Innovative Financing Method Makes Solar An Obvious ChoiceBy Cas Biekmann | Mon, 06/08/2020 - 15:05
Q: What are Proyecto Terra’s most prominent developments?
A: We have simplified the transition to solar for energy users. This includes financing, operation and decision-making. Our financing method makes it a competitive choice to switch to solar energy as part of distributed generation. Clients can come from either the industrial, retail or residential spheres and receive large savings on their energy bills. We understood from the start that there is still a lack of understanding regarding solar energy. This translates into clients seeing risks that are not there, deciding against investing in solar energy and taking on higher energy costs than necessary. We understand that new users are nervous, so we offer to take on the costs of installing and maintaining the solar panels. We sell energy at lower prices to the client and benefit from the extra energy generated ourselves by selling it to companies that financed the installation. By taking on the initial risks, we make it easier for our clients to switch to solar. Four years ago, we sold our first system. We now have a 15-18 percent market share for the installation of solar panels in Mexico´s public sector.
Q: What are your clients’ main concerns and how do you solve them?
A: We have two types of clients. First are our investors and they are very important to us. Their main struggle is related to changes in technology. They worry that panels will become obsolete quickly. What matters is the energy these panels produce. Within five years, we might very well see panels with double the current capacity. Just look at hydroelectric power plants. They might have been functioning for over 80 years, but they are still being used because they produce energy at low costs and do not pollute. The tech behind them is obsolete, but that is irrelevant because it still functions. Electricity demand will always be there, and will increase further in the near future. If you have already made the investments, you can produce energy for a long time with marginal operational costs.
Our other clients are end users. Many of them think their structure will not work. Our approach is to provide them with a simple solution. If our structure does not work, they do not pay a thing. They have nothing to lose as we make the investment ourselves. End users are less interested in the technical aspects of the panels we use, instead placing greater importance on the savings they can achieve.
Q: How do the investment, EPC and asset management areas of the company provide an added value?
A: These areas have two main focuses, which are innovation and a sort of obsession with our clients. “The customer is always right” might be an almost cartoonish cliché, but we follow it to the point that we go out of our way to make clients happy, even if it means we lose money. In terms of innovation, we continuously try to improve our financial model. The company continuous to grow, which increases access to more elaborate and cheaper financing options. Regarding EPC, we did not try to do everything ourselves at first, but the existing companies could not always operate at the cost and quality that we were looking for, so we decided to establish our own EPC division. Once fully immerged in the volume we were operating at, we decided to create a central platform to maintain oversight and this area has grown significantly. We have 15 warehouses and the platform helps to keep track of panel deliveries.
For our clients, we try to deliver great quality standards, presentation, response time and installation activities. Regarding asset management, we use our platform to monitor operations in real time. We use a cellphone carrier network to keep separate parts connected while moving large volumes of data. Our monitoring system has predictive qualities and takes the weather and city conditions into account. We monitor the use by our clients as well, so we can help them if they start using more energy. We do this by installing more panels or simply warning our clients when spikes occur. If for some reason they are not saving money we can help them figure out the reasons behind it. If they have a problem with CFE, we help them resolve their issues.
Q: How has the demand for the companies’ services changed over time?
A: The demand for energy has increased over the years. The company has grown a great deal because it has been in the right place at the right time. We started operating right after the enactment of the Energy Reform. I knew the company would have to start operations once the reform took pace. Energy demand has only gone up, this means smaller systems became more important as time went by. Bigger industries have seen similar trends. Large solar parks have played important roles in the industry. Distributed generation has become more prominent. This year, the industry will slow due to COVID-19. If the economy sinks, people will want to save more money. Unfortunately, there is no easy access to capital in Mexico to finance distributed generation. Those who do have access will see their market share improve significantly. For companies like us, cash flow will be harder to obtain.
Q: What changes could be made in the Mexican regulatory framework to boost competitiveness in the solar sector?
A: I think that the regulatory framework was well-planned and smartly designed. What matters is how well it is executed. Many people in the solar sector complain about prices being cut by CFE, for instance. They might have a point that Mexico is not always the most efficient, but some want the benefits at no cost. Personally, I do not believe in subsidies too much. Mexico has plenty of sun and cheap labor. Solar energy can compete by itself. Enforcing the law is somewhat problematic because CFE is handing out fewer permits give it has less staff available to deal with issues regarding infrastructure or grid connections. If you install over 500KW in terms of production, you have to pay MX$800,000 additionally for a permit. Other than that, there are no further restrictions. Cost should not be the main factor that sinks a project.
Q: What impact has COVID-19 had on the company’s supply chain and its projects?
A: The supply chain has indeed been affected, although not terribly. We have standing orders for purchases that were only about three weeks late. Mexico has a sizeable buffer for imports, meaning it has a decent inventory for solar panels in stock. Therefore, the closure of factories in China does not affect the country as much.
Q: What are the opportunities for Mexico regarding distributed generation and how can the company take advantage?
A: There are great opportunities for the government. Supporting CFE and the administration is important. They do not have sufficient infrastructure, knowledge or financing to focus on distributed generation. CFE offers subsidies for domestic users, so solar panels can take away some of the burden from the government as well. Bringing solar panels to the masses is a herculean task. Helping the government carry out this task is a great opportunity. To bring clean energy to all of Mexico would have strong social and economic benefits and create employment as well. As for the company, I think we will still grow quite a bit this year and in the coming years as well.
Proyecto Terra is a Mexican company founded in 2015. It offers an innovative financing method, installing and operating solar panels for businesses and private users who receive savings on energy costs in return.