solar pv in the uk, the developers prospective - Regensw
SOLAR PV IN THE UK, THE DEVELOPERS PROSPECTIVE
REGEN SW: PLANNING FOR SOLAR PV PARKS, OCT 2010 David Maguire, Director BNRG Renewables
The Developers Perspective • BNRG Intro • Commercial Background to PV – Solar PV in Europe – Solar PV in the UK • Current Market Perspective • Project Development, BNRG Experience, Best Practice • Wider Benefits, Hurdles
COMMERCIAL BACKGROUND Solar energy relies upon good solar resource and the provision of State incentives (known as Feed-in tariffs or Green Certificates) to stimulate investment. Feed in tariffs are typically: Granted for a long period Greece, Germany, Italy: 20 years UK, Bulgaria, Spain: 25 years Are at a substantial premium over other forms of electricity Bulgaria €0.37 /kwh Greece €0.40/kwh Italy €0.35/kwh UK €0.36/kwh
SOLAR RADIATION
PV MARKET IN EUROPE Country
2009
2010
2011
Duration
Cumulative PV
MAJOR
FIT (€ /MWh)
FIT (€ /MWh)
FIT (€ /MWh)
Years
(MWs – Dec 2010)
Germany
320
280
262
20
12,000
Spain
280
280
210
25
3,700
Italy
440
400
350
20
2,000
France
328
420
369
20
350
Czech Rep
492
467
327
20
1,000
Belgium
510
410
390
20
450
Greece
400
400
380
20
100
Bulgaria
371
371
354
25
10
0
366
366
25
60
EMERGING
UK
ASSESSING PV TERRITORIES In assessing countries that provide best and safest returns key factors include: – – – – – – – – – – –
Feed-in Tariff Solar Radiation Power purchase period Grid access Planning and permitting regime Forthcoming tariff degressions Land cost and availability Tax Availability and cost of credit Currency risk Political risk
PV MARKET IN EUROPE MAJOR ESTABLISHED MARKETS Germany • Over one third of the world’s installed capacity. • The investment market is mature and the process is well understood. • Poor solar resource (1100-1400 hrs/m2/year) and mediocre feed-in tariff • PV regarded as a trustworthy investment and has been embraced by the investing public. • Germany is the number 1 player in the market, but will not see any further dramatic growth.
Spain • Phenomenal growth during the period 2005-2008. • Excellent solar resource. Up to 2,000 hrs (even higher in Canary Islands) • New Programme Cap and now a much reduced tariff. • Spanish market is effectively closed off.
Italy • Italy is the fastest growing major market • Very good solar resource, good tariff • Municipalities causing delays in the south (bureaucracy, inefficiency) • The Italian market is tailing off with further tariff degressions.
PV MARKET IN EUROPE EMERGING MARKETS The following are regarded by most commentators as the major emerging markets: • FRANCE – Massive grid-connection delays mean the market did not take off as expected. • GREECE – Best combination of tariff and solar resource. Investment subsidies. Bureaucratic hold-ups are an issue. Economic difficulties make banking difficult. • CZECH REPUBLIC – Best tariffs. Bureaucratic. Difficult to get new projects going. Little further growth expected after 2011. • BELGIUM – Fast growth, renewables-friendly. Poor solar resource, degression now in place. Little growth expected after 2010. • BULGARIA – Good tariff and sun. Efficient and quick licencing. Banking is more expensive. The are grid access limitations. • UK – Latest entrant (2010). Secure territory. Expected to have efficient licensing. Banking should prove to be less expensive. Mediocre solar resource. Expensive land and grid connection.
COMPARATIVE PV INVESTMENTS 2010 Country
Greece
Italy
Czech Rp
Bulgaria
France Spain
Belgium
UK
Germany
Opportunities to invest
Index
FIT €/kwh
Good
680
Fair
Resource Hrs/m2/yr
City
€0.40
1,700
Naphlio
668
€0.40
1,670
Foggia
Now Difficult
564
€0.47
1,200
Brno
Good
562
€0.37
1,520
Bourgas
Fair
534
€0.32
1,670
Beziers
Now Difficult
496
€0.28
1,770
Valencia
Fair
463
€0.41
1,130
Bruges
Good
446
€0.36
1,240
Exeter
Fair
342
€0.28
1,220
Stuttgart
UK SOLAR PV POLICY DRIVERS • UK requires a 34% reduction in carbon emission by 2020. • 51% of this reduction is targeted to come from RES. • DECC projects 37% of electricity to come from RES. • DECC 2020 target for solar is 3% of the electricity mix or 3GW. • OFGEM project up to 60MW installed in 2010 and 250MW in 2011.
