designing eu policy to encourage new solar ... - pv …part of the pv financing research project,...

European Union

DESIGNING EU POLICY TO ENCOURAGE NEWSOLAR BUSINESS MODELSEU POLICY ADVISORY PAPER

PV FINANCING project | January 2017Deliverable 6.4 – Public – EU Policy Advisory Paper

Sonia Dunlop - Alexandre Roesch - James Watson

This project has received funding from the EuropeanUnion’s Horizon 2020 research and innovationprogramme under grant agreement No 646554

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Many thanks to all those that assisted in the review of this report, including: FrankfurtSchool, BSW-Solar, RESCoop, HousingEurope and Allianz Climate Solutions Gmbh.

This report has been prepared by SolarPowerEurope. It is being furnished to the recipients for general information purposes only. Nothingin it should be interpreted as an offer orrecommendation of any services or financialproducts. This is a report produced as part ofthe PV Financing project and does notrepresent the official views of SolarPowerEurope and its members. This paper does notconstitute investment, legal, tax or any otheradvice. Recipients should consult with their ownfinancial, legal, tax or other advisors as needed.

This report is based on sources believed to beaccurate. However, SolarPower Europe doesnot warrant the accuracy or completeness of any information contained in this report.SolarPower Europe assumes no obligation to update any information contained herein.

SolarPower Europe will not be held liable forany direct or indirect damage incurred by theuse of the information provided

This report reflects the views of its authors onlyand the Innovation and Networks ExecutiveAgency (INEA) will not be held responsible for anyuse of the information contained in this report.

AuthorsSonia Dunlop - Alexandre Roesch - James WatsonSolarPower [email protected]@solarpowereurope.org +32 2 709 5520

Cover image, page 2 and 3: Solar PV array on the “Europa”

building, the new seat of the European Council and Council of

Ministers in Brussels. The building was opened in January 2017

and has a 150kWp flat roof array, currently the largest of its kind

in the Belgian capital. European heads of government meet in

this building up to 12 times a year. © Philippe Samyn and

Partners architects & engineers - lead and design partner, Studio

Valle Progettazioni architects, Buro Happold engineers.

www.pv-financing.eu

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EXECUTIVE SUMMARY 4

1. INTRODUCTION 5

FINANCING SOLAR PV IN EUROPE 5

2. GENERAL POLICY CHANGES FOR SOLAR PV 7

1. A FINANCIAL MECHANISM FOR REDUCING THE COST OF CAPITAL ACROSS THE EU 7

2. A COMMITMENT TO AVOID FUTURE RETROACTIVE CHANGES 9

3. AVOID GRID CHARGES THAT DISINCENTIVISE SOLAR 10

4. ENSURE RENEWABLES ARE NOT SUBJECT TO UNFAIR CURTAILMENT 11

3. POLICY CHANGES FOR SPECIFIC BUSINESS MODELS 12

5. ENCOURAGE SELF-CONSUMPTION MODELS AND REMUNERATE EXCESS SOLAR ELECTRICITY 12

6. ENCOURAGE POWER PURCHASE AGREEMENT BUSINESS MODELS 13

7. ENCOURAGE THE MINI-UTILITY MODEL 14

4. POLICY CHANGES FOR APPLICATION SEGMENTS 15

8. COMMERCIAL SEGMENT: HELP MITIGATE OFF-TAKER RISKS 15

9. RENTED BUILDINGS SEGMENT: ENCOURAGE THE LEASING MODEL 16

10. MULTI-OCCUPANCY BUILDINGS SEGMENT: ALLOWING MULTIPLE POWER CONSUMERS 16

5. CONCLUSIONS 18

TABLE OF CONTENTS

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EXECUTIVE SUMMARY

This report puts forward a series of suggestedpolicy changes that could be beneficial, both atEU and national level, to allow the adoption ofnew solar business models, lower the cost ofcapital and increase deployment in a lowersubsidy environment. Ten changes are putforward in this report:

1. Create a financial mechanism to reduce thecost of capital for renewables across the EU,such as by getting the European InvestmentBank to guarantee specific support schemes inhigh cost of capital Member States.

2. Include a commitment in the revisedRenewable Energy Directive to ensure thestability of financial support, and widen this toinclude other non-financial retroactive changesthat can negatively impact existing projects.

3. Avoid grid and connection charges thatdisincentivise consumers from investing insolar, storage and other distributed generation.

