Flexible, Modular Solar Solves PPA Risk ExposureBy Cas Biekmann | Mon, 06/14/2021 - 09:39
Q: Why is Scatec ramping up its strategy to develop flexible, containerized solar projects for the commercial and industrial (C&I) segment?
A: Scatec traditionally focuses on utility-scale solar projects in emerging markets, aiming to deliver high quality in a timely manner. But self-supply demand is growing in many markets for various reasons. For instance, sometimes utilities cannot provide the power and reliability that C&I clients need. Therefore, we developed our Release concept, which is what we call our flexible containerized rental solution.
From our end, we generally bet on long-term power purchase agreements (PPAs) with utilities, ranging from 20 to 25 years, which are normally covered by a sovereign guarantee from the government. The structure needs to be financed by commercial and development banks as well, with long lead times and high cost. But we approach C&I projects differently with the Release model. We want to offer shorter contracts, even down to only 2-3 years, to adapt to the customer’s needs or restrictions, while still providing high-quality gear that we use in our other projects. The possibility of financing on a project-by-project basis is simply too costly and difficult for these smaller projects that often reach an 8 to 20MW capacity. Therefore, we found a way to deliver projects that are adaptable to such circumstances. We use a greater amount of standard equipment and apply modularity to increase or decrease capacity as demand changes over time. We also provide quick installations and moveable, re-deployable equipment. Battery storage integration is also an option relevant for many customers. Flexibility is the key word in our offer.
Q: How does the company approach the issue of ownership with such flexible projects?
A: The flexible, modular solution is a recent addition to Scatec’s portfolio. We have only deployed a few of these projects to date but are working on a large pipeline in many regions as we see a surge in the market for the more flexible alternative for utilizing the low-cost, clean solar power. In our standard business model, we have developed projects with an integrated approach, starting from development to designing our own EPC construction, down to operations and maintenance (O&M). We want to include the entire share in such projects to ensure the control and quality we need to provide the best results. We also do this for wind and hydropower projects. For our C&I-focused projects, the crux is to build a flexible portfolio with a fleet of equipment, which is one of the main reasons why we can develop these solutions quickly and inexpensively.
Q: How does the company support its clients in O&M?
A: Self-supply projects should be efficient and simple so that they can be operated on a day-to-day basis by the customer. The 8.5MW project we developed for Torex Gold’s Mexican mining operation has Torex’ own people that operate it on-site, for example. Fortunately, operating a smaller solar plant is not very complicated. We do, however, provide spare parts and training to ensure staff is comfortable. Scatec also provides guarantees regarding performance and availability, as well as remote live monitoring from our operating room in Cape Town, South Africa. From here, we monitor our global operations 24/7. The customer sees the exact same screen that we do, so we can provide them with the assistance they need. If there are bigger issues, we will travel to help on-site. We can also offer permanent on-site maintenance; however, we believe this quickly becomes costly and inefficient for the customer.
Q: How do you envision Scatec’s growth in the Mexican energy sector?
A: We considered Mexico for various projects during the long-term energy auctions for the large utility scale projects but did not pursue those in the end0. The utility scale projects represent our bread and butter; they are the largest part of our portfolio, and we look forward to reverting to Mexico once the large-scale projects for solar and wind resurfaces. We have not been very active in promoting self-supply projects in the Mexican market, focusing instead on the African market. The 8.5MW Mexican project is a new venture for us and we are building up the team and a legal structure again in Mexico. We will use the opportunity to become more present in the Mexican energy space, offering a broad range of renewable energy solutions.
Mexico is an interesting market, depending on the industry. For other industries outside of mining, for example, we might not have the same added value. Automotive manufacturing often prefers rooftop solar, which is not something we offer because of the exposure and risk associated with such systems. It is also difficult to standardize them. International players prefer to spend their time on larger projects so I predict that rooftop solar will remain largely in the hands of local contractors and suppliers. Scatec is very interested in participating in other solar projects that fit our business model and we are in early-stage talks for new projects. We can get a project operational within four months of signing a contract. We can move quickly on this front.
Scatec is a Norwegian player that develops, builds, owns and operates renewable energy projects based on solar, wind and hydro around the world. It has a portfolio of 3.3GW.