renewable energy & smart grid opportunities for finance ...pv portion / energy need 7% 7%...
TRANSCRIPT
Renewable Energy & Smart Grid Opportunities for Finance Institutions
Global Sustainable Finance Conference Karlsruhe, June 14th, 2014 Thomas Walter
Agenda
• Opportunities for renewable energies in sunbelt countries
• Overcome challenges and create even more opportunities
• A film if you have time….
• More details on financing if you wish….
July 22, 2012 Footer text here 2
Huge Market:
• Diesel powered grids
• RE is cheaper than Diesel already
(fuel cost ~ 0.3 $/kWh)
• Maximize RE share: solve energy
storage - the smart way!
• Example Indonesia: >3GW diesel
capacity in public grid alone
A new perspective: PV is a low cost replacement for Diesel Electricity
Opportunities for Renewable Energies
PV is beyond Grid Parity in diesel grids today, gas will follow soon..
Opportunities for RE
Client perception: CAPEX vs. OPEX
July 22, 2012 Based on estimation 5
Inve
stm
en
t
Diesel solution*
Diesel solution
Inve
stm
en
t
PV solution*
PV solution
Clients used to low CAPEX / high OPEX
PV is a new investment model with high CAPEX (upfront investment) and low OPEX
More liquidity for the upfront investment required in first year for PV project
Profitability analysis
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Scenario Europe Scenario Emerging
market Project specification PV Installation capacity 300 kWp 300 kWp Specific installation output 1 457,017 kWh/a 457,017 kWh/a PV portion / energy need 7% 7% Investment CAPEX 625,250 € 625,250 € Investment per kWp 2,085 €/kWp 2,085 €/kWp Savings (1st year) Fuel Savings (€) 113,917 € 113,917 €
Fuel Savings (Diesel litre) 135,016 litre 135,016 litre Emission savings CO2 361,844 kg 361,844 kg Savings (over 20 years) Fuel savings 4,397,279 € 4,397,279 € Total savings after OPEX ² 3,451,638 € 3,221,103 € Emission savings CO2 6,893,127 kg 6,893,127 kg Fuel savings (litre) 2,572,062 litre 2,572,062 litre Project financing
Equity ratio 70% 70%
Interest rate 7.50% 18.00% Amotization time 10 years 10 years
These two scenarios differ on financing conditions (European vs. emerging countries context). Impact: pay back period. Note: A PV plant (EEG basis) in Germany might have payback of 10 to 14 years.
-2.000 k€
-1.000 k€
k€
1.000 k€
2.000 k€
3.000 k€
4.000 k€
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Years
Pay Back Flow
Scenario Europe Scenario Emerging Market
Scenario Europe
Scenario Emerging market
Main five conditions to achieve success…
19 February 2014 7
PV Know-How & Perception
Awareness : PV is for the poor /
is too expensive“
Unrealistic expectation : „I want a carbon free solution“
Finance
Below 4 million € value, we
can‘t propose project
financing
Local banks not ready for type of project or technology
Grid Infrastructure
Invest to mini grid <-> grid
extension
Implementation
Logistics and local partner
management: higher $/W
than in Germany
Service
Difficult access / long reaction time in remote
area
Local commitment and competences are essential
1 DSM = Demand Side Management
Spinning Reserve (short term <minute)
Volatility of Renewables
Solution Challenge
Balancing Demand and Supply
Storage & DSM1
(long term >hour)
Storage type 1
Storage type 2
Grid balancing and stability become key from about 20% RE share
Challenges for Renewable Energy
Diesel 0.50 $/kWh
PV 0.25 $/kWh
Generation cost (Maldives)
Value of flexibility of diesel electricity
System cost (Smart Grid)
0,00… USD/kWh
Battery 0.20 $/kWh
E-mobility 0.00… $/kWh
Flexibility cost
Desalination 0.00… $/kWh
Cooling 0.00… $/kWh
Cheap solutions by Flexibility market: • Flexibility sources compete on price
• Smart Grid: provide means and incentives
to mobilize cheapest flexibility (Cooling, Desalination, Pumping, Electric Vehicles)
Challenge: As RE becomes cheaper, Flexibility becomes more important