4. Ensure renewables are not subject to unfaircurtailment due to a lack of flexibility in thesystem and/or grid congestion. Priority accessshould be maintained until an alternativeviable market mechanism is available, and anycurtailment must be fully compensated.

5. Ensure there is a framework for self-consumption in all EU Member States and that self-consumers are not subject tounnecessary administrative procedures.

6. Ensure that there is a framework for PowerPurchase Agreements in all Member Statesand that all consumers are allowed to havemore than one electricity supplier.

7. Encourage the mini-utility Power PurchaseAgreement model by making it easier forsuppliers who only supply a single corporateentity to get a supply license.

8. Help mitigate off-taker risks in the commercialsector by ensuring it is possible to ‘lift and shift’ a solar PV system elsewhere and considerinnovative financial mechanisms to address this.

9. Support tenants and the rented segment byensuring it is possible to implement the leasingmodel where a third party owns the PV installationand leases it to the occupiers of the building.

10.Support the multi-occupancy buildings model byensuring that a single PV installation can supplymore than one consumer or metering point.

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It is estimated that the European solarphotovoltaics (PV) market could more thandouble in terms of annual deployment by 2020.1

There is real potential for solar deployment inthe EU over the coming years. This report willlook at the policy and regulatory changeswhich are needed to boost the sector over thecourse of this period.

Ensuring that the right regulatory framework is inplace to allow developers and consumers toimplement cutting edge business models thatreduce risk and lower the cost of finance is key.

Solar is particularly sensitive to the perception ofpolitical risk in a country. Like many otherrenewables solar is very capital intensive, with lowoperating costs. The high up-front cost is one of thebarriers to investing in solar. In addition to this therevenues are spread out over 20 years or more. Aninvestor has to go “all in” today and be sure that theproject is going to be generating revenue in 2035and beyond. Policy can help bring investorconfidence in a market and reduce the perceptionof political risk.

Deploying new and innovative financingmechanisms and business models can overcomehigh up-front costs. There are two core businessmodels for solar in Europe. The first is the self-consumption model, where the power consumersown the PV system on the roof of its building andsaves money on electricity bills as well as sellingexcess power back to the grid. The second is thePower Purchase Agreement model, where theowners of the installation sign a contract with aconsumer or reseller to sell them a certain amountof power at a set price over a set period of time.More information and other more specific businessmodels such as the cooperative model and theVirtual Power Plant model are available in previousPV Financing reports.2

FINANCING SOLAR PV IN EUROPE

1. INTRODUCTION

1 SolarPower Europe analysis assuming High Scenario. SolarPowerEurope “Global Market Outlook for solar power 2016-2020”, June2016. Full report available here:http://www.solarpowereurope.org/insights/global-market-outllook/

2 For more information on business models and financing schemes,please see the separate PV Financing report: SolarPowerEurope “EU-wide solar PV business models: guidelines for implementation”, January2017. Available here: http://www.solarpowereurope.org/insights/eu-wide-solar-pv-business-models/, p. 39.

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3 BSW-Solar, “PV Investor Guide: New business models forphotovoltaics in international markets”, August 2014, p 22.

4 SolarPower Europe is calling for the EU 2030 renewables target to berevised upwards to 35%.

5 European Commission “Clean Energy for all Europeans package”,November 2016. Available here:https://ec.europa.eu/energy/en/news/commission-proposes-new-rules-consumer-centred-clean-energy-transition

6 The national PV Financing Policy Advisory Papers can be downloadedhere: http://www.pv-financing.eu/advisory-papers/.

The PV Financing project has shown that the costof capital or finance is usually the single biggestcost component in the Levelised Cost of Electricity(LCOE) of PV. This is particularly the case withprojects that have long-term tenors or loans. Abouta third of a typical solar LCOE is the cost offinance.3 As the EU strives to meet its renewablestargets of at least 20% of gross final energyconsumption by 2020 and at least 27% by 2030,4

business models, financing and the cost of capitalare becoming more and more important.This reportis being issued just after the European Commissionpublished its proposals for the Clean Energy for allEuropeans package – informally known as theWinter Package – including a draft revision of theRenewable Energy Directive and an ElectricityMarket Design package. Many of the suggestedchanges below are within this context.5

This paper builds on the previous work done aspart of the PV Financing research project, whichcan be viewed on the website www.pv-financing.eu. Seven national policy advisory papersdetailing the policy changes required in Austria,France, Germany, Italy, Spain, Turkey and theUnited Kingdom have been published in therespective national languages6 and many of thesuggested changes are reflected in this paper.

