Project planning and management, installation and the operation of ever larger PV power plants present new challenges to planners, investors and bankers alike. The larger the plant, the more likely it is that the proposed solar plant’s profitability, rather than the client’s credit standing, will be the deciding factor that determines whether or not the bank will finance the project. The profitability of the installation plays a decisive role in terms of project financing, while the investor’s credit standing hardly comes into question at all.
We must also bear in mind that countries such as Germany and Italy are slashing government incentives for solar power that are provided in the form of a legally guaranteed feed-in tariff. As a result, the photovoltaics power plant market is increasingly playing by the economic rules of the power generation market and it is no longer the level of the feed-in tariff but rather the levelized cost of electricity (LCOE) that decides whether or not investing in solar power plants will pay off. The LCOE is stated in either euros or US dollars per kilowatt hour (kWh) and takes into account the total cost of generating power, including investment costs for the plant itself, operating and maintenance costs, and other variable costs for the entire lifetime of the photovoltaic system.
At present, photovoltaics is obliged to compete with peak load power generation from gas power plants. Peak load occurs worldwide around midday when factories are working at full steam and the amount of power required for cooling is at its highest. This is when gas-fired and pumped-storage power plants are generally started up, as electricity prices are particularly high at this time of day. In Germany and several regions in the USA, up to 40 percent of the peak load power is provided by photovoltaics on some sunny days. At the European Energy Exchange in Leipzig, the falling procurement costs for solar power are striking, because its yield curve correlates closely to peak demand. Solar power curbs the cost of peak power and if the weather conditions cause a surplus of solar and wind power, this may even result in “negative” electricity prices being reached.
Solar power generation is already economically viable in southern countries such as Spain, Italy and Greece. Installation costs are falling steadily and, despite a lack of feed-in tariffs, investing in photovoltaics is becoming lucrative in many places – particularly in installations where grid parity has become tangibly close to being met or has even been exceeded. This trend was observed worldwide during 2012 and is likely to continue in 2013. By the end of 2012 it was possible to install a 770 kW solar generator for one million euros. Protecting such investments is of critical significance. Precise analysis and evaluation of all technical, financial, tax-related and legal details is therefore required to ensure the success of a solar project.