CURRENT MARKET PERSPECTIVE BNRGB’s market perspective as of October2010: PROS •Good market for completed PV projects from investment funds and pension funds. •A general enthusiasm for Solar PV at local and regional level. •Good regulatory framework. The current FIT model is working. •Good opportunity for employment and industry. CONS •Currency risk not experienced in other territories. •Relatively higher tax regime. •Land costs are amongst the highest in Europe. •Grid connection costs are amongst the highest in Europe. •Regulatory uncertainties: New government not giving clear signals. Institutional investors are nervous.
SOLAR PROJECT DEVELOPMENT Site identification
Site Negotiation
Planning
• Identification of • Determine • Screening suitable sites Maturity of • Pre-planning Licences - Size - Visual Impact • Negotiate - Inclination Stage - Env Issues (ideally flat) payments - FRA/LRA etc - Solar Radiation • Conduct Due Level - Design Diligence - Proximity to - Public consult Grid - Planning Application
Negotiate EPC Contract
Plant Construction
• Negotiation of EPC Contract, including :
• Civil Engineering activities
- Schedule of payments
• Fencing etc
- Timing of construction - Service Levels / Guarantees
• Installation of panels
Grid Connection
• Connection to Grid • Signing power purchase agreement (PPC) with Grid Operator
Plant Mgt. (O&M)
• O&M contract typically made with EPC contractor: - Ordinary maintenance (cleaning, scheduled maintenance, monitoring) - Spare parts replacement
- Grid Feasibility
- Mgt. of system failures
- Grid Application
- Security
RISK ASSESSMENT Risk
Planning Construction
Description
Failure in planning Construction failure or below expected quality
Changes at tariff structure
Political Risk
Risk Likelihood
Likely to occur in some cases
Potential Impact
Risk mitigation actions
Medium: abortion of planning process
Careful site selection and design
Low
Medium to High
Strict assessment of EPC’s Tight monitoring on construction through local presence
Low – no precedent
High only in dramatic scenario’s
Lobbying?!?
Theft/damage
Theft/Damage of (parts of) the installed equipment
Likely to occur in some cases
Limited (temporary breakdown, replacement of spare parts)
Use adequate insurance, as well as security systems
System Efficiency
Plant productivity is lower than expected Radiation levels
Possible, but unlikely to drop under guaranteed productivity
Depending on productivity value
Careful technical assessment during EPC negotiation Fix a realistic productivity guarantee
Default / Financial distress of EPC Partner Interest Rate
Low
Medium: abortion of construction process
Careful assessment of EPC’s Structuring of EPC Contract Hedging interest risk
Financial Risk
BNRG EXPERIENCE GREECE •Most attractive incentives in Europe and high solar resource. •Extremely long and uncertain permitting process. •Uncertain regulatory and economic conditions. BULGARIA •Good incentives and good solar resource. •Relatively low land costs. •Transparent and efficient permitting process. •Restricted grid capacity.
