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Monthly archives: June 2012

Late 2011 and the first half of 2012 has seen global investment in renewable energy reach new, unprecedented heights. Solar power has now surpassed wind power as the most popular renewable technology for investment and here in the UK our solar market emerged onto the international photovoltaic (PV) scene thanks to the tried and tested method of Feed-in Tariff (FiT) reduction. Despite being mismanaged by the government, the UK FiT’s have generated the spark required to move commercial solar investment into the realm of reality. This article will take a look at the current state of commercial solar investment in the UK, what kinds of projects are being considered and by whom.

Investment and funding of commercial solar power projects in the UK has never been a more diverse market. Knowing who has the control of this funding, what kind of projects they are interested in and how to produce viable, attractive proposals for the market of private equity and public investment is becoming an increasingly important and lucrative skill.

Here at Solar Selections Commercial we are competent with the understanding and sourcing of highly suitable clients and interested lenders and would be happy to assist anyone with commercial projects in need of funding to move their projects forwards.

Firstly let’s look at how this market has established itself and where it currently stands.

Large Scale Solar Power in the UK

The first standalone MegaWatt (MW) solar power installations in the UK involved forward thinking blue chip utilities such as Thames Water, major renewable energy manufacturers such as Canadian Solar and offshore equity investment groups like Isolux Corsan. The risk assessments and returns were scrupulously appraised by all involved and this is testament to their eventual success. This has in turn opened up the market for other projects to get off the ground.

What we are seeing now and through 2012 has been more farmersprivate conglomeratesproperty owners and investors becoming involved in the MW scale of solar PV investment. Of importance to all of this local councils, energy utilities and infrastructure services have also adapted their once somewhat prohibitive policies to make solar a more straightforward investment opportunity. Renewable Obligation Certificates (ROC’s) are present and despite an upcoming review in early 2013, are providing some stability on Return On Investment (ROI) figures.

Establishing Viability

As with all investment some opportunities are more attractive than others. We can separate ground and roof mounted solar power systems because the criteria differ slightly for each. It is important to note that whether the funding be private equity based or public, these factors hold equal importance.

Ground Mounted Solar Installation

The more of these considerations a potential site adheres to positively, the better chance that investors are going to be interested and the better returns are going to be involved. Note that this is not a comprehensive list, but a starting point.

    • The history of the land – especially including previous production capacity such as for agriculture or industry.
    • The size and location of the land.
    • Presence of rocks/debris.
    • Proximity of the area from major roads, communal areas and foot traffic.
    • Proximity of the land from protected regions of natural beauty.
    • Status of the land as ‘Derelict’.
    • The rating and age of the connection to the grid – energy capacity and phases present are of special interest.
    • Proximity to a suitably sized energy substation.
    • Potential of a potential Power Purchase Agreement (PPA) client.
    • Energy usage on site.

How does one know whether the energy usage or substation status of any one potential site is considered positive or not? Best to consult a professional such as Solar Selections; in short, it differs.

Roof Mounted Solar Installation

Roof mounts are similar in most respects. Factors that can affect viability include:

    • The roof space available for panel installation.
    • Location of the site.
    • Orientation and pitch of the roof.
    • Visibility of proposed panel location to highways and major thoroughfares.
    • The number of energy meters on-site (triple phased especially).
    • The status of the site as protected or heritage listed.
    • The rating and age of the connection to the grid.
    • The proximity to a power station or substation.
    • Presence of a potential PPA client.
    • Energy usage on site.

Types and Sources of Investment

Sites that can tick the boxes on the above considerations are in amazing demand at present. Private equity sources running through brokerages or consultancy firms are especially interested in outright purchases of such leads. Depending on the company rates for commissions to purchase the entire opportunity, finance the required capital or pay as a rental amount differ. For a better idea on what is available for your potential site, contact Solar Selections on 0844 567 9835.

Depending upon the clients profile and security there are many ways funding can be found. Let’s start at the top and work our way down through the various parties and possibilities involved.

‘Low Risk’

Client: For a freeholder or client to be considered low risk, they would need to be substantial, well established and profitable businesses. We are talking about organisations from HM Government to Tesco’s and British Gas to McDonald’s. To give an idea, Tesco’s had a turnover of £62.5 billion in 2010.

Fund: Large, international asset finance groups and commercial fund managers not specifically interested in renewable energy technologies. They would provide excellent rates of interest and usually no upper limit on funding available with a minimum spend of £150,000 being the norm.

