TIME TO INVEST IN THE SOLAR ENERGY

The main vector is renewable energy sources

Let's open the news feed for February 2018. Norway's Statoil has become another oil and gas corporation that will diversify investments in oil and gas in the next decade, shifting the vector towards renewable solar energy sources. By 2030, 15-20% of all Statoil's total capital expenditures will be for “new energy solutions”. French Total has already invested in a number of solar energy companies, including SunPower ($ 1.4 billion) and Eren ($ 285 million), Shell announced its intention to invest from $ 1 billion to $ 2 billion a year in renewable energy, and British Petrolium (BP ) - up to $ 500 million per year. According to Wood Mackenzie analysts, by 2030 renewable energy sources will account for about 20% of the investments of the largest energy companies - the pillars of the current hydrocarbon generation.

Regulatory prerequisites for the growth of the solar energy market

According to EnergyTrend, in 2017, more than 100.4 GW of solar PV energy were commissioned for the first time, and 106 GW of new capacities are planned to be commissioned in 2018. But also in our country important shifts have taken place. In 2017, the new Law of Ukraine "On the Electricity Market" was adopted, which improved the prospects for the development of renewable solar energy sources in the country and stabilized the legislative framework, laid down all the key components of the mechanism for supporting the production of electricity from renewable energy sources, namely:

The “green tariff” (FIT) in Australia is still quite high compared to other countries. Now FIT is ~ € 15.02 per kWh for solar power plants commissioned during 2017-2019. (~ € 10.18 per 1 kWh for wind farms), and the tariff is pegged to the euro exchange rate. The FIT size will gradually decrease according to the launch date of the new PV station.

There are 5% or 10% surcharges to the green tariff for the use of equipment made in Ukraine - for the “national component”.

Obligations (by the state-owned enterprise Energorynok, and subsequently by the so-called “Guaranteed Buyer”) are being fulfilled to buy back from the producers all the electricity produced at the “green tariff” fixed at the time of appointment during the entire period of FIT.

Such mechanisms to support and guarantee electricity sales provide additional confidence and protection against problems with sales markets, mitigate the risks of fluctuations in the national currency and / or price changes, and, of course, improve the attractiveness of solar investment projects.

New electricity market - new rules

The Law "On the Electricity Market" defines the role of RES and the procedure for its integration into the new Australia electricity market. Efforts are aimed at introducing a liberal, open and competitive market for the "3rd Energy Package" (including the provisions of Directive 2009/72 / EC of 13 July 2009 on general rules for the internal electricity market, Regulation 714/2009 on network access for cross-border exchanges with the EU, etc.).

Australia has pledged to include the 3rd Energy Package in its national legislation in the context of Association with the EU and membership in the Energy Community. In this regard, one way or another, there will be a rejection of the Wholesale Market Model with one buyer in favor of a multi-segment liberal market according to the pan-European model, which includes the day-ahead markets, intraday, balancing, ancillary services market (frequency and voltage “fixes”) plus the market for bilateral contracts. In the EU, such a market transformation (and a complete rejection of the green tariff) will be completed by 2030.

The law came into force on June 11, 2017 (with the introduction of some provisions for the launch of new market segments from July 1, 2019). Starting from 2030, all renewable energy producers will be fully responsible for their imbalances, regardless of the date the facility starts operating (see also “Day-Ahead Planning Horizon” ). Synchronization with neighboring energy markets will intensify, and a number of technical requirements will be introduced for the integration of the Australia solar energy system into the European environment.

It’s gone! The number of new solar installations is constantly increasing ...As of January 1, 2018, the National Energy and Utilities Regulatory Commission (NEURCU) reports about 1374.7 MW of the total installed capacity of renewable energy sources at the "green tariff" (excluding capacities in Crimea), of which ~ 55% are solar energy photovoltaic plants. (741.9 MW), and ~ 33.8% (465.1 MW) - at wind farms.

In 2017, 257 MW of new renewable energy projects were put into operation on a green tariff basis, which is more than 2 times higher than the figures for 2016 (about 127 MW), and 8 times more capacity compared to 2015 (about 30 MW ). The share of solar installations with FIT, commissioned in 2017, was ~ 82% of the total new capacity of renewable energy sources, while WPPs accounted for only ~ 10.6%.

Legislative support and other measures (FIT coverage of small private PV energy producers with installations up to 30 kW) have seriously spurred private initiative to invest in PV generation at all levels.

Features of national investment in solar energy projects

Recent changes to the standard Power Purchase Agreements (PPAs) have significantly improved the investment climate in the country.