Real Electricity Prices in Mini Grids: - If generation < load: Increase price until balance is reached - If load < generation: Reduce price until balance is reached - Flexible generators: Shift generation to high price times - Flexible consumers: Shift consumption to low price times - Storage: Charge at low price, discharge at high price (arbitrage) How to implement? - „Big Data“ (adapt planned industrial country „Smart Meter“ solutions)
or - „Easy“ Smart Grid (the robust mini grid solution with minimum cost)
Easy Smart Grid: A mini grid energy market
f [Hz]
p [$/kWh]
0.25
0.55
50.0 49.5 50.5
-0.05
Consumer: Switch off if possible
Consumer or storage: Switch on or charge if possible
Provide means and incentives to mobilize flexibility
KISS: „Easy“ Smart Grid
Easy Smart Grid - early markets and applications
Public
Public/ Private
Private
Small (100 kW)
Medium (3 MW)
Large (100 MW)
ccc Option 1
ccc
ccc
ccc
Option 2
Option 3
Option 4
Grid Operators - Make most of grid capacity - Reduce damage from blackouts - Increase customer satisfaction Infrastructure Players (governments, dev. banks, communities) - Greenfield and brownfield developments - Synergies from hubs and anchors RE Project developers and industry - Multi source integration (PV+Wind+Hydro
+Biomass) PV Project developers and industry - Get more PV into diesel grids - Lower battery investment
Be prepared for evolving business in RE
Option 1: Leasing of PV installations (IFC could refinance)
Option 2: gain know how financing energy projects of local
resources (e.g.biomass)
Option 3: PPP and Anchor Investor projects stimulate RE growth
Option 4: Use market mechanisms to stimulate RE and energy
availability (price down, reliability up)
Finance opportunities
July 22, 2012 Footer text here 13
Thank you for your interest! Dr. Thomas Walter Easy Smart Grid GmbH, Karlsruhe Mobile : +49 171 229 4629 E-Mail : [email protected] Coming soon: www.easysg.de
IOSD Economics analysis
Key economic indicators
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The Levelized Cost of Electricity calculation enables the economic comparison of different energy generation plant, for example diesel generator and PV plant. Discount rate is equivalent to the cost of capital. It takes into account : • Project specific conditions • Stability of the financial climate • Charges and country specific financing
conditions • Amount of foreign and local investments • Technology specific risk • how financing institutions perceive PV
technology today and in the future…
Scenario Europe
Scenario Diesel Substitution
Key Indicator Discount ratio 6% 15% Levelized Cost of Electricty (LCOE)
.19 €/kWh .28 €/kWh
LCOE with financing cost
.22 €/kWh .36 €/kWh
ROI 20 years 552% 515% IRR 18% 15%
Change in the discount ratio increases the LCOE of 47% to 63% in comparison with European context.
Clients approach toward infrastructure investment Solutions are required to provide clients with guarantee, risk mitigation tools as well as adequate financing instrument.
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Clients
On Balance / Corporate Finance
Off Balance / Corporate Finance
Willing to buy energy (commodity)
Loan with a local bank
Leasing concept
PPA on PV /RE energy
Willing to buy an energy system
PPA on whole energy (diesel, PV/RE)
Overview of Financing possibilities
However, these financing solutions can’t be designed in Europe but in these emerging countries. They should be managed by local institutions, with a deeper understanding of the local constraints and advantage.
July 22, 2012 Footer text here 18
Small project Small projects bundled
Big project
Size -> ~6 M.€ -> ~ 3 MWp
from ~6 to 20 M. € from ~3 to 11 MWp
from 20 M. € from 11 MWp
EPC Local Bank (Scenario 1)
~ 15 % interest Difficult support from Germany
~ 15 % interest Difficult support from Germany
~ 15 % interest Difficult support from Germany
EPC Leasing (Scenario 2)
Not possible 15-18% interest rate 15-18% interest rate
PPA (Scenario 3)
Not possible Complex structure - Same client - Same country
Classical WIRSOL Financing offer (SPV Structure)