Interview: Recognize where your PV competitiveness lies04. July 2012 | Top News, Applications & Installations, Global PV markets, Industry & Suppliers, Markets & Trends | By: Becky Beetz
According to the CEO of Spain-based solar development company, Solarpack, finding demand for photovoltaic projects is one of the biggest challenges today. Regarding the U.S.-Sino trade case, he further believes that "everybody has to realize where their competitiveness lies." In the following interview, Pablo Burgos discusses competitive strategies, bureaucratic hurdles, solar policies and project pipelines with pv magazine.
Having recognized back in 2008 that the future of photovoltaics does not lie solely in Europe, Solarpack packed its bags and opened a Chilean base from which it could start work on photovoltaic projects in Latin America. As Burgos explains, while most companies were still focusing on the European market, Solarpack had an almost competition-free environment in which to establish its position in the region.
Global solar market conditions have become increasingly difficult over the past two years. What's Solarpack’s survival strategy?
As developers, we have to enter markets at an early stage – that’s something very important to have a good footprint and capitalize on that. Our competitiveness in the region is based at this moment on our track record of projects being built there, which is not very common. I would say that the only power plants being built in South America at this moment with this size are our Peruvian projects, together with our Chilean projects, so this gives Solarpack a good position. On the other side, our strategy is to integrate development and construction activities.
How is the current financial environment for solar projects?
It’s quite challenging, because typically European banks have been very active financing these types of facilities and since last summer, they have been hit significantly, so these debt providers have almost disappeared from the market. Therefore, it’s a challenging new scenario for all the developers.
Who is making up the shortfall?
Multilaterals in this type of market are an option. Asian banks also have cash and also capital markets are something that developers are looking at.
How about Latin America – what is the financing landscape like there?
The Latin American banks are quite willing. I think that Latin America is now a place where investors like to be. Another thing is which terms and conditions you can get in these markets, compared to more stable markets like the U.S. and Germany, and they are worse, so this also has to be considered when you develop projects.
What are the main development challenges, apart from financing?
Finding demand. I think that now finding demand to develop new projects is challenging, because there is overcapacity on the manufacturing side, and I also think there is overcapacity in the development side, so there are many European developers whose market has been significantly reduced and who are looking for new markets, and these get crowded quite fast.
What are your thoughts on the US-Sino trade case?
I can understand the concerns of the different countries supporting solar and how the manufacturing is being localized, but I think that everybody has to realize where his competitiveness lies – not manufacturing modules in your country does not mean that you can’t develop a solar industry. Balance of system (BOS) is significantly more important than it was and I think that regulators should also pay attention to this.
Where, in your opinion, can BOS costs be improved?
Standardization is very important. We are having an internal process, which aims to standardize plants, so the engineering and procurement costs can be significantly reduced. Of course inverters are also something that has helped drive project costs down, but I would really say the challenges are in the core basic tasks, which would be civil works and mounting – streamlining these processes and reducing costs there have a huge impact, because these are even bigger than inverters in terms of total costs of a PV project.
Solarpack has just completed a one MW photovoltaic plant in Chile, without the support of subsidies. Where did the funding come from?
The funding came from Solarpack. We put our money there, because the plant has a long-term contract to sell the electricity to Codelco. We are saying the plant was built without subsidies, because there is no investment tax credit, for example, linked to solar investments in Chile, and there is no feed-in tariff in the market, so we had to deal privately with Codelco. They are paying a price for the electricity, which they consider fair and acceptable, in order to have a stable supply over 20 years, which is only something that renewables could deliver in this part of the country.
How much did the company invest in the plant?
We invested between US$3.5 million and $4 million.
What else is Solarpack planning for the Chilean market?
We have a pipeline of locations and permitting already developed in the range of around 150 MW. That’s nothing, however, if we don’t achieve some type of power purchase agreement (PPA) contracts for these projects, and that’s the process we are in now. One of the processes will be closed soon. Our aim is to start construction early next year, but we want to achieve financial close at the end of this year. Therefore, our plans include building at least one plant in Chile in 2013. Plants will range in size from under five MW, up to 50 MW.
(Yesterday, it was announced that Solarpack will build two photovoltaic plants worth 25 MW in the Tarapacá region of Chile for mining company, Compañía Minera Doña Inés de Collahuasi.)
Does the Chilean government plan to support its solar market?
The development in the Chilean market will not be by tax credits, but via bilateral, private PPAs. However, the government is thinking about setting some sort of price stability regime, so that renewable energy projects could fly on their own, with some sort of minimum price to be accepted by the market. It’s quite uncertain [when this will happen] – it depends on the politics, but there should be something in place this year. This is what the industry expects.
In Peru, Solarpack was awarded all the contracts for the country’s solar market.
We were awarded all the 80 MW, but for 40 MW of this, we went to the tender in a joint venture with Spanish developer and module manufacturer, T Solar and we did all the development for them, but they took responsibility for the construction and financing. It is almost online. We kept the other 40 MW and, together with a Spanish partner, we are currently building the [two 20 MW] plants. One of them will be connected before the end of October and the other before the end of December.
What sort of remuneration will Solarpack receive for these projects?
The plants have been awarded a PPA price of $215/MWh.
What about your recently announced 16 MW Peruvian project?
Last year, there was a new bidding process, and we were awarded [a contract]. It was for more or less a 16 MW plant, but you should consider that in Peru they don’t tender capacity, but rather annual energy and, given the yield in this area, it would result in a 16 to 17 MW plant. This time, watching the drop in the components market, we offered a price – $120/MWh – which is significantly lower than the first one of$215/MWh. This plant will be built in 2014, so we are counting on significant cost efficiency to be achieved before construction of this project. Permits and locations are being developed at this moment. In Peru, the order is different. First we get the PPA and then we fully develop the location.
In South Africa, Solarpack established a new company, Kabi Solar, alongside a South African partner. It intends to install 50 MW worth of projects. Can you expand?
We consider having South African partners, or investors very important in order to succeed in this market. At this moment, we are doing the development requirements for presenting a project in this program – they are quite demanding. The difficult thing to achieve is that you need to get credit approval from investors – you need to have the project fully funded, or at least have a funding commitment to be able to present an offer.
Is Solarpack active in Europe?
We were active in Spain and France, but both countries really stopped significantly their solar programs, so at this moment, we are performing operation and maintenance, and project management services. But we are not taking on new assets.
What about US, or Asia? Are these regions on your radar?
We are active in the U.S., but with a different type of approach to what we do in South America or South Africa. We are pure developers of projects. But ultimately this market has been slowing down significantly. We have approximately 150 MW of ground-mounted projects in the pipeline in the California state, but we don’t have a precise timeline [for their execution].
Overall, while we are interested in looking at new markets, we have to be very selective and to concentrate our efforts well.
Choose between a digital and print subscription from pv magazine publisher Solarpraxis AG’s online shop!
- 3031 views
- 3024 views
- 2616 views
- 2364 views
- 1659 views
Opinion & analysis
Why do so many believe MENA is the next big solar market?, asks Yassir Gamil, managing director of Solarpraxis' new MENA office
Want to publish your press releases for free? Simply log in or register, enter the information you want to appear and we'll publish it for you!