An example of this would be Commercial Asset Finance Group Australease (CAFGA) who have an Operational Lease Funding arrangement openly available in the UK. The client needs to be suitable as outlined above and also the freeholder of the site. As well as this they would need to consume the majority of energy from a proposed PV installation on-site. For more details, contact Solar Selections on 0844 567 9835 or go to www.solarselections.co.uk/commercial/commercial-solar-finance-package

Approach: A plethora of options from competitive out and out finance provision to tax-break inclusive operational lease arrangements and roof/site rental agreements with eventual transfer of ownership.

‘Medium Risk’

Client: Established business with healthy balance sheets and turnover in the general range of £1,000,000 to £50,000,000 or public sector clients such as councils. Turnover could differ significantly for private clients on this scale, and comprehensive vetting process would take place to verify assets and suitability.

Fund: Far more open than low risk opportunities, the specifics of site viability come into play more than before. These firms will usually possess some kind of interest in renewable energy above more mainstream investment markets like shares or bonds. Incredibly suitable sites owned by businesses with relatively weak security assurances would still be considered and possible. It’s as much about who you know as what you know in the finance market so best to consult with a professional for further advice.

Approach: More likely to involve partial generation benefit for the client with a view towards eventual ownership after a fixed term or perhaps a site rental arrangement. Usually the tariffs and earnings would be allocated towards the fund temporarily. Still a very attractive prospect for the client considering the lack of Cap Ex required.

‘High Risk’

Client: A renewable energy enthusiast with some land or property looking to how they could generate income from an installation. Generally this would be anyone from a farmer, freeholder of land to estate managers and smaller scale building developers that cannot provide large private or business turnovers or security assets. Realistically capital outlays over £20,000 are beyond this kind of client depending on site characteristics of course.

Fund: Generally smaller, less prohibitive and capital heavy private equity lenders specifically interested in renewable energy. They can also take the form of PV installation companies and their direct partners.

Approach: The Rent-A-Roof scheme is an example of this at a domestic level, as is the more recent cash-flow positive domestic finance. Essentially the client would receive the installation for no or nominal cost but receive limited benefits for the first 10 years or so.

Summary

It’s a complex and often fruitless task marrying up sites, clients and funding in the one project. Each party has it’s own variables and opinions on how best to go about installing a MW or large scale commercial PV installations. On top of this, solar installers differ massively in their capacity to provide experienced, timely and professional installation services. The success or failure of a project can come down to the meeting of deadlines and information provisions  as well as the ability of a fund or installer to provide their services as proposed, so vetting is of incredible importance within a potential project.

Solar Selections work with some of the most prominent, experienced utility and large scale solar installers in the world. We also have a network of funding partners such as the aforementioned CAFGA with which we can provide funding solutions for installers with their own clients or direct to clients looking for a complete management service. For specific assistance or advice on commercial solar project viability, funding or installation contact Solar Selections 0844 567 9835 and one of our commercial team will get in touch with you today.

Written by Jarrah Harburn

jarrah@solarselections.co.uk

0844 567 9835

© 2012 Solar Selections Ltd

Welcoming an announcement by Energy Minister Greg Barker today (Thursday 24 May 2012) setting out a clear plan for solar power to 2020, Friends of the Earth’s Executive Director Andy Atkins said:

“After a year and a half of crippling uncertainty, the sun is starting to shine again on the solar industry.

Greg Barker’s 2020 vision will allow solar firms to get back on their feet, protect jobs and plan for the future – but to avoid more fiascos any mechanism for setting subsidy payments must be managed independently of Government.

The Energy Bill is a once-in-a-generation opportunity to create jobs and tackle high fuel bills by switching our electricity supplies to clean British energy – but current plans will leave the nation hooked on costly gas and risky nuclear power.

Developing the nation’s huge renewable energy potential will help drive us out of recession – the Government must make it easier for communities, schools and hospitals to plug into clean power.”

This week, Friends of the Earth and the Federation of Small Businesses wrote to Energy Secretary Ed Davey, urging him to end the uncertainty over the feed-in tariff that is hampering the solar industry, and to set out a clear plan to 2020 that enables the sector to grow steadily and with confidence.

 

Originally published on www.foe.co.uk

The solar industry has welcomed new figures revealing the market is gradually recovering from deep cuts to the popular feed in tariff incentive scheme, which effectively halted growth across the sector last month.

