pv magazine: Why has solar been such a big topic of conversation this year at the BNEF Future of Energy summit?
Chase: First of all, the Investment Tax Credit was renewed in December. So the U.S. is starting to gear up for some early-stage development and also looking beyond 2016. So it also is a bunch of developers looking for tax equity a couple of years out now, whereas before they didnt really have much to say. So thats one reason whey there is so much interest in U.S. solar.
Secondly, people are expecting maybe some news from SunEdison in the next couple of days, so that is a bit of buzz, and thirdly, there are these incredibly cheap power contracts signed in Latin America in the last couple of weeks. So US$48 in Peru, which we thought was low, until Mexico came out with came out with an average of $40.3 per megawatt-hour, with the lowest bid at $35.5 by Enel, not by some random Greek developer.
pv magazine: You bring up several interesting points there. First lets go to Latin America. I note that there were energy ministers here from Mexico, Chile and Argentina, and we have a lot of solar being built right now in Chile. We have the recent auctions in Brazil and Mexico. When are we going to start to see massive deployment of solar in Latin America outside of Chile?
Chase: Well, the Mexico contract is due by the first of January, 2019 for delivery, so there will be quite massive development, I think it will be a gigawatt by then. So is that massive? I dont know. But there will be more contracts after this. Because if you can really buy solar for $36 per megawatt-hour, then they are going to be all over this.
pv magazine: You have been openly skeptical about the $36 per megawatt-hour price. And I will note that there are Clean Energy Certificates (CELs) included in that, so what is the value that the CELs are adding and what would the cost be without those?
Chase: As far as I know, as far as my understanding is, the $35.5 is including the CELs. That is the total price they get paid per megawatt-hour.
pv magazine: Wow. These are extremely low prices. Why do think companies are bidding in at these prices and what are the prospects of these projects actually getting built?
Chase: There has actually been a range of prices. The highest I think was $45, and the lowest was $35.5. My suspicion is that it is a little bit of a gamble. The worst-case scenario is that they find that they cant do it, and then they dont build the $35.5, and maybe they build the $45, or maybe they dont.
If CAPEX falls a lot, and all their most optimistic projections are realized – so they get development bank financing, maybe the Mexican peso gets stronger, I dont know if it is peso- or dollar-denominated, because you can choose between them. And of course they are probably getting some kind of corporate equity at a very low cost. So they are taking some of the risk of their own corporation.
And I assume that they are also using some sort of super-low OPEX assumptions, because you have to to get that low a price.??I think they just want a foothold in that market. I think theyve gone for broke in terms of making sure that they win some contracts.
pv magazine: So Jenny, there seems to be a big focus on utility-scale solar at this conference, and I notice that a lot of panelists are saying that utility-scale solar makes more sense than distributed solar. What do you see in terms of distributed solar deployment, particularly in the United States?
Chase: I think the reason that a lot of the people here like utility-scale solar is that it is a lot easier for big companies to make money on utility-scale solar, and the big companies are here, and that is why they are banging the drum for utility-scale solar.
So it is cheaper on a per-megawatt-hour basis. But there is a pretty good reason why politicians and regulators will prefer distributed solar over utility-scale solar, which is that is that people have votes, and people really like distributed solar. So my suspicion is that politically it will be not very palatable to let utility-scale solar totally crowd out small-scale solar.
So I think there will be some healthy competition in the next few years, battles over net metering dominating the growth of small-scale solar.
pv magazine: So when the ITC was extended, you said the policy battles in the United States would shift to net metering. I was dismissive of the idea that we would suddenly have an uptick in net metering battles, but that seems to be exactly what happened. What do you see in terms of overall trends, and where do you think this is going?
Chase: I actually have no idea where the current trend in the states are going. At the moment theyre all trying things out, right? Theyre trying out different ways to regulate and pay for small solar. And will probably see what works.
In the long run, I suppose well have a combination of maybe a fixed charge to be connected to the grid for a solar owner that keeps the lights on, while there is some kind of net metering, maybe it is much lower price, which is kind of what you are starting to get in Europe. At least an export credit that is much lower than your retail price.
And I think we are probably in Europe also going to move to higher fixed charges for electricity, at least for the people who have solar.
pv magazine: You are a global market analyst, and weve talked about the United States, weve talked a lot about Latin America. Outside of the big markets in the China, Japan and the United States, what do you see as the most exciting emerging markets right now?
Chase: North Africa. The number of questions that I am getting about Egypt, Jordan and Morocco there is a lot happening there. For exactly the same reason there is activity in Latin America. The tenders are coming up with low prices, there is disruption across the region that is upsetting the gas supply and also the export potential.
And so we are seeing a real upswing of interest in this region, mostly through tenders but a little bit also in other ways. Algeria built 260 MW last year, I actually think pv magazine reported that, and I have no real idea why. And thats quite a lot.
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