The Post-FIT reality: promising business models for PV

Riccardo Battisti, Ambiente Italia

This project has received funding from the European Union’s Horizon 2020 research and innovation programme under Grant Agreement No 646554

• Private consultancy company in the energy and environment field

• 20 years of activity

• More than 1,500 local, national and international projects

• 30 experts and 4 offices

• PV Financing:

– post-incentive experiences from 7 Countries(Austria, France, Germany, Italy, Spain, Turkey, United Kingdom)

– Focusing on PV primary market

IS PV STILL FEASIBLE TODAY?

YES, WE CAN!

• Price decline

• Reliable and well known technology

• New promising business models / financing schemes combining:

– Self-consumption for energy saving

– PV electricity supply (Power Purchase Agreements, PPAs)

– More active involvement of consumers (equity crowdfunding, energy

cooperatives, «solar bonds», etc.)

IS PV STILL FEASIBLE TODAY?

NO, WE CANNOT…

• No more incentives

• Low remuneration of electricity sold to the grid / on the market

• Therefore models relying on high shares of self-consumption

• And then high project risk (too strict connection with the consumption level)

• General risk of PV legislation: Unreliable and unstable(even retroactive measures)

• Legislation barriers still hampering the new business models

Political risk

Quality issues

Taxes and grid

charges

Minimum

Investment

Limits

Legal costsRisk of

curtailment

Bankruptcy or

re-locationBarriers

Source: Sonia Dunlop, SolarPower Europe

WHICH BARRIERS?

Due diligence

Replaceable power consumers

Direct grid connection and wholesale PPA

Watertight contract with take or pay clause

Lift and shift option

Government safety net

Source: Sonia Dunlop, SolarPower Europe

HOW TO FACE SUCH BARRIERS?

PROFITABILITY ANALYSIS

AND BUILT EXAMPLES

Analysed sectors

• Residential, single-family: No need for «special» business models

• Residential, multi-family

• Office buildings

• Public buildings

• Commercial & shopping malls

• Industrial

Multi-family house

Germany

• “Neue Heimat” Cooperative Family Home in Nußloch(close to Heidelberg)

• 445 kWp; 370,000 kWh/year

• 116 tenants buy PV electricity for 25.4 c€/kWh plus a monthly fee of 6.95 €

• 20-years price stability guaranteed

• Tenants can also buy sharesSource: www.pv-financing.eu

• Tenant package: 800 € private loan + two shares of 100 € each

• Loans are repaid through the following scheme:

– 3% fixed interest rate

– Payback time: 20 years

– Payback period starts from the third year with a yearly instalment of about 60 € inclusive of interest and amortisation

• Plant operator as electricity retailer – i.e. selling electricity separately to single households (not possible in other Countries, e.g. Italy)

Multi-family house

Germany

Source: National PV

implementation guidelines for

Germany, PV Financing project

Light Blue: Business share; Blue: Loan level

Light Green: profit shares

Green: Payback including interest and amortisation

Source: www.pv-financing.eu

Residential, multi-family

PPA profitability – Italy

• Plant cost: 1,800 €/kWp

• Plant size: 20 kWp

• Yield: 1,275 kWh/kWp (installation site: Central Italy)

• Self-consumption rate: 30% (only for common loads!)

• Not easy to increase it

• Grid electricity price: 0.22 €/kWh

• PPA price: 0.17 €/kWh (23% savings)

• Remuneration by “scambio sul posto” (net-metering): 0.10 €/kWh

• PBT = 13 years

• IRR = 8%

Public buildings

+�Attractiveness of PPA solutions for the Public Body

�Reliability of the consumer reduces the project risk

-�Complicated procedures for tendering

� Low self-consumption rates for some buildings (e.g schools)

Industrial

PPA profitability – Italy

• Not parks with multiple users

• Plant cost: 1,000 €/kWp

• Plant size: 1,000 kWp

• Self-consumption rate: 90%

• PPA price: 0.14 €/kWh (18% savings compared to 0.17 for grid electricity)

• No remuneration by “scambio sul posto” (net-metering)

• 70% debt financing with a 7 years loan (interest rate: 7%)

• PBT = 8 years (low…but low enough?)

• IRR = 17%

Small industrial plant

Self-consumption, Italy

• Plant cost: 105,000 € (VAT excluded)

• Plant size: 70.84 kWp

• Annual consumption before PV: 43,000 kWh

• Grid electricity price: 0.18 €/kWh

• PV output: 85,796 kWh

• Self-consumption (savings): 29,063 kWh (40% share)

• Grid injection: 56,733 kWh

• Energy from the grid: 13,937 kWh

• Annual savings: 5,231 €

• Annual remuneration for “scambio sul posto”: 5,673 € (about

10 c€/kWh)

• Asset amortisation: 4% in 25 years

• PBT: more than 8 years

• Wrong sizing of the plant, too large for the consumption

• A 35 kWp plant would have had a 80% self-consumption rate

Small industrial plant

Self-consumption, Italy

L‘Oreal industrial plant

Italy

• 3 MWp PV plant

• Expected yield: 3,600 MWh/year

• Specific yield: 1,200 kWh/year per

kWp

• Self-consumption rate: 100%

• PV output: 30% of the total demand

Source: Qualenergia.it

• Investment: 3,000,000 €

(about 1,000 €/kWp)

