PV Investor Guide - Pressemeldungen BSW-Solar · PDF filePV Investor Guide New business models...
Transcript of PV Investor Guide - Pressemeldungen BSW-Solar · PDF filePV Investor Guide New business models...
PV Investor GuideNew business models for photovoltaics in international markets
PV Investor GuideNew business models for photovoltaics in international markets
ImprintStatus: August 2014
PublisherBSW-Solar, The German Solar Industry Association (Bundesverband Solarwirtschaft e. V.), www.solarwirtschaft.de
AuthorsChristian Grundner, eclareon GmbH
María Jesús Baez Morandi, eclareon S.L.
Christine Wörlen, Arepo Consult
EditingMathias Böswetter, Rainer Brohm, Wibke Korf, Jan Knaack, Jörg Mayer, Joscha Rosenbusch, BSW-Solar - German Solar Industry Association
AcknowledgmentExpertise and case studies were kindly provided by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and the
Reiner Lemoine Institute.
© BSW-Solar – German Solar Industry Association, Berlin, www.solarwirtschaft.de
DisclaimerThis guide is protected by copyright. Any reproduction, modification or other use of the guide in full or in part that extends beyond purely
private use is prohibited without prior approval of the German Solar Industry Association. This applies in particular to reproductions/copies,
translations, microfilming and entry into electronic data systems.
The guide was compiled with greatest possible care and to the best of our knowledge. However, as mistakes can never be ruled out and content
is subject to change, we draw attention to the following: The German Solar Industry Association provides no guarantee for the topicality, cor-
rectness, completeness or quality of the information provided in this guide. For any damages of material or immaterial nature caused directly
or indirectly by the use or non-use of the information provided, or caused by the use of flawed or incomplete information, the German Solar
Industry Association assumes no liability as long as it cannot be demonstrably charged with intentional or grossly negligent action.
BSW-Solar, The German Solar Industry AssociationQuartier 207 | Friedrichstr. 78 | 10117 BerlinTelephone +49 (0)30 29 777 88 0 Telefax +49 (0)30 29 777 88 99 [email protected] www.solarwirtschaft.de
The German Solar Industry Association (BSW-Solar) is the interest group of the German solar industry and represents the interest of around
1,000 solar companies. Forming a strong community of companies, BSW-Solar acts as a source of information and an intermediary between
business and the political and public sectors. It represents the common commercial interests of businesses within the solar energy value chain.
BSW-Solar exerts a decisive influence on creating and securing a suitable policy framework for stable growth, and thus on investment security
throughout the entire solar industry. Our objective is to establish solar energy as a permanent pillar of the energy industry.
4 — PV INVESTOR GUIDE - NEW BUSINESS MODELS FOR PHOTOVOLTAICS IN INTERNATIONAL MARKETS
TABLE OF CONTENTS
— Foreword BSW-Solar 2
— Foreword Intersolar 3
— Figures, Tables and Pictures 7
Figures 8
Tables 10
Pictures 10
CHAPTER 1
— Preface 11
CHAPTER 2
— Introduction for PV Business Models 13
2.1 General Characteristics 14
2.2 General Project Structure 18
2.3 Status of PV Economics 20
2.4 Overview on Export Financing 25
2.5 Excursus: Solar Leasing 27
CHAPTER 3
— PV Self-consumption 29
3.1 Introduction 30
3.1.1 General Characteristics 30
3.1.2 Reasons for PV Self-consumption 30
3.1.3 Application Segments 31
3.2 Project Development 32
3.2.1 Project Structure 32
3.2.2 Planning and Design 33
— 5TABLE OF CONTENT
3.2.3 Implementation 35
3.2.4 Operations 36
3.3 Project Economics 38
3.3.1 Key Input Parameters 38
3.3.2 Sample Project Calculation 38
3.3.3 Sensitivity Analysis 41
3.4 Key Success Factors 43
3.5 Sample Projects 44
3.5.1 Supermarket “Super Selectos”, El Salvador 44
Chapter 4
— Net-metering 46
4.1 Introduction 47
4.1.1 General Characteristics 47
4.1.2 Reasons for Net-metering 47
4.1.3 Application Segments 48
4.2 Project Development 50
4.2.1 Project Structure 50
4.2.2 Planning, Design and Implementation 51
4.2.3 Operation 51
4.3 Project Economics 53
4.3.1 Key Input Parameters 53
4.3.2 Sample Project Calculation 54
4.3.3 Sensitivity Analysis 57
4.3.4 Key Success Factors 59
4.4 Sample Projects 59
4.4.1 Net-metering in San Francisco, California 60
4.4.2 Net-metering in Mexico 63
Chapter 5
— Power Purchase Agreements 67
5.1 Introduction 68
5.1.1 General Characteristics 68
5.1.2 Reasons for PPAs 70
5.1.3 Application Segments 70
5.2 Project Development 71
5.2.1 Project Structure 72
5.2.2 Planning and Design 73
5.2.3 Implementation and Operation 73
6 — PV INVESTOR GUIDE - NEW BUSINESS MODELS FOR PHOTOVOLTAICS IN INTERNATIONAL MARKETS
5.3 Project Economics 74