This paper lists the barriers that can be solvedthrough policy and regulatory changes, and is ofcourse not exhaustive – there are many otherpotentially useful policy changes not listed here.This is intended merely as a contribution to thepolicy debate at EU and national level and does notrepresent the official view of SolarPower Europeand its members.

Part I will look at recommended policy changes thatwill benefit the PV sector as a whole. Parts II andIII will then look at policy changes that can helpencourage specific business models andapplication segments or sub-markets. In each casea description of the barrier is provided and specificregulatory changes are suggested.

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There are big variations in the cost of capital for PVprojects across the EU – as indeed is the case forall renewables.7 Estimations within the PVFinancing project vary from 2.4% debt all-in rate forsolar self-consumption projects in the UK to 7.08%in Spain.8 Recent analysis as part of the Pricetagproject showed that in South East Europe alone thecost of capital for solar varies from 4.5% in Slovakiato 12.4% in Greece.9 The DIA-CORE projectshowed that for onshore wind, which has a similarprofile to solar, the Weighted Average Cost of

Capital (WACC) varies from as little as 3.5% inGermany to 12.0% in Greece and Croatia. Thisspread is largely due to perceptions of political risk,the extent to which there is a policy framework forrenewables in place, the level of competitionbetween providers of finance and the generaleconomic situation in that country.10

A FINANCIAL MECHANISM FOR REDUCING THE COST OF CAPITAL ACROSS THE EU

2. GENERAL POLICY CHANGESFOR SOLAR PV

7 DiaCore project “Assessing Renewables Policy in the EU”, p. 18. Availablehere: http://www.diacore.eu/images/files2/DIA-CORE_Final_Brochure.pdf.

8 Estimates taken from cash flow models for each country, where interestrate estimates were taken from a series of interviews with marketplayers conducted in mid 2015. The Excel cash flow models for eachcountry (PPA and self-consumption) can be downloaded in the bottomright hand corner of this page: http://www.pv-financing.eu/tools/.

9 Ecofys/Eclareon “Mapping the cost of capital for wind and solar inSouth Eastern European Member States”, January 2017. Availablehere: http://www.ecofys.com/en/publications/mapping-the-cost-of-capital-for-wind-and-solar-energy/.

10 Agora Energiewende “Reducing the cost of financing renewables inEurope”, September 2016. Availabler here: https://www.agora-energiewende.de/fileadmin/Projekte/2016/De-Risking/Agora_RES-Derisking.pdf.

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As was outlined above, about a third of a typicalsolar LCOE is the cost of finance.11 Analysis hasshown that if you equalised the cost of capitalacross the EU you could save EUR 34 billion oftaxpayers’ money12 and save EUR 160 billion ofpublic and private investments13 between now and2030. In addition, between 2013 and 2015 two-thirds of the renewable investment in the EU wentto the UK and Germany,14 politically safe low costof capital countries. Bringing down the cost ofcapital in certain Member States would allowrenewables deployment to be more evenly spreadaround the EU.

Suggested regulatory change

A new EU-level financial instrument to reduce andequalise the cost of capital across the MemberStates could help to overcome this barrier. Theproposed recast of the Renewable EnergyDirective15 requires that the Commission creates“financial instruments, especially in view of reducingthe cost of capital for renewable energy projects”.(Options for national level financial instruments arediscussed at the end of this section.)

An example of an EU-level instrument is the EURenewable Energy Cost Reduction Facility asproposed by think-tank Agora Energiewende,16

where the European Investment Bank (EIB) wouldback specific national support schemes and bringdown the cost of finance for projects within thatsupport scheme. This would be a voluntarycontractual mechanism which countries with highcosts of capital could choose to enter into. It wouldinvolve the Member State in question signing acontract with the EIB (or some other creditworthyEU institution) agreeing to the terms of the supportscheme(s) in that country and the conditions for EIBbacking. Any renewable project that then receivedfunding from that support scheme would receive aparallel guarantee contract from the EIB stating that,if the Member State for any reason failed to pay thepromised subsidy payments, the EIB will step in andmake the payments in its place. If the EIB wererequired to make these guarantee payments, theEIB would then reclaim the sum of the paymentsfrom the Member State concerned, as agreed in thecontract between the EIB and the Member State.

