pv magazine: In the space of just four short years, the Conergy UK timeline of achievement looks extensive. What is to come for 2015 and beyond?
Robert Goss: We acquired Wirsol Solar UK in January, adding another U.K. entity to our group. Then we had a big rush in Q1, and managed to get our solar farms connected on time. Since then we have been working on two substantial projects, the Kencot Hill solar farm with both RWE and Foresight, which is 37 MW and up and running; and also the 21 MW Grange site near Bristol and I must say it has been a pleasure building projects in the dry and warm.
Right now, we are building 120 MW in the next rush, which runs until the end of March 2015. These projects range from 2.8 MW through to a 20 MW site, and we are on schedule with the majority of them, either with the fitting out works and heavy construction, or indeed moving on and ramming in the posts for the modules. So we are making some good progress. Last year, the weather was awful in January and February but actually rather good in December, so our basis this year is to try to get on a bit in December and work right up to the 19th and get as much done as we can so that we have an easier ride in the following three months.
That is the situation with ground mount. At the same time were setting up our rooftop team and have recruited a high-profile team member to lead that. Further information on that will come out shortly. The team will comprise an additional 4-5 people and will focus across the sector, from multiple roof housing projects through to commercial projects through to the public sector schools and other rooftops in the public domain environment.
How has DECCs extension of the grace period for ROC eligibility affected your plans?
There are two projects where the planning permission is very old in that the original application was a long time ago. They were refused, went into appeal and have come out again, or are coming out again, and should they go through which we think they will because we have made them more pertinent to the community they will be great for summer projects. These are in the 10-20 MW range.
What is Conergy UKs current PV footprint in Britain, and what does the future pipeline look like?
We have 176 MW today, finished. Then 120 MW in the pipeline. So we will be certainly above 250 MW by the end of Q1 2015.
How will the shift from the ROC scheme to CfDs shape Conergy UKs strategy in 2015?
We will still have ROCs for sub 5 MW and the FIT for standard size solar farm projects which is important. As for the CfD, I will not reveal exactly what we are doing at this stage, but needless to say we are having a look at it. If you have read some of the learned publications recently about how and when the U.K. will get close to grid parity there is a lot of talk out there regarding this issue and how quickly well be comparable with onshore wind, it is an interesting change in the subsidy.
I think we are close to being there. We have had to deal with the upward pressure on prices brought about by the minimum import price (MIP) deal, which is gradually fading away and we may see the end of the MIP deal during 2015 or 2016, which will bring EPC prices down a bit. We are in a strong position to compete with wind anyway because we have a no maintenance, or low maintenance, solution versus a wind solution, which will always have higher O&M costs. So the CfD mechanism in theory makes sense: lets try to compare things on an equal basis and get the best possible value. Or in any case get a better value than what we are getting for our nuclear power stations.
With onshore wind still eligible for the ROC until 2017, could the first few months of the CfD prove valuable for solar?
In the first year it is possible, yes. The onshore wind sector operates on a much longer timescale than solar. We go from talking about it to deployment in a matter of weeks, whereas for wind it takes longer. So they have been given the breathing space of changing their regime over an extra year compared to solar. I think that there will be a possible boon for solar. The other discussion point is, the big players like Conergy are more likely to do well out of CfDs than the small developer with one 5-8 MW project. It is difficult to see how the CfD will benefit this type of smaller developer.
As an EPC working in one of the PV industrys most dynamic markets, what are the main challenges you expect to face next year?
This has been an intensely political time in the U.K. It is very interesting to see the politics. It looks as though we may end up with another coalition next year but it is probably too early to say for sure right now. The General election in May is inescapable, and presents an interesting challenge.
Populism is dangerous. We know that solar farms are liked by the public, and when you see ill-informed comments from people about the amount of countryside we are taking up with solar farms, that is a bit frustrating. We have made a big effort to mostly use sites that are not good for agriculture. Generally we are working on second-rate agricultural sites, and we are working in places where the farmer sees that it is a much better deal to take the revenue from solar farm rent than in trying to grow crops on such land.
That is a bit of a headline focus discussion, when actually if you talk to farmers who have PV or are contemplating it, they consider it very carefully. They are custodians of the land often for multiple generations so they take a serious view of what they are going to do with their land. We have worked very hard with the National Farmers Union (NFU), with Friends of the Earth, with all these bodies in terms of doing a much better job. We have biodiversity, chickens, sheep underneath the panels etc it is very different story to that which is often reported in the media.
And Kencot Hill solar farm is in Prime Minister David Camerons [Oxfordshire] constituency. It is an ex-airfield site, and there is lots of rock beneath the surface of the ground. The site is covered with concrete runways and outlying ex-military hardware, so it is an ideal place to put a solar farm. It is not a good piece of farmland. It is accessible, it is close to Oxford and Swindon so the power can go straight to those major conurbations. So it makes a lot of sense to me, and actually makes more sense than pushing just 5 MW sites because the impact of setting up a solar plant is pretty much the same whether it is 5 MW or 37 MW.
And so the U.K. is going to get to 20 GW by 2020 one way or the other, so why not try to get there with some big sites and some well-chosen small sites? Lets not take a swipe at what, in fact, are some of the best solar installations to build and thats the larger sites.
How much mileage and profitability is there in the sub 5 MW ground-mount sector, considering these projects will still be eligible for the ROC at 1.3 after April?
In general you think If Im going to do 100 MW and they are all going to be 5 MW, there must be an economy of scale , a way of doing these things that somehow becomes more efficient. Sadly, because each site is different, that is not the case. We are doing a series of installations right now in South Wales where there are challenges with damp conditions, or steep hills, or rather narrow access you cannot get a multiple economy going.