5.3.1 Key Input Parameters 74
5.3.2 Sample Project Calculation 75
5.3.3 Sensitivity Analysis 77
5.4 Key Success Factors 79
5.5 Sample Projects 80
5.5.1 Direct Line PPA, San Salvador, El Salvador 80
5.5.2 Generation Utility PPA, La Paz, Mexico 84
Chapter 6
— PV-Hybrid Mini Grids 87
6.1 Introduction 88
6.1.1 General Characteristics 88
6.1.2 Reasons for PV-Hybrid Mini Grids 90
6.1.3 Application Segments 91
6.2 Project Development 95
6.2.1 Project Structure 96
6.2.2 Planning and Design 100
6.2.3 Implementation 104
6.2.4 Operations 106
6.3 Project Economics 108
6.3.1 Key Input Parameters 108
6.3.2 Sample Project Calculation I: PV-Diesel-Battery Mini Grid 111
6.3.3 Sample Project Calculation II: PV hybridization of a Diesel Mini Grid 116
6.3.4 Sensitivity Analysis 118
6.4 Key Success Factors 120
6.5 Sample Projects 121
6.5.1 PV-Hybrid Mini Grid for Telecom Towers and Villages in Uganda 121
— Conclusions 124
— Annex: Acronyms 127
12 — PV INVESTOR GUIDE - NEW BUSINESS MODELS FOR PHOTOVOLTAICS IN INTERNATIONAL MARKETS
PREFACE
Triggered by the remarkable decreases in photovoltaic (PV) components and system prices of the
recent years, in more and more application segments and locations the available alternative sources
for electricity are more expensive than the kWh generated by a PV system. Based on these frame-
work conditions, new business models for the operation of PV systems in the different application
segments such as residential homes, commercial and industrial uses as well as off-grid locations
and others are evolving. A PV business model in this sense is an operating model of the PV system
that integrates the stakeholder and market environment in a way that makes an economic viable
operation of the PV system possible for the investor. Based on this definition, it is obvious that the
complexity of PV projects is increasing compared to projects build in the feed-in tariff era.1 This how-
ever offers a unique opportunity for the PV sector to become independent from feed-in tariffs and
evolve into a future where PV plays a major role in the electricity sector of a low carbon economy.
Despite this promising future, PV will remain very capital intensive, and investors will continue to
be challenged by the increased complexity when implementing the business model for a PV project.
In addition, due to its decentralized nature, which moves generation very close to consumption, PV
can only fully leverage its strength in small to medium sized applications. This means that for a wi-
despread application of PV, the investment of semi-professional investors is needed. This guide on
international business models for PV aims to help these kinds of investors cope with the increased
complexity by providing them with best practices for the implementation of PV projects using vari-
ous PV business models.
In addition to educating investors on the implementation of profitable PV projects, the second key
enabler for a widespread application of PV is the regulative framework, as well as aspects such as
the grid connection process, the handling of excess PV electricity, the sale of PV electricity to local
consumers via a direct line or the grid, how Mini Grids in off-grid regions fit into the overall energy
sector and its roadmap for the future, the availability of debt financing and complementing support
schemes that encourage the implementation of certain business models in early stages of the mar-
ket. The regulative framework needs to be further developed to support the implementation of the
PV business models. The first step to achieve this is by reaching a thorough understanding of PV
business models; this guide will be the basis for the development of an adequate regulative frame-
work.
A selection of PV business models that currently have the greatest relevance in international mar-
kets has been analyzed by BSW-Solar regarding their implementation and profitability in various
markets. Based on this analysis in the following chapters, the business models will first be structured
according to key differentiators, after which the selected business models will be presented individu-
ally. The presentation is done on a generic level to ensure applicability in every country and region.
For each business model the general introduction is followed by a chapter on the specifics for project
development and project economics. This is completed by a selection of real sample projects for
each business model to show the practical viability of the presented business model.1 Still, feed-in-tariffs are a well-proven and cost-efficient instrument to kick-off the market, compensate for competitive disadvantages of RES
and stimulate private capital. Their deployment heavily depends on the specific market environment and energy subsidies in a country.