The contract between the EIB and the MemberState would also cover non-financial aspects of theregulatory framework for renewables in that countryi.e. permit granting and grid connections, and couldset a maximum volume of projects in MW that wouldbe covered under the mechanism so as to cap themaximum liability. An initial assessment has foundthat there are 18 Member States with high costs ofcapital that could potentially benefit from such amechanism. A pilot of such a mechanism could beincluded in the extension of the European Fund forStrategic Investments (EFSI 2.0).17

Of course this is not the only idea as to howMember States can reduce the cost of capital. Analternative idea is that Member States could issue‘sovereign renewables bonds’ or ‘sovereign climatebonds’18 where the interest rates on the bondswould be linked to renewables or carbon dioxidereduction targets. Governments could set a rate ofreturn on their bonds where the higher thepercentage of renewables, the less interest thegovernment pays. Governments could use theinstrument to add credibility to their commitment torenewables policies and therefore help to reducethe cost of capital for renewables in that country.Businesses could use these sovereign renewablesbonds to hedge or insure themselves againstchanging government policy.

11 BSW-Solar, “PV Investor Guide: New business models forphotovoltaics in international markets”, August 2014, p 22.

12 Ibid.

13 European Commission analysis.

14 Ibid.

15 Proposal for a Directive of the European Parliament and of the Council onthe promotion of the use of energy from renewable sources. Available here:http://ec.europa.eu/energy/sites/ener/files/documents/1_en_act_part1_v7_1.pdf.

16 Agora Energiewende “Reducing the cost of financing renewables inEurope”, September 2016. Availabler here: https://www.agora-energiewende.de/fileadmin/Projekte/2016/De-Risking/Agora_RES-Derisking.pdf.

17 For more information on the European Fund for Strategic Investments,please see: https://ec.europa.eu/growth/industry/innovation/funding/efsi_en

18 Official Monetary and Financial Institutions Forum “The case forsovereign climate bonds”, January 2017. Available here:https://www.omfif.org/analysis/commentary/2017/january/the-case-for-sovereign-climate-bonds/

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Furthermore, the TerraWatt Initiative,19 whichbrings together governments, investors, energysuppliers, NGOs and citizens to promotecompetitive solar power, has identified five keysteps to bridge the current market gap between theneed for cost-effective solar power and institutionalprivate investors. The aim is to reduce the cost ofcapital when refinancing solar PV projects aroundthe (mainly developing) world. The five steps are tostandardise solar development, aggregate solarassets into larger portfolios, de-risk the cash flows,rate the portfolios and issue securities on liquidmarkets. The end result is a much safer investmentproduct for institutional capital.

The TerraWatt Initiative has launched three majorsub-initiatives to support the structuring of this newglobal framework:

• The Solar Energy Standardisation Initiativeproject, in partnership with the InternationalRenewable Energy Agency (IRENA). It aims todesign and draft a comprehensive set ofstandardised and simplified contracts (orguidelines) in collaboration with leadingdevelopment banks, law firms and industryassociations to speed up project developmentand reduce transaction costs. Thisstandardisation will be welcome in Europe.

• The AMBROGIO project in partnership withleading law firms. This project aims to develop aleadership and coaching program around afinancial model capable of assessing the cost ofsolar electricity according to the effectiveness ofthe regulation of a given country. This will then helpgovernments identify, on a voluntary basis, theareas of reform that will enable them to achievetheir renewable energy targets at lower cost.

• The Global Renewable Energy Guaranteeproject. This project aims to provide developersand private investors with a single, publiclyfunded, comprehensive instrument coveringstructural risks (counterparty, political risks andlong-term risks). This would accelerate thedevelopment of energy projects and facilitateprivate financing in developing and emergingeconomies. More information on thismechanism will be published in the near future,and could potentially be adapted for parts ofEurope with high cost of capital.

All of the initiatives above could in theory beadapted and implemented within the EU and wouldhelp reduce the cost of capital for solar in Europe.

19 For more info see http://www.theterrawattinitiative.org/

20 Keep on Track project “Policy paper on retrospective changes to RESlegislation and national moratoria”, May 2013. Available here:http://www.keepontrack.eu/contents/publicationsbiannualnationalpolicyupdatesversions/kot-policy-paper-on-retrospective-changes-to-res-support.pdf

21 DiaCore project “Assessing Renewables Policy in the EU”, p. 18.Available here: http://www.diacore.eu/images/files2/DIA-CORE_Final_Brochure.pdf.

