tariff Forum. It is regarded by industry as the spring renewable energy event in Canada. We try to host our events like we are hosting an event at our house.  Though now quite big, we try to make this conference intimate, personable and an opportunity to meet all the right people in an informal but professional manner.

Milk the Sun: How has Ontario’s FIT program propelled Ontario in the renewable energy market? How is renewable energy progressing in other provinces?

Slavin: The Ontario FIT program has transformed the energy sector in Ontario (and arguably across Canada). The aim of the scheme was to enable the province (Ontario) to close its coal-fired power stations, create jobs and create a renewable energy industry in Ontario.  All of this has been achieved in a relatively short period of time. The program has not been without its teething troubles. The FIT was massively oversubscribed, swamping the administrators and creating delays. There has been some negative sentiment in rural communities who object to the rapid growth of wind farms. There has been friction between renewable energy developers and the incumbent utilities regarding connecting projects. Lastly, and perhaps most significantly, the FIT scheme has become a political issue with the scheme proponents, the Liberal Government, coming under pressure from the main Conservative opposition who claim the scheme is expensive and cumbersome.

Milk the Sun: How has Canada progressed in the renewable energy sector in comparison to other countries? What has made it competitive and how could it be improved?

Slavin: The Canadian energy market is complex with each Province having its own energy policy and goals. Provinces such as BC and Quebec have huge hydro power resources providing up to 90% of the energy needs from renewable sources. Ontario and Nova Scotia on the other hand have traditionally relied on coal or nuclear and hence have been more innovative when it comes to supporting renewable energy projects. The Ontario FIT scheme was seen as a way to both stimulate the economy and shift the power mix towards more renewable sources of energy. The scheme has energized the renewable energy sector across Canada making it more competitive in policy and financial terms. This competitiveness will increase once the real cost of carbon is included in energy pricing.

Milk the Sun: What do you expect to see in Canada’s future policies regarding the renewable energy sector?

Slavin: In the next few years all the provincial governments will mandate the procurement of more renewable energy. Even oil rich Alberta recognizes the benefits of supporting alternative energy sources.  Canada has huge potential in both traditional and renewable resources and has the opportunity to be a real leader in sustainable and balanced resource development. The federal government has committed to matching the US when it comes to carbon and climate change policies but in the meantime is taking a sector-based approach to climate policy in an attempt to clean up the most polluting industries. These actions, at all levels of government, are creating exciting opportunities for the Canadian renewable energy industry.

Milk the Sun: What are some of the issues Canada may have to overcome to reach a low-carbon economy?

Slavin: Just politics! The potential is there and huge it just requires politicians with the foresight to look beyond the next ballot.

Milk the Sun would like to thank Mr. Slavin for the interview.

The Rise of Solar Storage Technologies in the UK

A recent report by IHS Inc. (Colorado, US), a renowned global information company, has stated that photovoltaic (PV) storage systems will be on the rise by 2014. They estimate that there will be a global PV storage market worth $19 billion USD by 2017. Germany is currently leading in storage technologies and beginning May 1st, the nation will offer tariffs for PV storage technologies. This will lower the average 20-year cost of a PV installation with a storage system to 10% less than an installation without storage. The IHS report predicts that many countries including the UK will follow closely behind Germany’s example.

Countries using this technology will eventually drive global installations to 7 GW by 2017. The UK is expected to also use a similar method to Germany’s subsidies to encourage the use of PV storage technologies. Other countries may also adopt a tariff model to increase the use of PV storage which can be used to promote self-consumption of energy and grid stability. Grid stability can already be supplemented through solar PV energy. Using storage systems in connection with residential PV set-ups are still extremely attractive in this market.

Solar storage technologies were also forecasted to grow stronger in larger PV systems as well, especially as solar PV energy continues to place pressure on grid systems. The report predicts that utility-scale storage will increase to over 2 GW by 2017 with Asia and Americas dominating the market.