— 13
2
—
INTRODUCTION FOR PV BUSINESS MODELS
2
—
INTRODUCTION FOR PV BUSINESS MODELS
14 — PV INVESTOR GUIDE - NEW BUSINESS MODELS FOR PHOTOVOLTAICS IN INTERNATIONAL MARKETS
GENERAL CHARACTERISTICS
In the last few years, PV cost competitiveness has improved remarkably mainly due to large cost re-
ductions in system prices. As a result, in many markets it is already more attractive from an econo-
mic point of view to self-consume PV electricity than to buy electricity from the grid. The moment
when the cost of PV-generated electricity equals the cost of electricity from the grid is referred to
as “grid parity”, which is indicated in Figure 1.
2.1
Simplified illustration of PV grid parity and PV generation parity
Figure 1
Grid electricity price
PV electricity cost (LCOE*)
Grid Parity
• Grid electricity is cheaper than PV-generated electricity
- PV needs support mechanisms (FiT,tax credit, etc.)
• PV-generated electricity is cheaper than grid electricity including distribution costs
- It is more attractive to self-consume PV electricity than to buy electricity from the grid
Generation Parity
Generation price
• PV-generated electricity is cheaper than generation prices excluding distribution costs
- Not only self-consumption on site is competitive but also supply of PV electricity via the public grid is a viable business model
EU
R c
t/kW
h
Years
Note: * Levelized Cost of Electricity
— 15
Once grid parity2 is reached, certain electricity consumers will prefer to cover part of their
electricity demand with PV-generated electricity instead of buying all their electricity from the
utility. The next big step for PV competitiveness is generation parity,3 which is very similar to
grid parity except that here PV competes with sometimes even lower generation prices of other
centralized or decentralized generation sources. Large ground-mounted PV installations usually
supply their electricity to consumers via a public grid and thus compete with other centralized
generation sources and prices. In the case of off-grid PV installations, usually small to medium
sized systems, PV competes with other remotely available alternatives, which are very often die-
sel generators (gensets) but also small or large wind turbines or CHP plants based on biomass
or natural gas.
Potential business models for PV systems can be structured according to how they compete with
other generation sources. First, a PV system can compete at grid parity level meaning that the
competition is taking place at or close to the point of grid-supplied consumption. A PV system
has the advantage of being able to generate electricity at the point of consumption, whereas
other centralized generation sources have to use the transmission and distribution grid to sup-
ply an electricity consumer; this results in a cost advantage for PV.
Second, a PV system can compete at generation parity level with other generation sources. This
means the cost advantage resulting from avoided transmission costs cannot be leveraged by
the PV system because either the grid also has to be used to supply consumers, e.g. for large
ground-mounted systems, or, in the case of an off-grid location, competition takes place between
alternatives that both generate at the point of consumption, such as diesel generation and PV.
In this guidebook, we address five of the seven PV business models mentioned in Figure 2, which
are briefly introduced in the following.
INTRODUCTION FOR PV BUSINESS MODELS
2 Grid parity occurs when an alternative energy source can generate electricity at a levelized cost (LCoE) that is less than or equal to the
price of purchasing power from the electricity grid. The term is most commonly used when discussing renewable energy sources, notably solar power and wind power.
3 Generation parity on the other hand occurs when alternative energy sources can generate electricity at a
LCoE that is less or equal than the generation costs of conventional power plants without considering transmission and distribution costs.
Figure 2
Differentiation of various PV business models
GRID PARITYPV competes with grid electricity prices consisting of generation and distribution costs at the point of con-sumption.
GENERATION PARITYPV directly competes with generation prices and has to bear the same dis-tribution costs like centralized gene-ration sources.Via public grid vs. central generation sources
off-grid vs. other decentralized generation
Self-consumption
Net-metering
Direct Line PPA*
Utility PPA*
Virtual Power Plant
PV-hybrid Mini Grid
Mini PVNote: * Power Purchase Agreement
16 — PV INVESTOR GUIDE - NEW BUSINESS MODELS FOR PHOTOVOLTAICS IN INTERNATIONAL MARKETS
Self-consumption
Here, the PV system owner and electricity consumer is the same legal entity. The electricity is di-
rectly consumed on-site without using the grid. Usually, excess electricity is sold to a third party,
e.g. to the grid operator for a feed-in tariff. For consistently high loads throughout the whole year,
a self-consumption share of 100% relation to demand is possible for small PV systems. In that case
a feed-in tariff for excess electricity is not needed even if small amounts of electricity are lost. The
key driver for the profitability of this segment is the cost of grid electricity. The self-consumption
business models will be described in Chapter 3.