Also, the legalities and the deal will differ every time. So conceptually the 5 MW sites are as much work to set up as a 10 MW or 20 MW site. Perhaps not a 40 MW site. However, we see investors being much more interested in yield than they are in just the price per MWp. There is a role for companies like Conergy to build quality sites that can be refinanced, as we have proven, that stand up to technical enquiry from assessors.
It is not all doom and gloom but its a little hard work. Clearly if you do have a target of 100 MW youve got to build 20 plants, which means more setting up, more legal work.
What are Conergy UKs plans for the commercial rooftop sector in the UK? How does the acquisition of Wirsol affect these plans?
We are very experienced in the rooftop sector across Europe and the U.S. We have also done a number of projects in the U.K. where in our previous role as system integrators we worked on, for example, Carillions project at the Nationwide Building Society headquarters, and have worked together with Photon on London Southend airport. We tendered for a couple of large projects last year and came in second, so we set up our supply chain, have got a good team of people together and have looked at the challenges etc (in this case a 5 MW roof and multiple 50 kW installs we looked at both of those), and we are prepared now for more of those. We have also got a bit of skill from the Wirsol team they were involved with a previous Jaguar Land Rover project.
We have hired in a top engineer from the team that carried out the Sainsbury install, so have them in place as well as our international resources. So we are well placed. We have the money in place and support from Kawa, and other financial backers. So we have a system that is running, drawing money from investors and putting it into large-scale solar farms. We will then have a situation next year where we will be putting it into 5 MW farms, and we will have a surplus: people are used to investing with us, they are used to our high-yielding and successful solar farms. We will then take the approach of asking clients Well can we put this into your rooftop deals? The rooftop deals we are putting together are commercial roofs, social housing sites, multiple roof government and quasi government-type buildings this is where we want to be.
What are your commercial rooftop targets looking ahead?
We have grown to 60 people in Conergy UK in quite a short space of time. Many of the people we have hired for ground mount have been brought on board with one eye on the future. They all have plenty of rooftop experience among them, and so what we want to begin doing is to convert the team across; a seamless change into rooftop.
We have to build a strong pipeline of roof-mounted PV and become a top 3-4 player in this sector. I think we can do that. We have the financial backing, we have the engineering expertise, we have the brand recognition and relationship with banks and investors.
What we will do is replace the missing MWs of ground mount as far as we can with rooftop.
As a leading developer of solar projects in the UK, what is your view on solars perception among the British public?
The U.K.s slightly strange property ownership structure stands in the way a little because it is often that the occupier of a building is not the owner. The owners interest is in getting the best yield from the building, and the challenge then can become convincing the property owners to embrace PV. But largely, solar power is well supported in the U.K. Distribution centers and large warehouse buildings, especially refrigerated ones, are simply crying out for rooftop solar installations, so lets just do them.
Has the recent announcement that companies can take PV systems with them when they move had any bearing on your strategy at all?
This is a response to a problem that Conergy and others in the industry gave to DECC and so its helpful and a good signal. But we need to work harder the other way around: if our tenant and our landlords believe that a 20-year deal is too long it might work well in Germany and elsewhere but for the U.K. we see life in seven-year bands then we need to address that. In the U.K. Financial directors plan in three and seven-year terms, so lets try with the money thats available to focus on the real challenge the shorter-term tenancy and solve it.
Which parts of the country are you intending to focus on moving forward? And how much attraction do brownfield sites hold for Conergy UK?
We are doing a nice swathe of projects in South Wales, from Swansea across to the extreme west, past Haverfordwest. These projects are bringing money into some of these areas that have suffered economically in recent years, so we are welcomed with open arms. The local topography is a little challenging. If youre going inland then there are reasonably steep hills. In terms of brownfield sites, there are challenges with waste from a nearby mine on one project, but all in all it is a fairly good region for solar farms.
So South Wales is strong, and we have a couple more around the Southampton area, and some in the Southwest, but there is a problem with grid connection in Cornwall and Devon. These two counties have been really proactive on solar and have really pushed for investment, and if you build a good solar farm there the yield is high. We should take care to avoid some of the particularly the beautiful spots in the country, but there is a site down near Poole in Dorset that is hidden behind hedgerows. You hardly know the site is there solar is a low-impact technology, except for the six to eight weeks when we are building it.
In the middle of the country we have a site near to Milton Keynes and this one may prove typical of the future: mid-size, next to the M1 motorway, located on a low-lying piece of land, and the farmer happy to have this land support other parts of his farm.
Beyond EPC, what other areas of the solar value chain are Conergy UK exploring?
We look at sites from the very early stages, starting with the site survey and evaluation. We go in very early in financial evaluation and putting money down the value stream and supporting developers with connection and planning permission costs. We also do O&M using Conergy Services, which is part of our group. Thats a big success story. We know that the yield story is very important what the finance guys want is something like a bond that doesnt have any variables and is just delivered through Conergy.
We also have world-leading supply chain management so we can put together a very compelling offer for a local councils social housing project, for example. Even if they wanted to use local installers we could still be very useful for them on the technology side.
We want to use our existing Conergy team to grow, but on the mergers and acquisitions and joint venture front, we are talking with other businesses about working together with them, especially where they have very detailed, close penetration of a particular segment, for example social housing or government buildings. If theyre really specialised, really in deep, then we are very interested. They may not be growing their company as fast as they could because they have cash flow challenges for example, so we would like to talk to them because we do not have those financial constraints. Why not support them if the opportunity is right?