DNV GL, a global leader in energy advisory, testing, inspection and certification services, has released a new whitepaper titled “Bright Ideas: Global Trends in Solar Finance”. The whitepaper presents an in-depth analysis of major trends in solar financing, including an assessment of the technical risks and insight into the future of solar energy finance.
With Singapore committed to install 350 Mw solar power by 2020 through the launch of the SolarNova programme, new financing models and trends are emerging to broaden sources of capital. The four key trends identified by the Bright Ideas whitepaper as having major impact on the future of solar finance are securitisation, new sources of debt and equity, new routes to market and crowdfunding.
Mathias Steck, Regional Manager for DNV GL – Energy in Asia Pacific said, “Solar technology may be innovating fast, but new financing models are just as important to broaden sources of capital and meet growing demand. Access to significant amounts of efficient capital is vital to support continuing growth.. We are seeing many new business models emerging across markets in Asia with Singapore acting as a hub for investment of this kind. From green bond issues to crowd funding and crowd leasing – it’s all here.”
The use of solar energy continues to grow with Singapore seeing robust investment in the Asian solar markets. In 2013, Japan, China and Thailand doubled their end-market demand levels over the previous year. But adoption is not at its peak due to challenges in financing the sector. According to the Bright Ideas report, that may all change with new finance models gaining momentum.
The new paper focuses on four global trends in solar finance:
Securitisation refers to the process of converting a pool of illiquid assets into tradable securities. While it’s not a new model, its application to the solar sector is to reduce the capital requirement for domestic-scale solar deployment. DNV GL acted as Technical Advisor on the first major example of securitisation in 2013, helping to raise USD 54 million in asset-backed securities.
(2) New sources of debt and equity
Placing the ownership of a large number of solar projects into liquid and publicly tradable vehicles provides investment avenues suitable for a wider range of investors and deepens the pool of capital available to developers. Due to the nature of solar assets – namely, the predictable cash flows – these vehicles can raise equity at rates similar to the cost of debt.
(3) New routes to market
As diverse solar assets are being combined to create investment products attractive to new sources of capital, the way that solar PV projects interact with electricity markets is undergoing its own revolution. Alternative offtake structures such as direct sales and even merchant solar plants are on the rise. The traditional role and model of a power utility is being challenged with new types of off-takers stepping in.
Crowdfunding sees project promoters using online platforms to directly connect with small investors looking for an investment return. In essence, crowdfunding allows investment decisions to be made collectively by potentially millions of people rather than by traditional financier credit committees.
The paper is also available on DNV GL’s website: www.dnvgl.com/brightideas.
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