Net-metering
Net-metering is very similar to self-consumption: Here too, the PV system owner and electricity
consumer is the same legal entity. It differs in how excess electricity is handled. The PV generation
that is not directly consumed on-site is fed into the grid and balanced by credits or by reversed me-
tering. The grid effectively acts as storage for excess electricity, which eases the dimensioning of
the PV system. As with self-consumption, the main driver for profitability is the grid electricity price
and the way excess electricity is credited and balanced. Building on the self-consumption chapter,
the net-metering business model will be described in Chapter 4.
Direct Line PPA
The PV system owner sells the electricity within the same building or via a direct line to a nearby
consumer. They are different legal entities but ownership in the PV system may be shared between
both parties. A direct line PPA avoids the use of the public grid for the supply of the PV electricity
and any regulative issues as well as potential grid costs. The profitability is mainly driven by the
costs for grid electricity as an alternative source for the consumer. The consumer reduces his grid
electricity demand and consumes PV electricity at a lower price while still consuming grid electrici-
ty for his residual demand. The direct line PPA business model will be described in Chapter 5.
Utility PPA
The utility PPA structures the supply of PV electricity to a utility or the distribution grid operator
(DSO) via a power purchase agreement (PPA) for a feed-in tariff. The feed-in tariff may be fixed or
indexed. Other sources of remuneration like green certificates may be part of the business model.
Utility PPA contracts are usually granted via tenders with a level of high competition on prices. The
description of the utility PPA business model is found in Chapter 5 as well.
PV-hybrid Mini Grid
PV-hybrid mini grids are typically used for remote regions with no or with only a weak national grid,
but also suitable for industrial parks with an independent grid. They include grid infrastructure,
other generation and storage to reliably supply residential, commercial or industrial demand. The
— 17
main drivers for an investment in a PV-hybrid mini grid are reduced overall costs for electricity due
to a replacement of e.g. diesel-based generation, an increased reliability of electricity supply in
weak grid locations and savings of CO2 emissions. The main driver for profitability is the reduced
cost of alternative sources of electricity that is available (grid or diesel genset) and an increased
reliability of supply is a strong non-monetary factor as well. The PV-hybrid mini grid business model
will be described in Chapter 6.
Although not covered in this guide, the following business models are briefly described for the sake
of completeness.
Virtual Power Plant
This model represents the sale of PV electricity at the electricity exchange (EEX), often via pooling
of several PV plants and other forms of generation (e.g. hydro, wind, biogas, fossil). The goal is to
create a certain generation profile that allows taking advantage of peak prices during certain times
of the day to increase profits. Other sources of remuneration could be included in the calculation
for the model, e.g. green certificates. The virtual power plant business model is not covered in this
guide since it still lacks relevance in the market and no commercial-scale project has been realized
so far. It may be added in later editions of this guide.
Mini PV
Mini PV systems are used for a single purpose and without grid connections (lighting, cell phone
charging, water purification, household appliances), and are very flexible regarding their location.
The driver of this market segment are electricity savings and an easy access to electricity that
otherwise wouldn’t be available. Due to the wide diversity of this segment and since it is more like
consumer products than a commercial-scale investment; it is not covered by this guide.
INTRODUCTION FOR PV BUSINESS MODELS
18 — PV INVESTOR GUIDE - NEW BUSINESS MODELS FOR PHOTOVOLTAICS IN INTERNATIONAL MARKETS
GENERAL PROJECT STRUCTURE
From an investor standpoint an understanding of the structure of a PV project, the involved
stakeholders and their business relationships is essential to be able to assess the involved risks
and to implement a project for sustainable long-term operation. The individual business model
has a strong impact on the project structure, but it is always based on the general structure
illustrated in Figure 3.
The central roles in a project are the owner, plant operator and the power consumer. For self-
consumption and net-metering these roles are represented jointly by a single entity by definiti-
on. External investors may be integrated via a leasing structure for example, but ownership re-
mains with the entity that bears the operational risks and benefits from savings by consuming
the PV electricity. For PPA projects the power consumer still plays a key role as main off-taker
and source of revenue for t he project but usually the power consumer does not hold shares
in the ownership of the PV system.
