Image credit: BayWa r.e.
Solar’s embrace of subsidy-free models could push it in greater numbers towards owners with the experience to navigate power price swings, according to Wood Mackenzie.
In a recent report, the consultancy said some of the world’s developed solar markets could witness an asset management shift as merchant business models become more prevalent.
The analysis found independent power producers (IPPs) topped solar asset sales in 2018, while institutional investors ranked first in terms of purchases last year.
As Wood Mackenzie solar analyst Rishab Shrestha noted, institutional financiers – a group typically comprising pension funds, insurers and others – increasingly see solar as a mature asset class.
According to the firm, institutional investors’ ascendancy as asset holders last year was especially marked in Europe, the Middle East and Africa, where they owned over half of region-wide solar capacity.
The exposure to unsubsidised business models could yet bring changes to the solar ownership landscape across developed markets, said Tom Heggarty, senior analyst at Wood Mackenzie.
According to him, the increasing reliance on merchant revenues could see projects become “less attractive” to risk-adverse institutional investors.
“We could see a greater role for large utilities, who will be more comfortable with exposure to wholesale power price risks,” Heggarty added.
Ownership fragmentation on the wane as solar goes large
For solar, the emergence of new financial suitors follows years of steep technology cost drops, pushing the industry nearer – or past – the grid parity mark all across the globe.
Particularly in Europe, the list of PV projects relying on power purchase agreements (PPAs) and uncontracted revenues grows every month, with some now backed by major banks.
Some have warned the industry’s rising acceptance of shorter, lower priced PPAs makes it more vulnerable to power price fluctuations, increasing the need to question optimistic forecasts.
Statkraft – the utility offtaker to BayWa r.e.’s subsidy-free Don Rodrigo series – said at Intersolar this year that investors may soon be ready to accept a 20-30% merchant share in their solar portfolios.
The talk on unsubsidised solar’s potential and pitfalls finds the market still fragmented in terms of ownership, according to the new figures from Wood Mackenzie.
Taken together, the top 10 solar owners worldwide only held 6.9% of global capacity as of the end of December 2018, analyst Shrestha pointed out.
The firm’s top 10 solar asset holder ranking for last year was led, in descending order, by utilities NextEra Energy, Southern Company and India’s ACME Group.
According to Shrestha, PV ownership fragmentation could however be on the wane as new investor moves – including Macquarie’s new clean energy 20GW pipeline – and auctions combine to bring scale to the market.
The prospects and challenges of solar's new era in Europe and beyond will take centre stage at Solar Media's Solar Finance & Investment Europe (London, 5-6 February) and Large Scale Solar Europe 2020 (Lisbon, on 31 March-1 April 2020).
Rethink repowering or replacing while there is a much more elegant, low risk and retrofit solution available: retrofitting with AR coating. In this second TechTalk webinar, DSM and its ecosystem partners, SternEnergy and Encavis will discuss all the relevant aspects of in-field retrofit AR coating technology and step-by-step procedures from the perspective of investors, maintenance engineers, and asset owners.
The business of solar is changing, as the industry scales up, technology, IT and new players to the market will add complexity. This sparks a host of opportunities such as co-location of solar and storage and the rise of unsubsidised solar projects as well as challenges which will question the very business model of European solar asset owners. Solar Finance & Investment Europe is the meeting place for institutional investors, sovereign wealth funds, solar, wind and storage funds and large energy buyers to do business.
The Utility Solar Summit UK will focus entirely on the opportunities in the UK ground-mount space and feature the new technology and advanced innovations allowing asset owners to improve yield in a subsidy free market. Listen to senior market leaders share stories of their successes and manufacturers pushing the envelope for solar PV whilst taking advantage of our enhanced networking features to connect you with your peers onsite; realising the potential of UK utility scale deployment from 2020 and beyond.