• Balance sheet finance, no debt

financing

• 20 years contract, including a “take or

pay” provision

• 10% savings with respect to grid price

• Investor also broker for the additional

energy demand of the factory

Source: Enersol

L‘Oreal industrial plant

Italy

Commercial sector – SPAR

Austria

• Good load curve (75% in sun hours)

• Two PV systems (176 kWp)

• Crowdfunding towards customers

• 950 € shares (maximum 5)

• 60 €/year through purchase coupons

for 25 years

• Corresponding to 5.1% return rate

plus a portion of the purchase price

• The remaining 400 € will be paid at

the end as coupons or cash

Source: www.pv-financing.eu

Arese shopping mall

Italy

• 50% of the common loads covered by PV (1.4 MWp)

• Lighting and space cooling through heat pumps

• Also 2 cogeneration units Source: Qualenergia.it

• Expected yield: 1,500 MWh/year

• Self-consumption rate: almost 100%

Source: Qualenergia.it

Arese shopping mall

Italy

LEGISLATION OUTLOOK

AND IMPACT ON PROFITABILITY

WHAT COULD HAPPEN AFTER?

• Profitability relies on high self-consumption shares

• Is legislation going to make it easier or harder?

+ Extending self-consumption and PPAs to multiple users (AT, FR, no IT)

- Shifting grid charges from the volumetric share to the capacity-based

share, thus making savings less attractive

POTENTIAL IMPACT

AN EXAMPLE FROM AUSTRIA

• Amendment of Electricity Act expected by the end of 2016

• Enabling common PV systems for supplying electricity to multiple users in buildings (residential, office, commercial)

+ Increasing possible self-consumption rate

-– How to organise the billing?

– How to share the PV output among the users?

Source: Mira Teoh, Photovoltaic Austria

POTENTIAL IMPACT

AN EXAMPLE FROM AUSTRIA

General

consumption

Unit 3

Unit 2

Unit 1

Meter

Meter

Meter

Meter

inverter

Public grid

Difference

Supply/demand

Source: Mira Teoh, Photovoltaic Austria

POTENTIAL IMPACT

AN EXAMPLE FROM AUSTRIA

General consumption Separate systems Common PV system

System size 10 kWp 2 kWp per system 20 kWp

System cost 12,250 EUR 3,600 EUR 21,000 EUR

Self-

consumption

20% 35% 90%

Financing Loan Self-funded Loan

Amortisation 19.5 years 16.82 years 9.81 years

Project

rentability

2.94% 3.55% 10.18%

Source: Mira Teoh, Photovoltaic Austria

POTENTIAL IMPACT

AN EXAMPLE FROM ITALY

• Reform of the bill for non-domestic customer (75% of the nationalconsumption) should be ready by the end of 2016

• 5 scenarios under consultation

• Estimated cut of 0.36÷4.5 billion investments until 2030

• The Energy Authority seems to be oriented towards the 2 «positive» ones (estimated market decrease: 7÷12%)

• Detailed study is available (in Italian)

Source: eLeMeNS

POTENTIAL IMPACT

AN EXAMPLE FROM GERMANY

• Tenant sub-metered electricity supply (TSMES):

– Tenants and owners; Residential and commercial

– No grid charges

– 100% of the EEG levy (6.354 c€/kWh)

• Amendment to the Renewable Energy Sources Act (EEG) in Jan 17

• § 95 no. 2: German Federal Ministry of Economics (BMWi)

authorized to further regulate TSMES

• Reduced EEG levy for PV electricity…?

Source: National PV implementation guidelines for Germany, PV Financing project

POTENTIAL IMPACT

AN EXAMPLE FROM GERMANY

Challenges / restrictions:

• No legal claim for implementation

• No deadline

• Residential only

• Using only the building roof

• Possible distinction by installation sizes or user groups

• Opening a potential market of 1 million multi-unit buildings

• A portfolio of projects to increase profitability

Source: National PV implementation guidelines for Germany, PV Financing project

AVAILABLE DOCUMENTS AND TOOLSWWW.PV-FINANCING.EU

AUSTRIA

FRANCE

GERMANY

ITALY

SPAIN

TURKEY

UK

EU LEVEL

FACTSHEETS ON

FINANCIAL SCHEMES

GOOD PRACTICE

EXAMPLES

IMPLEMENTATION

GUIDELINES

CONTRACTUAL

MODELS

PROFITABILITY CALCULATION TOOL

MAIN MESSAGES

• Focus on user-oriented models:– Smaller scale

– Business models involving more roles and stakeholders

– Direct participation of users:• Financial (crowdfunding, cooperatives)

• Consumption (load management, aggregators for providing grid services)

– Not speculative and highly profitable investment

• “Incentives”:– Self-consumption will be the incentive

– No significant revenues from selling electricity to the grid

– Additional benefits from grid services

– Financial synergy with other technologies in large projects

– PV is the main competitor…of PV (secondary market)

Thanks for your time!

Contacts:Email: riccardo.battisti@ambienteitalia.it

Website: www.ambienteitalia.it

Linkedin and Facebook: Ambiente Italia S.r.l.

Twitter: @AI_AIP