Source: Solar Power Portal UK

 

Milk the Sun interviews Jason Loyet of Solar Site Design

Today Milk the Sun is speaking with Jason Loyet, CEO of Solar Site Design (SSD). SSD recently launched their solar project development app for solar professionals, currently available as a free download in the iTunes App Store and Google Play Store.

 

Thanks for taking the time to talk to us today Jason. First off, what can you tell us about your background in Solar?

Milk the Sun Intervie Jason Loyet Solar PhotovoltaicsI started in solar development in 2005 after a trip to China sparked my entrepreneurial spirit. After starting two software companies that were sold in the streaming media and newspaper publishing industry, I was exploring my next venture. I was visiting a friend in China and spent two months attending large tradeshows with him throughout the country, and witnessed firsthand the number of solar manufacturers that had sprouted up. I came back to the United States and went to work learning all the facets of the solar industry, developing projects with both small, pure-play solar firms and some of the largest electrical contractors in the United States.

Where did your inspiration for the SSD app come from?

Solar development is complex and each project invites its own unique challenges. After eight years of experience in taking a preliminary solar prospect all the way through to a commissioned project, I experienced first hand how the demanding soft costs and inefficiencies in the industry were troublesome, for myself an others. I knew there was a better way to manage day-to-day tasks, most of which included multiple visits for solar site surveys. This is what sparked the inspiration for our solar project development app.

I have led and contributed to every type of solar design conceivable, so I intimately understand the challenges faced by the emerging solar contractors across the United States. We have designed the Solar Site Design app to accelerate project management from the early onsite data collection stage, all the way through to permitting and commissioning.

Our software is designed around the amazing evolution in smartphone technology, something that was not available even a few years ago. We believe our app will continue to evolve based on the industry’s needs and users’ feedback, and will become an everyday part of solar project development for contractors.

What problem does the app solve and how?Solar Site Design PV App

Solar Site Design is focused on lowering the expensive soft costs our industry faces, specifically customer acquisition and permitting. With the app, solar contractors are introduced to a new level of efficiency through better data collection and enhanced engineering support.

Who is it best suited for?

All solar professionals who are want to win more clients and streamline the time consuming paperwork involved with permitting. If a contractor is looking to save time and make more money, we know we have a solution that will help.

What is your outlook for the US Solar Market in 2013? What do you see as the most important upcoming policy developments affecting your users?

We continue to see explosive growth in solar across the US and the playing field is wide open; not only for pure play solar companies to win market share, but also for traditional Electrical and Roofing Contractors to service their existing clientele with solar. The market is waking up to the significant return on investment, and with the right education in place to inform the consumer of the benefits of solar, there is exponential growth ahead.

As for policy development, each US footprint and region is completely different and will be for the conceivable future. Electric inflation is escalating at a faster pace than most realize and at some point every Utility in the US will face the decision to either buy more clean & renewable energy – or risk maintaining the status quo and passing their ratepayers the higher associated costs of fossil fuel. We are betting on the Sun.

Milk the Sun thanks Jason Loyet for an interesting and informative interview. You can check out the Solar Site Design App here.

 

Milk the Sun to exhibit at Intersolar Europe 2013

Milk the Sun GmbH will be present at Intersolar Europe 2013 from the 19th-21st of June,  along with over 1,200 other exhibitors. The online marketplace for photovoltaic plants and projects (www.milkthesun.com) will be exhibiting in Hall B2 at stand 170N.

„Intersolar is the most important trade fair in the solar sector. We are pleased to present to the international and adept audience this event attracts. It is a tough time for the solar sector, and we see more than ever a need for the efficient and direct project promotion opportunities our online marketplace milkthesun.com provides. Our primary focus is on the continued development of our core-market here in Europe, but we are also continuing our expansion into new photovoltaic markets such as North and South America, as well as the Middle East and Asia,” says CEO Felix Krause.

Intersolar 2012 marked the official launch of the PV Services platform, and its first year of independent exhibition to a very interested public. The marketplace and its spectrum of services were well received, and this year Milk the Sun will again utilize the occasion to present a number of other updates and innovations, further broadening its service offering.

Intersolar Europe Milk the Sun Solar PV

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