Massimiliano Vernaleone, the Head of International Business Development at Phelan Energy Group speaks to pv magazine about why he is confident the company is well positioned to be awarded the 350 MW Sweihan PV project. The project is being tendered by the Abu Dhabi Water & Electricity Company.
pv magazine: Phelan Energy Group is a part of one of the shortlisted consortia for the 350 MW ADWEA project. Who are Phelan’s consortia partners and why do you think the bid has gone forward to the shortlist phase?
Massi Vernaleone: The proven solar expertise of Phelan and the significant strength of Tenaga were they key reasons that the Phelan-Tenaga consortium has been selected in the last seven consortia for this 350 MW bid by ADEWA. Phelan Energy Group is a leading international dedicated solar PV developer. It recently grid connected the largest solar farm in South Africa. It is well known as a leading low-cost developer in the industry. Phelan Energy Group has formed a consortium with Tenaga Nasional Berhad, the Malaysian utility company that is a leader in generation and distribution with 10,000 MW of total installed capacity, with additional 4,400 MW of generating assets under construction.
pv magazine: At 350 MW this is a huge project and in a region where there is still a limited experience of large scale solar. Why do you think Phelan and its consortium partners will be able to deliver?
Vernaleone: Mainly because we have already successfully delivered large scale solar plants in very similar desert conditions. In fact, our subsidiary Solar Capital currently operates a 175 MW plant completed in March 2016 in De Aar, South Africa. The De Aar plant is currently the largest solar plant in Africa, Middle East, and the Southern Hemisphere. Furthermore, we think we have put together the perfect team that includes Phelan’s solar expertise, top tier EPCs and component providers with an important local presence element, on top of the high-value utility company background from our partners Tenaga.
pv magazine: The tariff bids for this and other projects in the Gulf States have come in at astoundingly low prices. Why do you think these prices can be realized and with sufficient quality to see the project deliver over the long term?
Vernaleone: Phelan Energy Group, through its South African subsidiary Solar Capital has been at the forefront of solar innovation since its inception ten years ago. Phelan Chairman Paschal Phelan has 30 years of experience of business in the MENA region. Add to this the dedication of our experienced team, and it is clear why we have been pioneers in low solar energy prices already in South Africa. We have won most of the tenders we have participated in, competing with most of the same companies that are now participating in the Abu Dhabi project. We have target return that we seek, and that will define the price that we are prepared to bid. We are long-term investors in all our projects, so tier 1 superior quality is a prerequisite for all our bids. We expect our farms to be still producing 75% to 80% of their peak power in 30 or more years time, and invest in quality accordingly.
pv magazine: What do you see as being the major challenges to realizing the project?
Vernaleone: The high temperatures on the Sweihan site will certainly be an issue to be dealt with during construction, as we have already done on our 175 MW plant in De Aar. There are a couple of remarkable challenges about the site that we are already busy mitigating, but Ill keep these close to my chest for the moment as we havent won the bid yet!
pv magazine: You’ve mentioned Phelan and Solar Capital’s experience with the De Aar project in South Africa. What did Phelan learn from that project?
Vernaleone: Phelan has gained tremendous experience with the development, construction and operation of the PV facilities constructed near De Aar in South Africa. The Phelan team have learned how to integrate the local community into the project while learning to install a PV facility in a record time. The teams have forged long term relationships with the local community, contractors and grid provider. Continuous learning from experience is brought into current projects to ensure better integration and faster execution with a key emphasis on quality that has to be maintained throughout the project. We have a dedicated Management Services division, that lead an efficient and quality design group. They then supervise the entire operation to conclusion. The key is teamwork between all the stakeholders to ensure optimum performance at a competitive market price.
pv magazine: What is your expectation for the South African large scale market going forward? Are more delays to the REIPPP scheme expected?
Vernaleone: Despite some further delays in the announcement of the bid results, we still consider South Africa’s REIPPP a very successful scheme that we all know has paved the way for many other similar programs adopted in most of the important solar markets around the world. Our subsidiary Solar Capital has just been awarded an additional 86.25 MW plant, now at the financial close stage, and we await decisions for further projects in bid round 4.75. The price of solar power has continued to drop in South Africa, where we are blessed with very high irradiation. This will make solar a key element in the future of electricity in South Africa – much larger than the current forecasts.
pv magazine: How do you think project construction costs in South Africa compare with those anticipated in Abu Dhabi?
Vernaleone: The South African experience will definitely be a very good reference for us to cost a Solar plant on the Sweihan site in Abu Dhabi. Clearly, different tax systems, labor costs and local content requirements play a major role in the gap between overall construction costs and BoS in the two regions, despite major components having become pretty much a commodity for such large scale projects, with standard prices regardless of the location they need to be delivered to.
pv magazine: What is Phelan Group expecting from the MENA region as a solar market more generally?
Vernaleone: Thanks to its optimal irradiation conditions, high availability of land and good interconnection plans, we see the MENA region as one of the most active markets in the renewable energy industry. This is even more so with the recent advent of new storage technologies, which we firmly believe will be a game-changer in terms competitiveness of solar PV with historically more dispatchable sources of energy like fossil fuels. Solar at current price levels is an ideal way to replace local oil utilization and generate higher export revenue.
pv magazine: Phelan is also active in Southeast Asia. What markets are most interesting in this region and why?
Vernaleone: Southeast Asia is now becoming one of the most significant regions in the global expansion of the PV industry. With high levels of solar irradiation, a combined population of more than 600 million people expected to rise to 760 million by 2040 and GDP expected to grow almost 5% annually, the regional countries are now planning to reduce energy intensity and promote energy efficiency going forward. Many Southeast Asian countries have set very attractive and ambitious renewable energy policies and targets to face increasing energy demand challenges. As an International Solar Developer and IPP, Phelan is actively involved in these key markets. We are also working on some innovative solutions to bring large scale solar plants that fit the specific characteristic of countries like Bangladesh, India, Pakistan, Vietnam and Thailand.