WoodMac: Merchant shift may push PV towards risk-keener owners

Share on facebook
Share on twitter
Share on linkedin
Share on reddit
Share on email
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).

Read Next

October 22, 2021
The clean energy business of US utility NextEra Energy had a record quarter of origination success in Q3, adding approximately 2,160MW to its backlog, including 515MW of new solar projects.
October 19, 2021
Lightsource bp has announced its entry into Poland’s solar market through a co-development deal which will see the developer proceed with a 757MWp pipeline in the country.
October 19, 2021
The White House has said renewables are still key to its budget reconciliation bill despite rumours of the investment tax credit (ITC) being modified as opposition to the bill by senators Manchin and Sinema continue
October 19, 2021
Europe's energy crisis can be a boon for renewables deployment on the continent by bolstering business cases, but familiar foes such as grid constraints will still need to be hurdled in the coming years.
October 15, 2021
Doral Renewables has broken ground on the 1.65GWdc Mammoth Solar project in Indiana, set to be the US’ largest solar farm once complete.
October 13, 2021
Calling for a three-fold increase in renewables investment in the next decade, the International Energy Agency’s (IEA) latest edition of its World Energy Outlook, published today, has been largely welcomed by analysts and industry observers, who are urging world leaders to respond accordingly at the COP26 Climate Change Conference.

Subscribe to Newsletter

Upcoming Events

Upcoming Webinars
November 10, 2021
8am (PST) | 5pm (CET)
Solar Media Events
December 1, 2021