SOS Solar Cities Presentation

© Sustainable Opportunity Solutions Ltd 2012 1

Solar Cities Scotland 2012 Conference

Business Case for

Solar PV Investment

Paul Adderley

15 June 2012

© Sustainable Opportunity Solutions Ltd 2012

Is it worth it?

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!  Since March 1, 2012, system delivered: –  15,700 kWh –  Income equals 100% of Electricity Bills –  8.5 TCO2e Carbon Saving

!  100% Loan Finance (low interest) !  Tax Benefits !  Better Staff Engagement !  Strengthens Reputation


OUTLINE

!  Case Study Background

!  Business Case

!   Integrated Due Diligence Approach

!  System Performance (Energy, Carbon, Cash)

!  Key Messages

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Case Study Background

!  Blue Chip Customers:

!  MD’s Leadership !  Average Energy Spend: £7000 pa !  Low Carbon Reputation

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Business Case for Solar PV (50kW)

!  Additional revenue (FiTs) generation £11.5k pa

!  RPI linked for 25 years (20 years from 1 Aug’12)

!  Reduce exposure to energy price volatility

!  Engage staff in “Tangible” low carbon project

!  Easy access to 5% loan finance up to £100K

!  Benefit of £25k Annual Investment Allowance 5


Approach: Integrated Due Diligence

Technical

Supplier Financial & Carbon Returns

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Optimal Investment


Technical

Initial Assessment Technology

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Panel Efficiency & System Size

Structural Considerations


Supplier Selection: 3 Stage Process

1. MCS Suppliers/Installers -> Mandatory for FiTs 2. Short List:

–  Seek Recommendations –  Local Case Studies

–  Financial Position (Companies House / Credit Check) –  Telephone Interview

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Supplier Selection

3. Tender List: - Customer Site Visits & Feedback - Review of Contractual Terms: “Ownership” - Rigourous Assessment of Assumptions - Benchmark to industry averages (EST)

Selection: Installer that remained committed, & managed risk 9


De-Select Suppliers

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Flawed Assumptions - 90% proportion for Own Use - Incorrect Feed-in-Tariff Rates

- Optimistic System Yields

Lack of Transparency


Financial: Investment Models

!  Reflect Savings of Energy Efficiency Energy for Own Use (~60%) System Degradation (20%) Seasonality

!   Impact of Loan on Weighted Cost of Capital

!  Net Present Value –  Discount Rates: Benchmark @ 10% , Project Specific @ 5%

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!  Tax: Capital Allowances –  Solar PV ineligible for Enhanced Capital Allowances –  Annual Investment Allowance (General P&M) –  £25K at 100% Allowance in Year 1 –  £5k Cash saving

!  Value Added Tax –  Must have export contract to recover VAT paid –  £100k System = £20k “cash saving” in next return.

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!  Financing: Energy Saving Scotland Loan –  Only for SMEs, landlords –  5% interest rate –  Loan Up to £100,000 repayable over 8 years –  100% LTV –  Solar PV Income covers 67% Repayments

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Financial: Managing Uncertainty

At 4th Feb 2012 Option 1 Option 2 Energy Yield (kWh) 33,500 37,000 Carbon Saving (KG CO2e) 18,250 20,150 CAPEX £’000 98 111 Low FiTs: 15.2p (NPV @10%) 54 45 High FiTs: 32.9p (NPV @10%) 85 88 . Additional CAPEX Funds 0 11

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© Sustainable Opportunity Solutions Ltd 2012 15

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System Performance Since March 1, 2012

Generation: Expected 14,600kWh Actual 15,700kWh Export: Expected 8,700kWh Actual 6,500kWh Own Use: Estimated 60% Actual 59% Income Up 15%


Key Messages for Business

✓ Optimise ROI: Avoid >

Efficiency > Renewables

✓  Uncertainty requires

robust Financial models

✓  Balanced Assessment of

Multiple Benefits

Key Messages for Installers

✓  Commitment Wins

✓  Realistic Assumptions &

Transparent Quotes

✓  No longer a “No-Brainer”

✓  Engage with Accountants

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Thank you for your time

Paul Adderley Managing Director:

[email protected]

Tel: 0845 475 1275 / 07917 372573

Web: www.sos4business.uk.com

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SOS Solar Cities Presentation

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