In the past, the generic PPA has been criticized for not being completely acceptable or reliable. To solve this problem, NEURC on 14/9/2017 approved amendments to the model PPA (entered into force on 29/10/2017) to increase its "bankability" (the ability of banks to take into account the availability and conditions of PPA when lending). PPA will be valid until the end of the "green tariff", i.e. until January 1, 2030 - this is perhaps the most requested amendment. Previously, PPAs were concluded for 1 year with the right of annual renewal. It is now allowed to conclude a PPA even before the completion of construction or commissioning of a plant, but it comes into force after a number of conditions are met (for example, obtaining a license to generate electricity, providing the manufacturer with FIT, connecting to the wholesale electricity market, obtaining approvals for design and technical documentation of a commercial electricity metering system, etc.). Not all conditions depend solely on the project developer and decisions by the regulator or third parties will be required. This "conditional burden" preserves certain risks for the manufacturer. However, the general procedure for “entering the market” has been significantly simplified and accelerated, according to business analysts and corporate lawyers from Denton's and Redcliffe Partners.

PPA can now be used as collateral or otherwise encumbered. Disputes between the parties can now be settled in international arbitration (according to jurisdiction) and with the help of out-of-court arbitration, up to the Secretariat of the EU Energy Community. Previously, claims arising from the PPA could only be considered in Ukrainian courts. All issues of reorganization of the energy market and the enforcement of the PPA must be fully resolved no later than the date of the launch of the new electricity market (i.e., by July 1, 2019).

NEURC adopted further amendments to the standard form PPA in the context of the current reform of the electricity market to increase banking and insurance PPA protection and strengthen protection of the rights of producers and creditors (at the time of this writing, this resolution of NEURC was awaiting official publication, after which it will enter into force).

So far, there are other factors that hinder the development of renewable energy generation. These are the high cost of capital, regulated and lengthy land allocation procedures, lack of the necessary network infrastructure, problems with connecting to power grids, a number of regulatory inconsistencies in risk allocation and damage compensation, etc. There is a general understanding that it is vital to ensure stability and the continuity of consumption and payment for electricity produced from renewable energy sources at the "solar energy", as guaranteed by law.

Not having time to get on its feet, solar PV generation is facing growing opposition from traditional energy. Nevertheless, the main trends in the energy policy of the EU and other international markets are aimed at the gradual "equalization" of the legal status of various energy sources, reduction or limitation of mechanisms of state support and subsidies for renewable energy sources, implementation of conditions of equal competition for all electricity producers from different sources. In countries where the production of electricity from renewable energy sources already reaches a significant share in the total volume of solar energy generation, this is justified (see "How to switch to fully renewable energy" ), although it is apparently premature for the Australia market. But, as they say, once I took up the tug ...

This focus on the PPA is understandable - it is a recognized instrument for securing guarantees. Globally, in 2017, corporate PPAs from RES were concluded for a record 5.4 GW - report by Bloomberg New Energy Finance (BNEF), see Fig. 3. (Local PPA not included; first data for 2017 in infographic is split by Asia Pacific (APAC), Europe and the Middle East (EMEA) and Americas (AMER), but no data for Mexico so far.)

Besides, such market instruments as “contracts for difference” (CfD) are gaining strength in Europe. Typically, this is a long-term contract for a fixed price for the purchase / sale of electricity throughout its duration (“strike price”), which ensures sustainable and predictable profitability and hedges the risks of market fluctuations. It also helps reduce the cost of capital - CfDs are usually signed after the auction.

A variety of more sophisticated and flexible incentives for RES are being developed, including combinations thereof. For example, microgeneration sells energy at a green rate, while other types of generation compete with each other in CfD auctions, which are “technology neutral”, do not discriminate against bidders, and do not provide any incentives by type or source of generation.

Each according to his ability - time to invest in solar power plants

There is a growing interest in the world in diversified investment in the PV industry through stocks and bonds of green companies. Their special appeal is that the gap in the financial capabilities of large and small investors is eliminated. For example, in Fig. 4 shows how the "green" stocks have grown, and in recent years the growth is largely due precisely to the contributions of small and medium investors, who find it difficult (and risky) to become a shareholder of a specific PV project, but they got the opportunity to "invest" in PV -generation in general. For example, according to the Rentechno group, it is planned to attract investments in new PV capacities at least three times more than it was in 2017 through solar energy funding.

The Clean200 ™ Index of 200 clean stocks rose 32.1% in the first 18 months after its public listing, according to a January BNEF report (see Chart 4). This is double the ~ 15.7% increase in the profitability of fossil fuel energy companies (S&P 1200 Global Energy Index). For comparison, the indicator of the S&P Index for "clean energy" is also given.