"Solar power is here to stay": Climate Change Capital's Peter Sweatman

CSP and CPV Investment & Finance Summit Special
 

It is estimated that the solar industry grew from 427MW to 1,744 MW from 2002 to 2006 and from 2003 to 2006, 45 venture capital backed clean energy companies based in Europe raised over €2.5 billion from the quoted markets.

Assessing the situation from project finance's perspective especially in the context of development cycles for companies, capital intensive investments or even a factor like risk management and funding opportunities, Peter Sweatman, Managing Director, Climate Change Capital (Iberia Office) told CSPtoday.com, "Solar projects have found strong support from project financiers in regions where there is solid and long-term solar energy support regimes (like Spain or Germany)."

According to Sweatman, this has fed back into an increased demand for panels and is helping to drive down costs and accelerate the industry down the technology curve to lower cost solar power production. 

"As long as the renewable energy support regimes remain favourable to solar development, there is no reason why Project Finance for these projects, and by implication the factories and firms, which are involved, will change," says Sweatman, who is scheduled to speak during CSP and CPV Investment & Finance Summit (to take place on 8-9 October in Madrid).

One of the critical components related to the development of this industry in this region is feed-in tariffs.

The incentives for developing solar in many European markets arise from the significant feed-in tariffs that solar generators can collect from utilities to which they sell electricity.

Acknowledging the same, Sweatman said, "Not all of the system costs of developing "an industry" can be driven out "in the laboratory".  We need a thriving global marketplace, which has sufficient volume and activity to attract competing firms and talent into the race to lower cost systems.  This I believe is happening due to the leadership, and investment through tariff regimes, of selected EU countries.  For project finance, the predictability and certainty of long-term tariffs is a clear benefit."

In the recent past, there have been new precedents in structured finance such as Abengoa's framework approach for financing.

Sweatman acknowledged that portfolio approaches for project finance are commonly used and can bring diversification benefits and cash flow recycling characteristics due to staggered needs and project timings, and even solar hours/ local conditions. 

"Portfolio PF deals in wind have been around for several years, and as the PV industry grows the same techniques will apply," said Sweatman.

In the past, Sweatman has been quoted as saying: "A typical range of equity return for low-risk projects, such as fixed flat panel arrays, runs at around 10%. The higher risk projects that involve a twin tracking system or other new technology can return up to 20%."

Elaborating on the same, he said the terms "low" and "higher" risk refer to the relative number of moving parts and "experience" in the different panel configurations at an installation level, i.e. this does not apply to general financial risk or individual project risk in PV. 

"The situation has become more competitive as greater numbers of investors have entered and become familiar with the PV markets.  Tariff uncertainty aside, today's equity investment environment for PV projects is as competitive or more so than one year ago," he said. "Project feasibility is always a judgment call based upon analysis of the details of the project itself, and hence hard to generalise about.  The regulatory environment is critical to the cash flow solidity of a PV project and is no more or less so than it ever was."

Discussing CSP and CPV separately, from Climate Change Capital's perspective in these two renewable offerings, considering typical structuring, criteria for bankability and overall project economics, he said, due to size and projected theoretical plant efficiencies of as yet emergent technologies, there is an interest in the sizeable development of CSP power stations at scales that are uncommon for PV, today. 

"Much may change in the coming years, and most likely it will.  The bankability criteria for projects remains the same, while the newer the technology or specific project detail will determine the risk factors which banks apply. Climate Change Capital supports and is working currently in both technologies and plans to do so for the foreseeable future, as they are complimentary and have interesting projects in both," shared Sweatman.

It is being projected that the combined average growth rate of CSP capacity over the last five years has been at around 250% and 16,000MW could be installed by 2015.

Assessing the popularity of solar technology soaring vis-à-vis other renewable energy forms, Sweatman pointed out that when a technology, like CSP, emerges from a very low base of MW installed, the % growth figures are naturally high. 

"There is no reason why the amount of CSP installed globally may not reach 16 GW, and the final result will depend upon the number of countries with efficient irradiation developing sites and supportive regulatory regimes.  If CSP is to take a serious seat at the table in the development of a low carbon future we need to focus on more "wind like" numbers of GW installed globally, as the sun's energy competes to prove theorists correct about its potential to power our development," he said.

Ending on a positive note, he said, "Solar power is here to stay. We will see greater use of industrial roof space, integrated technologies, thin film and the like, and I believe that the regulatory environment will be supportive."

CSP and CPV Investment & Finance Summit
 

Peter Sweatman, Managing Director, Climate Change Capital Iberia Office is scheduled to speak during

CSP and CPV Investment & Finance Summit (8-9 October in Madrid).

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