Many reasons can cause the insolvency of a solar PV plant: incorrectly calculated construction costs, poor performance due to technical problems or lack of savings. When such a situation happens, how can you achieve an optimal insolvency liquidation?
Costs and revenue of a PV system
The lease on the area, the insurance of the system and the maintenance expenses (for direct marketing, financing, management, tax advisor, taxes) are just some of the many costs for a photovoltaic system.
Revenue is generated via the feed-in tariff, which – depending on the time of commissioning, the size and type of the system and the previous use of the land – is guaranteed by the state for 20 years under the EEG law in Germany.
A system makes profit only when it generates more than what it spends on maintenance expenses. It is considered to be a good investment when the surpluses allow a reasonable return on the invested capital.
If this is not (or no longer) the case, the PV system is threatened with insolvency. You should then correctly assess the sales opportunities and have good access to potential investors.
Reasons leading to insolvency
Different reasons can lead to a solar plant becoming insolvent:
- The construction company becomes insolvent or unplanned costs incur during the construction phase.
- Technical problems due to construction damages or lack of maintenance occur in the operating phase which can result in performance loss.
- If the grid operator finds out that the compensation criteria are not met, the guaranteed compensation claim can be denied.
- Liquidity bottlenecks occur due to a lack of reserves. In such cases, even well-running solar plants are threatened with insolvency.
How much is an insolvent solar PV plant worth?
When determining the value, one should differentiate between material and income value. The asset value of the plant is defined as the pure sales value of the installed components. In practice, it plays a subordinate role, as it only has an effect if the plant is no longer eligible for compensation. Due to the devaluation of old modules and the increase in performance of new modules, the sale of used components is difficult and can involve losses.
The income value is the actual value of the solar plant, because it describes which surpluses (income minus expenses) will be generated over the remaining term. Since the income side is fixed due to the fixed EEG compensation, you as the operator can only increase the surpluses via the expenditure side. If you reduce the costs for management and insurance, the surpluses increase and with them the value of your system.
Insolvency recovery options
There are various ways to increase the recovery outcome after insolvency, which depend on the situation. The optimal solution is to continue operating your system at the same location with a fixed compensation.
The capitalised earnings value with corresponding discounts comes into play here: if your system cannot continue to be operated at its previous location, it must move, but retains its right to compensation. The costs for dismantling, transport, assembly and, if applicable, the new lease, must be deducted from the capitalized earnings value.
If the modules in your system are too badly damaged or broken, repowering can be an option: when the old, damaged modules are replaced by new, more powerful ones, the previous compensation claim remains. If neither the relocation nor the replacement is possible or profitable, the only thing left is to sell the components.
The sales returns should exceed the transport and dismantling costs, so that you do not have to undergo a total loss.
What to do in case of a solar plant insolvency
In a nutshell, here are different options to explore when a solar PV plant becomes insolvent:
- continue operating
- replacement of the whole system (also called “Repowering”)
- relocation with new technology
- dismantle and resell components