Greek sites
21/10/2010
Greek Sites
21/10/2010
Bulgarian Sites
21/10/2010
IMPLEMENTING BEST PRACTICE Key Planning/Environmental Issues • Materials and Construction • Visual Impact • Ecological Impact Mitigation • Careful site selection based on grid and planning issues. • Environmental Impact Mitigation – Suitable mounting systems (little or no concrete) – Suitable screening (selective planting) – Enhance biodiversity (margins, planting, grazing) – Suitable security fencing 21/10/2010
WIDER BENEFITS • • • • • • • •
Energy Security (1MW = energy for circa 250 homes) Reduction in Carbon Emissions Job creation and up-skilling workforce Community benefit Investment in grid infrastructure Tax revenue UK Pension Funds Enhanced biodiversity
21/10/2010
UK HURDLES • Regulatory Uncertainty • Narrow window of opportunity (31st March 2012 or 2013 Deadline) • Planning timelines • Grid connection timeline and costs 21/10/2010
BNRG Renewables Ltd., Dublin Exchange Building, IFSC, Mayor Street, Dublin 1, Ireland T: 0035317917882, F: 0035317917932
REGEN SW: PLANNING FOR SOLAR PV PARKS, OCT 2010 David Maguire, Director BNRG Renewables
The Developers Perspective • BNRG Intro • Commercial Background to PV – Solar PV in Europe – Solar PV in the UK • Current Market Perspective • Project Development, BNRG Experience, Best Practice • Wider Benefits, Hurdles
COMMERCIAL BACKGROUND Solar energy relies upon good solar resource and the provision of State incentives (known as Feed-in tariffs or Green Certificates) to stimulate investment. Feed in tariffs are typically: Granted for a long period Greece, Germany, Italy: 20 years UK, Bulgaria, Spain: 25 years Are at a substantial premium over other forms of electricity Bulgaria €0.37 /kwh Greece €0.40/kwh Italy €0.35/kwh UK €0.36/kwh
SOLAR RADIATION
PV MARKET IN EUROPE Country
2009
2010
2011
Duration
Cumulative PV
MAJOR
FIT (€ /MWh)
FIT (€ /MWh)
FIT (€ /MWh)
Years
(MWs – Dec 2010)
Germany
320
280
262
20
12,000
Spain
280
280
210
25
3,700
Italy
440
400
350
20
2,000
France
328
420
369
20
350
Czech Rep
492
467
327
20
1,000
Belgium
510
410
390
20
450
Greece
400
400
380
20
100
Bulgaria
371
371
354
25
10
0
366
366
25
60
EMERGING
UK
ASSESSING PV TERRITORIES In assessing countries that provide best and safest returns key factors include: – – – – – – – – – – –
Feed-in Tariff Solar Radiation Power purchase period Grid access Planning and permitting regime Forthcoming tariff degressions Land cost and availability Tax Availability and cost of credit Currency risk Political risk
PV MARKET IN EUROPE MAJOR ESTABLISHED MARKETS Germany • Over one third of the world’s installed capacity. • The investment market is mature and the process is well understood. • Poor solar resource (1100-1400 hrs/m2/year) and mediocre feed-in tariff • PV regarded as a trustworthy investment and has been embraced by the investing public. • Germany is the number 1 player in the market, but will not see any further dramatic growth.
Spain • Phenomenal growth during the period 2005-2008. • Excellent solar resource. Up to 2,000 hrs (even higher in Canary Islands) • New Programme Cap and now a much reduced tariff. • Spanish market is effectively closed off.
Italy • Italy is the fastest growing major market • Very good solar resource, good tariff • Municipalities causing delays in the south (bureaucracy, inefficiency) • The Italian market is tailing off with further tariff degressions.
PV MARKET IN EUROPE EMERGING MARKETS The following are regarded by most commentators as the major emerging markets: • FRANCE – Massive grid-connection delays mean the market did not take off as expected. • GREECE – Best combination of tariff and solar resource. Investment subsidies. Bureaucratic hold-ups are an issue. Economic difficulties make banking difficult. • CZECH REPUBLIC – Best tariffs. Bureaucratic. Difficult to get new projects going. Little further growth expected after 2011. • BELGIUM – Fast growth, renewables-friendly. Poor solar resource, degression now in place. Little growth expected after 2010. • BULGARIA – Good tariff and sun. Efficient and quick licencing. Banking is more expensive. The are grid access limitations. • UK – Latest entrant (2010). Secure territory. Expected to have efficient licensing. Banking should prove to be less expensive. Mediocre solar resource. Expensive land and grid connection.
COMPARATIVE PV INVESTMENTS 2010 Country
Greece
Italy
Czech Rp
Bulgaria
France Spain
Belgium
UK
Germany
Opportunities to invest
Index
FIT €/kwh
Good
680
Fair
Resource Hrs/m2/yr
City
€0.40
1,700
Naphlio
668
€0.40
1,670
Foggia
Now Difficult
564
€0.47
1,200
Brno
Good
562
€0.37
1,520
Bourgas
Fair
534
€0.32
1,670
Beziers
Now Difficult
496
€0.28
1,770
Valencia
Fair
463
€0.41
1,130
Bruges
Good
446
€0.36
1,240
Exeter
Fair
342
€0.28
1,220
Stuttgart
UK SOLAR PV POLICY DRIVERS • UK requires a 34% reduction in carbon emission by 2020. • 51% of this reduction is targeted to come from RES. • DECC projects 37% of electricity to come from RES. • DECC 2020 target for solar is 3% of the electricity mix or 3GW. • OFGEM project up to 60MW installed in 2010 and 250MW in 2011.
