a study of south africa’s small-scale solar pv installations: market · pdf...

27 May 2015

Mike Smith | Renen Energy Solutions

ON BEHALF OF THEAGENCE FRANCAISE DE DEVELOPPEMENT (AFD)

A STUDY OF SOUTH AFRICA’S SMALL-SCALE SOLAR PV INSTALLATIONS: MARKET DEMAND, FINANCING AND SUPPLY

Broad study objectives

• Estimate the size of the small-scale PV market in SA

• Small-scale being < 5 MW

• Ascertain the perception of the industry’s growth potential

• Clarify the financing methods applied throughout the sector

• Present a recommendation on what segments require support from DFIs

The climate for Solar PV in SATechnical suitability

The climate for Solar PV in SAPrice & energy security

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

35,00%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Percentage increase of electricity and CPI (inflation)

Electricity price increase (average) CPI

0

100

200

300

400

500

600

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Price increase with year 2000 = 100 (base year)

Electricity price increase (average) CPI

?

The climate for Solar PV in SAPrice & energy security

The climate for Solar PV in SARegulations

• REIPPP programme

• Municipal programmes initiated• City Power (JHB)• City of Cape Town• eThekwini Municipality• NM Metropolitan

• NERSA consultation paper on SSEGs

• Registration not licencing < 1MW

• Equipment accreditation

• Grid codes

• Tariffs – Import / Export ?

The climate for Solar PV in SAElectricity schematic

REIPPPP & case-by-case

Estimated size: Small-scale PVEstimating PV size ?

• Methodology

• Challenges

• We have tried to find out, from PV suppliers, from PV installers, but they do not want to tell us … probably because most of the installations are illegal” (Dr. Susana Godehart, eThekwini Energy)

• Use of existing databases

• Moving targets…

Estimated size: Small-scale PVSize – Our estimation & prediction

• Known / reported capacity of installed small-scale PV in SA

• 34.9 MW and 450+ installations (6th May 2015)

• Estimation of unreported installations

• Small pilot assessment (known vs. unknown)• Only 20% of < 10 kW are reported…• … 70% of 10-30 kW• … 85% of 31-100 kW• … ALL 100 kW+

• Estimated 40.5 MW as of 6th May 2015

Estimated size: Small-scale PVGeographic distribution (reported)

445668

1144 1331 13681761

2088

3747

10843

11532

0

2000

4000

6000

8000

10000

12000

14000

Eastern Cape Northern Cape Limpopo Mpumalanga Unknown Free State North West KwaZulu-Natal Western Cape Gauteng

Sola

r P

V C

apac

ity

(kW

p)

Province

Dominated by larger plants

Estimated size: Small-scale PVGeographic distribution (reported)

Estimated size: Small-scale PVGrowth … ?

• Where is the small-scale PV market going …

• Estimation based on levels of optimism for an enabling environment (high-level ‘guesstimates’)

0

500

1000

1500

2000

2500

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

MW

inst

alle

d

Very high High Moderate Low

2.2 GW ?

0.85 GW ?

0.3 GW ?

1.25 GW

1.5 GW ?

Financing of Small-Scale PVWhat has and is being done

• Very little …

• 20 – 25 known projects at four major SA banks

• Appetite to finance

• “massive”

• “absolutely”

• “yes … “

So what is holding us back … what are the obstacles?

Financing of Small-Scale PVObstacles

REGULATION

CONSISTENCY

and

AN ENABLING REGULATORY ENVIRONMENT


• Cost of capital

• PV is still expensive? Grid parity only being reached in year 3-4 from installation

• The threat of ‘chancers’

• Fly-by-night installers without requisite ability or experience

• Absence of appropriate financing structures

• Reluctance to extend loan terms beyond 5 years


• Certification and standards

• Certification of installers / equipment

• Integration with the national grid

• Absence of a 2nd Hand PV market

• Asset classification (moveable / immovable)

= No - asset based financing

• Others…

• Municipal revenues?

• Illegal installations

Financing of Small-Scale PVWhat are some of the financing options?

• Standard commercial loans

• Restriction of payment terms

• Repayment / saving parity only at years 3 - 4

• Project / contract financing through PPAs

• Resource intensive

• Similar effort and expense for R3 million projects and for R200 million projects


• Asset financing

Can it easily be (i) repossessed, (ii) resold, (iii) residual value

sufficient to cover cost to financier


• Asset financing

• TeaserBreak down of costs on a 50 kW roof-mount system?

Modules

Mounting structures

Inversion

Comms & control

Installation

Balance of system

~51%

~4.5%

~17%

~1%~16%

~10%


• Solar leasing / equipment leasing

• Tax benefits

• Lessor – Section 12B depreciation

• Lessee – Cost as OpEx

• Negotiated sale of equipment through repayment


• Home loan financing

• Spare capacity on home loans or new loans

• Question regarding value added?

• Third-party PPA or ESCO financing

• International success of model

• ESCOs balance sheets?

• Support for project pipelines?

Opportunities for DFI supportHow can DFIs help build the PV sector

• What type of growth does the industry need?

• Immediate?

• Sustainable?

• Robust?

• …

• So how do we reach that?


• Grant funding and subsidised loans

• Immediate growth stimulus

• Directed at ‘marginally feasible projects’?

Accompanied by other forms of support


• ESCO enterprise development

• Asset based financing clarifications

• Technical assistance and advisory

• Training and development at banks (specialised units)

• Standardised protocol and documentation

• Development of a regulatory body

ConclusionSmall-scale PV in South Africa

• Significant growth potential

• Greatest obstacles

• Enabling regulation

• Cost of capital

• Industry regulation

• Financing mechanisms

Unquestionably a nascent sector, with significant potential, but still requiring support to

develop a robust and sustainable industry

RENEN ENERGY SOLUTIONS (PTY) LTD

WWW.RENEN.CO.ZA

MIKE SMITH

[email protected]

with thanks to AFD and Enclude

Thank you

http://www.renen.co.za/

mailto:[email protected]

a study of south africa’s small-scale solar pv installations: market · pdf...

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