Photovoltaic Plants are establishing themselves more and more as a Liquid Asset Class
The photovoltaic market is currently facing a paradigm change. While the former tumultuous expansion of solar projects has come to a halt, the secondary market for photovoltaic systems is largely flourishing. The market for trading existing PV-plants is becoming more and more liquid due to an increased market understanding of PV-plant operators and investors. This trend will proceed in 2016.
From 2013 onwards, it can be observed that the photovoltaic market is in a transition. Private- as well as large-scale investors are increasingly losing interest in new solar projects and solar parks. Instead, they are investing in already operating PV-systems. A trend that since 2013 is picking up speed. Nevertheless, why is there a paradigm change in the first place?
It is the Rate of Return and Availability that matters
The question is easy to answer. We just have to bear in mind why there has been such a huge expansion of photovoltaic facilities from 2009 to 2012 – and why it has dropped so rapidly ever since. The key words are the rate of return and availability. The feed-in-tariffs introduced by the EEG have been an excellent basis for investors to generate attractive and predictable revenues by installing solar plants. Thereby, the EEG has helped to enforce the breakthrough of the technology.
Photovoltaic system operators and investors are discovering increasingly the secondary market for PV-plants. Their understanding of the market is consolidated by continuous explanatory work und a standardization of processes: By contrast to new PV-systems, the trade with operating photovoltaic plants is offering still attractive rate of returns.
The private investors’ willingness to invest in the secondary market of PV-projects continues to increase
The trend for trading existing photovoltaic projects is experiencing a strong growth which is not only transitory. This can be observed by the transactions generated on our online market place www.milkthesun.com. In 2014, trading volumes of existing photovoltaic plants have increased dynamically. In 2015, the amount of transactions has doubled once again. Milk the Sun has traded PV-projects with a trading volume of nearly 100 million Euros in the business year 2015.
The majority of the existing solar projects in earlier core markets – Germany, Italy, France, Spain, and the Czech Republic – exhibit plant sizes of about seven to ten kilowatts. Simultaneously, the trading of PV-rights has decreased by seven per cent compared to the previous year. Both trends prove: the private investors’ willingness to invest in the secondary market for photovoltaic systems is steadily increasing. By contrast, investments in new PV-systems seem to become more and more unattractive.
The increasing understanding of the secondary market mechanisms provides even further advantages. The turnover speed of the photovoltaic projects on our market places – that is from publishing to sale – has improved considerably. In 2014, the turnover speed has been on average five months while in 2015 it has been decreased to 2015. In 2015, even 14 per cent of all photovoltaic plants have been sold within a month.
Faster and Augmented Transactions Thanks to better Professionalization
This development is reflecting particularly the persisting professionalization of the secondary market for PV-plants and its actors. PV-plant operators and investors have understood that investments in existing solar plants are a new way of financial investment. A faster and a largely standardized transaction process is not only possible but also, depending on the individual situation, required. For this purpose, with our platform we have created a new quality standard with respect to documentation and data preparation. By the provision of all necessary information right from the start, we enable sellers and buyers to highly efficient acquisitions and sales of photovoltaic projects.
In the process of professionalizing the PV market, service providers also play a decisive role. They have understood to digitalize their offers linking them to the secondary market. PV-system operators and investors are booking transaction accompanying services that accelerate the sales process as well as services around the operation of the solar plant. This applies especially for the innovative service offerings by our partner network that support the yield optimization of the PV-systems.
Insecure Energy Policy + Increasing Interest in Existing PV Plants = Further Growth of the Secondary Market
Due to the insecure future design of the photovoltaic support in Germany and the steadily decreasing feed-in-tariffs, in addition to the expansion limits defined by the tendering system in Germany we expect a further increase of trading volumes of existing solar plants for the year to come.
Already in the previous year, we have recognized an over-proportional increase of acquisitions and sales of existing PV-plants of plant sizes from 31 to 500 kilowatt. Those PV-projects constituted 78 per cent of total last year’s sales and in the majority of cases have been acquired by private investors. Thus, also in the running year we expect a dominance of the market by this size segment. However, this holds not only for Germany and Italy, which achieved a market share of 90 per cent, but also increasingly for Spain and France, whose PV markets have been vitalized in 2015 and presumably will grow significantly in 2016.
The trading of large-scale PV-projects upwards of 500 kilowatts has evolved to a fixed variable having a constant share of 22 per cent at the trading volume of our online platform. Notwithstanding the difficult supply situation, in 2016 we expect an increase of trading willingness also for this size segment. There are good signs for that, as transactions here have doubled compared to last year.
Many factors come together that make us believe that the PV secondary market will continue to increase significantly this year. Especially in view of the fact that the vast existing total stock of photovoltaic plants in Germany, Italy, France, Spain, and now also in Great Britain is “turning” faster and faster and the legal framework conditions appear to be largely stable.
The author Dirk Petschick is CEO and Co-Founder of Milk the Sun, an open Online-Marketplace for photovoltaic plants. On the platform, project developers and operators can offer their solar plants for sale while investors can find interesting projects as a green capital asset. In addition, in cooperation with specialized partners Milk the Sun acts as a broker for services along the complete life cycle of a photovoltaic plant. Via the closed market place, Utility Scale Network the company provides also large-scale solar investment www.milkthesun.com