22 PV Financing “Country report on regulatory barriers (update) – Spain”(D6.2), June 2016. This was a non-public deliverable, please contactthe authors Creara for more information.

Retroactive regulatory change that reduces orabolishes the revenues of existing projects is theworst thing that can possibly happen forrenewables finance. It increases the political riskand cost of capital in a country for years thereafter.This has occurred in the past for solar in Spain, theCzech Republic, Bulgaria, Greece and Italy,20 and

indeed costs of capital for renewables in each ofthose countries are now consistently high at 7-12%.21 The PV Financing Country Report onRegulatory Barriers for Spain identifies regulationchanges, retroactive policies and mistrust frommarket players as key barriers in that market.22

A COMMITMENT TO AVOID FUTURERETROACTIVE CHANGES

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A less extreme but still important issue is theinstability of regulatory frameworks in general. InItaly for example a tax rebate is available for newresidential systems which allows the owner tospread the rebate over ten years. However theavailability of this tax rebate is only ever confirmedfor a year at a time, creating instability andpreventing businesses from planning ahead.


It is critical that the proposal for an article on thestability of financial support in the revisedRenewable Energy Directive is maintained in thefinal piece of legislation. The article requiresMember States to ensure that there are no changesthat negatively impact the economics of existingprojects that benefit from support. It would be

beneficial if this article could be widened further, tocover not just support schemes but also curtailmentand grid access rules, taxation, surcharges and gridfees. All of these have the potential to negativelyimpact the economics of projects.

With regards to ensuring the stability of support, thefact that the Commission has proposed in theRenewables Directive that Member States are topublish plans three years ahead on supportscheme budgets, timing and capacity is positive.Five years would be even better. A recent reportshowed that even if a country has low cost ofcapital, deployment will remain low if there isn’t areliable support scheme.23 Member States shouldalso have the possibility, if necessary, to holdtechnology specific tenders, to ensure a diversemix of renewables in the system and ensure a goodgeographical distribution of technologies withintheir territories.

23 Ecofys “Mapping the cost of capital for wind and solar energy in SouthEast European Member States”, January 2017. Available here:http://www.ecofys.com/en/publications/mapping-the-cost-of-capital-for-wind-and-solar-energy/.

24 European Commission “Impact Assessment accompanying theproposal for a directive on renewables”, p. 141. Available here:http://ec.europa.eu/energy/sites/ener/files/documents/1_en_impact_assessment_part1_v4_418.pdf.

25 CEDEC “Distribution grid tariff structures for smart grids and smartmarkets”, March 2014. Available here:http://www.cedec.com/files/default/cedec%20leaflet%20grid%20tariffs-final-140403-1.pdf

The design of grid fees can have a fundamentalimpact on self-consumption and PPA businessmodels. As was shown in the PV Financing projectand Impact Assessment that accompanied the newRenewable Energy Directive,24 Belgium, Spain, Italy,Latvia, Lithuania, Hungary, Portugal and Sweden allhave some form of grid fees on self-consumed solarelectricity. Disproportionately high grid charges onself-consumed solar electricity can stronglydisincentivise prosumers from investing in self-consumption and generating their own electricity.

Furthermore, the Netherlands has capacity-basedgrid charging and France combines volume andcapacity-based charging for commercialcustomers.25 In Italy there are currently variableand fixed (capacity-based) levies on electricity bills.In Austria the government is debating theintroduction of a small grid charge for prosumers –a charge on self-consumed electricity. In Portugalself-consumption systems will have to contribute topartial grid costs once the total self-consumptioncapacity reaches 3% of total capacity.


Distribution grid tariffs should incentivise the energytransition and incentivise consumers to invest insolar, storage and other technologies, and not bea barrier to such investment. Smart meters and thedigitalisation of the grid should allow forincreasingly intelligent distributed solar which willthen allow for a balance between volumetric andcapacity-based grid tariffs. This balance mayevolve over time with increasing penetration of

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solar in the electricity system - grid tariffs areadjusted by national regulators every 4-5 years.

Initial analysis has shown that provisions within theMarket Design package on network chargesensure there will be no discrimination for energystorage and demand response but does not offer

the same protection from discrimination to solar.This needs to be fixed so that network charges donot disincentivise distributed generation and self-consumption. Self-generators and prosumers needto be protected from prohibitive grid charges.

