Insights RenDays Milan

May 28, 2015

By Emanuele Tacchino, Italy Country Manager, Alectris

The Renewable Energy Days event producers recently hosted two events assembling leading Italian solar photovoltaic (PV) market operators for a discussion centered on emerging market models. Global PV Day 13 May and Asset Management Day 15 May at the Hilton Hotel in Milan, Italy, once again brought together representatives from leading solar PV companies. Alectris once again sponsored the conference.

As always the RenDays events produced by SaveNet, are a very good opportunity to gather fresh insights from solar PV market leaders on the relevant topics of our industry. It is also an excellent networking stage, with annual participation by top level players and investors.

Day 1: Global PV Day

The main topic day one was the strategy Italian companies could follow to approach new international markets.
The event started with a presentation of new emerging markets insights from Turkey, Egypt, Poland, and the UK. Each market presentation analyzed existing FIT or incentive schemes, projects or tender on the run and the solar PV development so far achieved. Other subjects included regulatory, in general terms for all of renewable energy solutions with the main focus on solar PV.

Speakers involved included D’Appolonia (International Technical Advisor), Moroni &Partners (International Technical Advisor), OST Energy (International Technical Advisor), and Res4Med (Association of renewable companies active in EMEA markets).

The topic for my presentation emerged out of the international experience of our Alectris Italy team. The presented business case study of our new project in the Middle East brought forth insights into our new formula in which the strengths of EPC and O&M as separate models emerges and the bankability and global replicability of the model is evident.

Alectris RenDays Global PV Day Presentation cover slideTitled, “The EPC and O&M Partnership in New Emerging PV Markets, A Bankable Formula to Build and Internationalize in a Sustainable Way”  the presentation explained the disadvantages of the current market model and the strengths of taking a new approach as exhibited in our Jordan project.

The disadvantages of the current model wherein EPC/construction roles are intermingled with those of the operations and maintenance team include:

  • Needs for the constructor to structure his operations and maintenance activities locally (with recurrent yearly costs for direct structure or with subcontractors)
  • Difficult sustainability of this direct local structures and of the relevant O&M contract in case of market slow down or stop
  • Difficult process control, reporting and subcontractors and quality management
  • Bad quality of services, bankruptcy, and investors and lenders severely unsatisfied

Construction vs service business models in solar pv Alectris T

Solar PV Investors and Lenders must rely as earlier as possible in the asset life cycle on players:

  • Who are O&M long term business models (not market opportunists)
  • Who are already structured to provide services compliant to their contractual obligations in an efficient, flexible and agile way
  • Who daily chase the maximum productivity of PV Plants under management, because their customer s’ satisfaction levels directly affect their business profitability and growth

An emerging market model in which EPC focuses on construction and operations and maintenance (O&M) is involved from the beginning of construction focusing on service issues is showing promise.

From “burst market” (like Italy, Spain) experience, it is a win/win formula to involve professional O&M players from the solar asset’s beginning:

  • Guarantee for investors and lenders to have a dedicated and committed servicer throughout all stages of the assets’ lifecycle
  • Business advantage for the EPC derived from avoiding care of local structures outside their core business leaving them free to move away with agility towards other markets in case of market stops
  • Advantage for the O&M servicer to be involved from the beginning to inform supervising engineering and construction, to the benefit of long-term operations and provided guarantees and to reap references for new promising markets

Alectris Business Case: 12MWp in the Middle East
See slides here.

  • Alectris is involved as O&M servicer in a 12MWp project under construction in Middle East
  • ACTIS (Solar ERP) shall be installed on the plant and Alectris shall provide O&M services from the beginning
  • The EPC constructor is a primary NASDAQ listed player
  • Contractual set up has been prepared by an international top level team of Legal and Technical Advisors
  • The structure EPC & O&M as two different players resulted in full bankability and eligibility for project financing from a primary global lender.  This new model can be replicated worldwide.
  • Alectris shall perform also a technological transfer to a local subcontractor starting from the fourth year for the local company to operate and maintain the plant autonomously.

The day’s discussions ended with a panel conversation with all the speakers about how O&M or EPC players can approach the new emerging markets and with which formula, plus a generic discussion of which shall be the best and stable market among the ones presented according to the speakers’ viewpoint.

Day 2: Asset Management Day

The main topic for Asset Management Day was analyzing the impact of the last change in law which occurred in Italy (Spalma incentive and last GSE new regulation against plant improvements and revamping) on the PV market, analyzing the consolidation process on the run for the secondary market and the impacts on O&M player and investor strategies.

The attractiveness of the Italian secondary market and investors’ expectations has been analyzed in details showing still acceptable returns for foreign investors, even after the change in laws. Specifically, several new instruments have been analyzed to restore profitability of PV plants after the FIT cut, like the sale of electricity to Traders, O&M contracts contingent on realized energy production, optimization of insurances and deductibles, evolution and rationalization of O&M services and enlargement of the role of the asset manager in dealing with all of these new complex opportunities.

Reliance on new IT instruments like asset management systems or via the consolidation of monitoring system into unique IT platforms was one of the primary discussions.

All of the topics discussed have clearly underlined how Alectris strategy is perfectly aligned with the market evolution. Our integrated asset care services (O&M plus Asset Management) and ACTIS, the world’s first Solar ERP system, are perfectly suited to the evolution of the global solar PV market and the future needs of investors to focus on asset performance.

To reach Emanuele Tacchino directly in the Alectris Italy office: [email protected]