 

The current figures are testament to the need for a consistent government policy for renewable energy, which will encourage public investment and interest in this sector. Solarfeedintariff would hope to see more positives coming from the UK Government in this regard.

 

Deployment of solar PV has increased steadily at around 620 kilowatts per week since the start of April, according to a report published by the Department of Energy and Climate Change (DECC) late last week.

Demand collapsed after the government changed the rules governing the scheme and halved the level of incentives available from April 1. The number of installations dropped to 885 in the first week of April, creating around 2.5MW of new capacity – a huge reduction on the tens of thousands of installations undertaken during February and March.

However, provisional figures show that 1,788 solar installations were completed in the week ending 3 June, creating around 6.4MW of new capacity. The figure is less than the 2,186 installations in the last week of May, however the June 3 figure is likely to be revised upwards slightly as new information is collected.

Paul Barwell, chief executive of the Solar Trade Association, said he was confident the industry was now “on the road to recovery”, following the recent confirmation by Climate Change Minister Greg Barker that the next wave of cuts to the solar feed-in tariff will come into effect in August, cutting payments for small scale installations from 21p/kWh to 16p/kWh.

Barker also announced a new mechanism for reducing feed-in tariff that gives the government an option to cut the tariff every three months from November, based on the level of deployment in the preceding months.

“The steady climb in deployment – which will see a minor blip next week owing to the Jubilee weekend – is a sign of a stable and sustainable future for the UK PV sector,” said Barwell. “Consumers are getting the message that returns are as good as ever and the feed-in tariff is finally stable.”

However, many industry insiders remain concerned that the industry has shrunk in size as a result of the deep cuts to feed-in tariffs.

Building company Carillion confirmed last month that it would cut 1,400 jobs following a drop in demand for solar as a result of the deep cuts to feed-in tariffs. Coventry-based Norton Energy Solutions also entered administration at the end of May, putting around 100 jobs at risk.

 

Originally published on BusinessGreen.

Ministers must send clear signals that they believe in new forms of green technology if they want companies to invest in them, a think tank has said.

 

Solarfeedintariff believes that it is important for the government to agree on a clear and comprehensive energy policy that will allow for greater investment into renewable energy with an all-inclusive outlook, rather than a focus on energy companies alone.

 

The Institute for Public Policy Research (IPPR) said the government had been blowing “hot and cold” on its commitment to cut carbon emissions.

That caution had made the energy sector jittery about investing, it concluded.

The government said its proposed Energy Bill would provide “certainty” for investors in the electricity market.

Energy Secretary Ed Davey said last month climate change goals could be met by banishing coal and gas in the 2030s.

But launching the draft Energy Bill, the government said it wanted to retain flexibility on the target date.

It had previously indicated it could make energy clean within two decades.

 

‘Mixed-signals’

IPPR research fellow Reg Plant said: “An ambitious decarbonisation policy offers a route to long-term sustainable economic growth, and productive British businesses.

“But businesses need to know the government will provide consistent support for their investments.

“And at the moment ministers blow hot and cold on their commitment to a green future.”

The IPPR said there were “mixed signals” because the government initially promised ambitious targets before seeming to waver about their effect on the economy.

It also said the Treasury should ditch plans to introduce a “carbon floor price” – a green energy tax setting a minimum price for greenhouse gases.

Mr Davey has said the scheme would encourage companies to develop more green technologies, but critics argue the tax would be passed on to consumers.

 

‘Best deal’

A Department of Energy and Climate Change spokesman said: “The government is proposing to reform the electricity market and give certainty to investors with the Energy Bill and revolutionise the energy efficiency of millions of homes and business across the UK through the Green Deal.

“This approach will deliver the best deal for Britain and for consumers, cutting energy waste and helping get us off the hook of relying on imported oil and gas by creating a greener, cleaner and ultimately cheaper mix of electricity sources right here in the UK.”

The IPPR report comes amid lobbying from environmental campaigners to cut subsidies to onshore wind farms further.

They argue their spread across the UK has been a blight on the countryside.

Mr Davey has already indicated the government wants to cut wind farm subsidies by about 10%.

Prime Minister David Cameron has said the growth of renewable energy is vital for the British economy.

He has promised to lead the “greenest government ever”.

 

Originally published on the BBC website