26 European Commission, “Impact Assessment accompanying theproposal for a regulation of the European Parliament and of theCouncil on the internal market for electricity”, November 2016.Available here:https://ec.europa.eu/energy/sites/ener/files/documents/mdi_impact_assessment_main_report_for_publication.pdf.

In markets where there is a lack of flexibility andwhere the network needs upgrading, there is a riskthat a solar generating asset may not be able to sellelectricity in the market and may not be fullycompensated for this. This could occur, for example,due to network or grid issues. This could have amajor impact on the expected revenues andtherefore bankability of a project. In Germanycurtailment of solar is widespread, althoughcompensation is provided. The PV Financing projectshowed that in one region of Austria the grid operatorregularly curtails PV systems above 5kWp and nofinancial compensation is paid for that curtailment.This is a barrier to investment in PV in that region.


As part of our efforts to decarbonise the system weshould make the most of solar and renewablegenerated electricity when it is readily available.Priority dispatch and priority access for renewablesshould be maintained unless the readiness ofmarkets and networks shows that carbon andrenewables targets would still be achieved and thatviable market-based mechanisms and compensationmechanisms are available to replace priority access.

The European Commission’s analysis has shownthat removing priority dispatch and access willincrease the CO2 emissions from electricitygeneration by 11%,26 which shows why therenewables and carbon target criteria is important.Priority access is particularly critical as this dictateswhich generator gets access to the grid in times ofcongestion. And if curtailed, generators should becompensated for lost revenues. Furthermore, fulltransparency is required around “must-runarrangements” between TSOs and inflexible powerplants and a strategy is needed to increaseflexibility and phase out inflexible capacity asquickly as possible.

ENSURE RENEWABLES ARE NOT SUBJECT TO UNFAIR CURTAILMENT

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The PV Financing project showed that self-consumption is one of the leading business modelsacross Europe. Many Member States haveframeworks that incentivise the uptake of self-consumption business models. That can take theform both of individual self-consumption andcollective self-consumption through energycommunities. However nine EU Member States donot currently have a legal framework for self-consumption – namely Bulgaria, the CzechRepublic, Estonia, Finland, Ireland, Luxembourg,Romania and Slovakia.27 Others like Spain haveframeworks that dis-incentivise this business model.


As stated in the proposed Renewable EnergyDirective, all renewable self-consumers shouldhave the right to generate, consume, store and selltheir self-generated electricity, both individually andthrough energy communities. The draft directivethen goes on to state that they should not be subjectto disproportionate charges that are not cost-reflective – however this should be made strongerby adding a requirement that the charges should bedone in a way such that consumers are stillincentivised to become prosumers. Consumers

ENCOURAGE SELF-CONSUMPTION MODELS & REMUNERATE EXCESS SOLAR ELECTRICITY

3. POLICY CHANGES FORSPECIFIC BUSINESS MODELS

27 European Commission “Impact Assessment accompanying theproposal for a directive on renewables”, p. 141. Available here:http://ec.europa.eu/energy/sites/ener/files/documents/1_en_impact_assessment_part1_v4_418.pdf.

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should not be required to become electricity tradersor suppliers in order to sell their excess power, asis the case in Spain. This is particularly importantfor community energy groups, who do not have themeans to deal with complicated administrativeprocesses in the same way as utilities, licensedsuppliers and commercial developers. Self-consumers should be able to get at least the marketvalue (and more in the case of support schemes)for excess electricity, and this needs to be includedin the final Renewable Energy Directive. The PV

Financing project has shown that the cost of capitalwill come down if there is a low-risk, governmentguaranteed revenue stream for excess electricity.

In Austria there is a settlement centre for renewableenergy which has to by law purchase excesselectricity from self-consumers that engage in self-generation at a pre-set (low) market price. OtherAustrian utilities can offer slightly higher prices forexcess electricity, as a way of attracting customers.This could be an interesting model for other countries.

28 PV Financing “National Policy Advisory Paper: Spain”, Creara,January 2017. Available here: http://www.pv-financing.eu/wp-content/uploads/2017/01/ES-Policy-Advisory-Paper-PVF-D6.3.pdf.