CURRENT MARKET PERSPECTIVE BNRGB’s market perspective as of October2010: PROS •Good market for completed PV projects from investment funds and pension funds. •A general enthusiasm for Solar PV at local and regional level. •Good regulatory framework. The current FIT model is working. •Good opportunity for employment and industry. CONS •Currency risk not experienced in other territories. •Relatively higher tax regime. •Land costs are amongst the highest in Europe. •Grid connection costs are amongst the highest in Europe. •Regulatory uncertainties: New government not giving clear signals. Institutional investors are nervous.
SOLAR PROJECT DEVELOPMENT Site identification
Site Negotiation
Planning
• Identification of • Determine • Screening suitable sites Maturity of • Pre-planning Licences - Size - Visual Impact • Negotiate - Inclination Stage - Env Issues (ideally flat) payments - FRA/LRA etc - Solar Radiation • Conduct Due Level - Design Diligence - Proximity to - Public consult Grid - Planning Application
Negotiate EPC Contract
Plant Construction
• Negotiation of EPC Contract, including :
• Civil Engineering activities
- Schedule of payments
• Fencing etc
- Timing of construction - Service Levels / Guarantees
• Installation of panels
Grid Connection
• Connection to Grid • Signing power purchase agreement (PPC) with Grid Operator
Plant Mgt. (O&M)
• O&M contract typically made with EPC contractor: - Ordinary maintenance (cleaning, scheduled maintenance, monitoring) - Spare parts replacement
- Grid Feasibility
- Mgt. of system failures
- Grid Application
- Security
RISK ASSESSMENT Risk
Planning Construction
Description
Failure in planning Construction failure or below expected quality
Changes at tariff structure
Political Risk
Risk Likelihood
Likely to occur in some cases
Potential Impact
Risk mitigation actions
Medium: abortion of planning process
Careful site selection and design
Low
Medium to High
Strict assessment of EPC’s Tight monitoring on construction through local presence
Low – no precedent
High only in dramatic scenario’s
Lobbying?!?
Theft/damage
Theft/Damage of (parts of) the installed equipment
Likely to occur in some cases
Limited (temporary breakdown, replacement of spare parts)
Use adequate insurance, as well as security systems
System Efficiency
Plant productivity is lower than expected Radiation levels
Possible, but unlikely to drop under guaranteed productivity
Depending on productivity value
Careful technical assessment during EPC negotiation Fix a realistic productivity guarantee
Default / Financial distress of EPC Partner Interest Rate
Low
Medium: abortion of construction process
Careful assessment of EPC’s Structuring of EPC Contract Hedging interest risk
Financial Risk
BNRG EXPERIENCE GREECE •Most attractive incentives in Europe and high solar resource. •Extremely long and uncertain permitting process. •Uncertain regulatory and economic conditions. BULGARIA •Good incentives and good solar resource. •Relatively low land costs. •Transparent and efficient permitting process. •Restricted grid capacity.
Greek sites
21/10/2010
Greek Sites
21/10/2010
Bulgarian Sites
21/10/2010
IMPLEMENTING BEST PRACTICE Key Planning/Environmental Issues • Materials and Construction • Visual Impact • Ecological Impact Mitigation • Careful site selection based on grid and planning issues. • Environmental Impact Mitigation – Suitable mounting systems (little or no concrete) – Suitable screening (selective planting) – Enhance biodiversity (margins, planting, grazing) – Suitable security fencing 21/10/2010
WIDER BENEFITS • • • • • • • •
Energy Security (1MW = energy for circa 250 homes) Reduction in Carbon Emissions Job creation and up-skilling workforce Community benefit Investment in grid infrastructure Tax revenue UK Pension Funds Enhanced biodiversity
21/10/2010
UK HURDLES • Regulatory Uncertainty • Narrow window of opportunity (31st March 2012 or 2013 Deadline) • Planning timelines • Grid connection timeline and costs 21/10/2010
BNRG Renewables Ltd., Dublin Exchange Building, IFSC, Mayor Street, Dublin 1, Ireland T: 0035317917882, F: 0035317917932