2.2
General project structure for PV projects
Figure 3
CashflowPowerflowContracts
Loan Contract
Payout, Fees, Debt Service
Investment Capex
EPC Contract
Grid contract
Excess Electricity
Feed-in tarif
Supply Contract
PowerSupply
Power Price
EPC
O&M SERVICE
ELECTRICITY EXCHANGE
Service Contract
Service Fee, Opex
UTILITY
BANK
EQUITYINVESTORS
Shares
Payout, Dividends POWER
CONSUMER
OWNER OPERATOR
GRID OPERATOR
Market Price
— 19
A key relation for the project is the supply of residual electricity from the grid. The price and the re-
liability of the residual electricity supply strongly influence the profitability of the whole investment
and are key in the relation between the PV plant operator and the power consumer. For this reason,
general information on the economics of projects will be provided in the next chapter, while specific
information on the respective business model can be found in the project economics sub-chapters
for each business model.
Because the load profile of the power consumer and the generation profile of the PV system usually
do not perfectly match, another key relation is with the local grid operator who takes the excess PV
electricity and remunerates it via a net-metering scheme or a feed-in tariff. If such support schemes
are not available, the remaining alternative is the sale of the excess electricity for a market price
via the electricity exchange. In unregulated markets it is often the case that participation in the
market as an independent power producer is not even allowed; this forces self-consumers to avoid
any grid injection and to avoid losses by reducing the PV system size to ensure self-consumption
shares above 90%.
The construction and operation of medium to large-scale PV systems is often subcontracted by the
system operator in order to benefit from the cost advantages and the experience of specialized
EPC and O&M service companies. In addition, this also avoids certain construction and operational
risks for the owner and operator of the PV system.
Especially in developing countries, the relation to banks and equity investors for the financing of
projects is one of the most crucial factors of a PV project. Since PV investments are very capital-
intensive they require low-cost and long-term financing for successful implementation. Banks and
investors need to understand the applied business model and the risks involved, and the market
needs a certain project pipeline to encourage banks to build the knowledge for a sufficient assess-
ment of projects.
The above-mentioned relations between the involved stakeholders and their individual structure
strongly influence the profitability of the projects. The next section provides an overview on the
various key parameters for the economics of a project.
INTRODUCTION FOR PV BUSINESS MODELS
— 57NET-METERING
4.3.3 —SENSITIVITY ANALYSIS
In the presented sample case the yearly electricity price escalation has been assumed with 5%
p.a., which is for many countries a very conservative assumption. Looking at the past 5 to 10 years,
price increases of 10% and up to 15% per year can be observed. However, the electricity market is
usually very regulated, with subsidies for low-income consumers especially prevalent in developing
countries. Steep price increases for many consecutive years may cause government intervention to
slow down price escalation; however, the underlying drivers are continuously increasing prices for
conventional energy sources, which limit a government’s ability to intervene because of budgetary
restrictions.
Sensitivity for electricity price escalation [% p.a.]
Figure 29
BASECASE
26% 29%
33% 36%
39% 42%
45% 48%
5.3 4.7 4.3 4.0 3.7 3.5 3.4 3.3
0% 2% 4% 6% 8% 10% 12% 14% 16%
Equity IRR Amortisation
Equity IRR[%]
Amortization[a]
58 — PV INVESTOR GUIDE - NEW BUSINESS MODELS FOR PHOTOVOLTAICS IN INTERNATIONAL MARKETS
Figure 30 looks at the influence of changing system prices due to greater experience on the
part of the installer, lower component prices and also investment subsidies. The sensitivity of
the amortization changes for higher prices than the base case when the debt tenor is similar to
the amortization period because the debt service influences the yearly cashflow available for
dividends to the equity investor. The equity IRR instead reacts in almost linear correlation to
changing system prices.
Figure 31 analyses the correlation for changing system yields and the profitability of the invest-
ment. The sensitivity is not exactly linear because of the block structure of the electricity tariff,
and because changes in the total generation per year influence indirect savings due to lower
average prices for the remaining grid consumption.
Sensitivity for specific yield [kWh/kWp/a]
Figure 31
BASECASE
18%
21%
26%
30% 33%
35%
39% 42%
46%
8.9
7.7
6.5
4.8 4.3
3.8 3.2 2.9
2.5
1,000 1,200 1,400 1,600 1,800 2,000 2,200
Equity IRR Amortisation
Equity IRR[%]
Amortization[a]
Sensitivity for system price reduction and subsidies [%]
Figure 30
BASECASE
21% 24%
28%
33%
40%
51%
7.9 7.2
5.7
4.3
3.1 2.2
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Equity IRR Amortisation
Equity IRR[%]
Amortization[a]