29 Recital 20 of the Directive 2009/72/EC of the European Parliament andof the Council of 13 July 2009 concerning common rules for theinternal market in electricity” states that: “In order to developcompetition in the internal market in electricity, large non-householdcustomers should be able to choose their suppliers and enter intocontracts with several suppliers to secure their electricity requirements.Such customers should be protected against exclusivity clauses theeffect of which is to exclude competing or complementary offers.”

There are many countries such as the UK, Germany,Italy, the Netherlands where corporate PPAs with apower consumer (within the same building or off-site)are relatively common. In some countries such asSweden and Norway this business model is stillrelatively rare but growing. However corporate PPAsare not currently authorised or have not beenlegislated for in France, Spain and Turkey. In Spainit is almost impossible to sell power direct in a PPA –it is an unregulated space, almost no-one is willingto fix a price for more than one or two years aheadand power consumers cannot have more than onesupplier per consumption point.28 Austria allows on-site direct wire PPAs but not off-site PPAs. In Franceit is very difficult to get permission for private wireconnections. In Denmark an on-site corporate PPAis classed as a small utility, requiring a supply license,and the electricity is subject to energy taxes, leviesand VAT. In Turkey the power consumer, operatorand investor cannot be different entities for projectsless than 1MW in size.


The Commission’s proposal for the revisedRenewable Energy Directive states that “MemberStates shall remove administrative barriers tocorporate long-term power purchase agreements tofinance renewables and facilitate their uptake”. Thiscould be expanded further, and the directive shouldbe amended so that all consumers, even smalldomestic consumers, should be allowed to havemore than one electricity supply contract.29 This willallow residential PPA models as currently availablein the US to be implemented more easily in Europe.National regulators should also remove barriers toprivate wires, with particular attention to barriers forsmall-scale and community energy projects.

ENCOURAGE POWER PURCHASE AGREEMENT BUSINESS MODELS

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The mini-utility business model is where thegenerator sells power to a licensed supplier whollyowned by the corporate consumer (or the generator),called a trading SPV or mini-utility. The mini-utilitythen contracts to sell the power on to the corporatepower consumer. This business model is currently inuse in Ireland in the wind sector and in the US.However the high up-front costs (often about EUR 1million) of obtaining a supply license are a barrier, andso this model usually only works for large consumers.


Regulatory authorities should make it easier andcheaper for mini-utilities who only supply a singlecorporate entity (even if that is an off-site consumerin another part of the country) or a small number ofconsumers (even if they are in different locations)to get a supply license.

ENCOURAGE THE MINI-UTILITY MODEL

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A major barrier to building-mounted commercialsolar PPAs is the perceived risk that the powerconsumer in the building could change, move awayor go bankrupt.


To mitigate off-taker risks regulatory authoritiesshould ensure that the “lift and shift” option (i.e.removing the PV system from the roof and

transferring it elsewhere) is a theoretically viableoption as a last resort, as recommended in the EU-level PV Financing implementation guidelines.30 Thisshould include the right to continue receiving thesame level of support once the modules are re-located, as will be the case in the UK for medium andlarge installations as of 2019.31 In the UShomeowners moving within a single utility district orwho have permission from their utilities can take theirPV panels with them when they move as long as theypay a re-installation fee.32 It may also be possible touse innovative financial mechanisms and state-backed guarantees to help reduce off-taker risks, andit would be useful to look into this area further.

COMMERCIAL SEGMENT: HELP MITIGATE OFF-TAKER RISKS

4. POLICY CHANGES FORAPPLICATION SEGMENTS

30 SolarPower Europe “EU-wide solar PV business models: guidelinesfor implementation”, January 2017, p. 26. Available here:http://www.solarpowereurope.org/insights/eu-wide-solar-pv-business-models/

31 UK Department of Energy and Climate Change “Transferability ofbuilding mounted solar PV installations”, March 2015. Available here:https://www.gov.uk/government/consultations/transferability-of-building-mounted-solar-pv-installations.

32 For more info see here: http://www.solarcity.com/residential/solar-energy-faqs/buying-selling-solar-homes.

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33 Such as in the Proposal for a Directive of the European Parliamentand of the Council amending Directive 2010/31/EU on the energyperformance of buildings. Available here:http://ec.europa.eu/energy/sites/ener/files/documents/1_en_act_part1_v10.pdf.

Rented homes and commercial buildings have thedisadvantage of complex legal rights issues, as thepermission of both the tenant and the landlord arerequired to install a PV system. The two majorbarriers are often that landlords are not allowed tosell electricity to third parties e.g. tenants and that,because of the landlord/tenant dilemma, thelandlord has no incentive to invest in PV if thebenefits go to the tenant.


Leasing financing schemes where a third party paysfor the installation of the system and the tenant pays amonthly fee in return for the solar electricity generatedis one of the ways to overcome this barrier and allowthe tenant to use the electricity. Third parties should

be allowed to own renewable self-consumers’installations, and the draft Renewable Energy Directiveand national property legislation should be amendedto reflect this. The PV Financing project has produceda number of tools for Germany and austria to spreadbest practice in leasing. Regulations that stipulate thatthe power consumer has to also be the owner of thePV system in order to receive certain benefits, such asin Denmark, Spain and Turkey, should be amendedas this precludes leasing. Finally, both national andEuropean energy performance of buildingsregulations33 should be strengthened for landlords inthe rented segment (as well as in new build and socialhousing). Strengthening them could involve requiringmore on-site renewable electricity generation andhigher energy efficiency standards, or simply higherEnergy Performance Certificate requirements. Thesecould be set as criteria in order for landlords to be givenpermission to rent their buildings.

RENTED BUILDINGS SEGMENT: ENCOURAGE THE LEASING MODEL

A barrier for residential and commercial multi-occupancy buildings in many countries is therestrictions on a single PV installation selling powerto multiple consumers or metering points. Italy andAustria are examples of this, and this was one of themain conclusions of the PV Financing researchproject in these countries. In some countries powercannot be transferred and sold from the roof of abuilding to apartments within that building becausefrom a legal perspective it is considered to have usedthe public grid and therefore requires a supplylicense, is subject to grid charging or is simply notlegally permitted. In France power can only be soldto more than one consumer if the generators andconsumers are part of a single legal entity, as set outin the new collective self-consumption framework.


The draft Renewable Energy Directive states thatconsumers living in a single apartment block orlocated in the same commercial or shared servicessite should be considered as being an individualself-consumer, which is very welcome. This couldbe widened to consumers within the same branchof the distribution grid.

MULTI-OCCUPANCY BUILDINGS SEGMENT:ALLOWING MULTIPLE POWER CONSUMERS

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This provision should be made more specific so thatis allows for a single PV installation to supply morethan one metering point (a maximum number couldbe stipulated) and still benefit from support and beexempted from taxes, surcharges and grid tariffs.The Renewable Energy Directive could also beamended to specify that consumers within a sharedbuilding should be allowed to use shared wires andcables within that building to transfer electricity fromroof to metering point without being considered tohave used the public grid. This is currently the casein Germany and is being considered in Austria.

Smart meters are a key enabler for multi-occupancyPV business models as they are essential for theaccurate metering and billing of the solar electricity.This is yet another reason for governments tocontinue the widespread roll out of smart meters andsubsidise them where necessary, although thisshould of course always be subject to a positive cost-benefit analysis.

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The policy outlook is broadly positive for solarat EU level thanks to the publication of theClean Energy for all Europeans package. Bymid-2018 there should be clarity on what theEU-level regulatory framework is going to beover the next ten years or so, and we hopesome of the barriers above will have beenremoved. This should help shape a positiveframework for solar at national level.

Furthermore, a number of the policy changesdetailed above are national competences. It ishoped that this paper will therefore act as a usefulcontribution to the policy debate in the EU MemberStates that were not covered in the PV Financingresearch project. For Austria, France, Germany,Italy, Spain and the United Kingdom please referto the national PV Financing Policy AdvisoryPapers, available in the national languages.34

As the European PV industry gains more experiencein different markets and business models acrossEurope, and as the debate at EU level proceeds,undoubtedly more policy barriers will surface that willrequire attention from regulators. It would be usefultherefore to continually update this work in line withchanging circumstances.

5. CONCLUSIONS

34 The national PV Financing Policy Advisory Papers can be downloadedhere: http://www.pv-financing.eu/advisory-papers/.

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www.pv-financing.eu

SolarPower Europe(European Photovoltaic Industry Association)Rue d’Arlon 69-71, 1040 Brussels, BelgiumT +32 2 709 55 20 / F +32 2 725 32 [email protected] / www.solarpowereurope.org

© evgord

designing eu policy to encourage new solar ... - pv …part of the pv financing research project,...

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