SOS Solar Cities Presentation
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Transcript of SOS Solar Cities Presentation
© Sustainable Opportunity Solutions Ltd 2012 1
Solar Cities Scotland 2012 Conference
Business Case for
Solar PV Investment
Paul Adderley
15 June 2012
© Sustainable Opportunity Solutions Ltd 2012
Is it worth it?
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! Since March 1, 2012, system delivered: – 15,700 kWh – Income equals 100% of Electricity Bills – 8.5 TCO2e Carbon Saving
! 100% Loan Finance (low interest) ! Tax Benefits ! Better Staff Engagement ! Strengthens Reputation
© Sustainable Opportunity Solutions Ltd 2012
OUTLINE
! Case Study Background
! Business Case
! Integrated Due Diligence Approach
! System Performance (Energy, Carbon, Cash)
! Key Messages
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© Sustainable Opportunity Solutions Ltd 2012
Case Study Background
! Blue Chip Customers:
! MD’s Leadership ! Average Energy Spend: £7000 pa ! Low Carbon Reputation
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© Sustainable Opportunity Solutions Ltd 2012
Business Case for Solar PV (50kW)
! Additional revenue (FiTs) generation £11.5k pa
! RPI linked for 25 years (20 years from 1 Aug’12)
! Reduce exposure to energy price volatility
! Engage staff in “Tangible” low carbon project
! Easy access to 5% loan finance up to £100K
! Benefit of £25k Annual Investment Allowance 5
© Sustainable Opportunity Solutions Ltd 2012
Approach: Integrated Due Diligence
Technical
Supplier Financial & Carbon Returns
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Optimal Investment
© Sustainable Opportunity Solutions Ltd 2012
Technical
Initial Assessment Technology
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Panel Efficiency & System Size
Structural Considerations
© Sustainable Opportunity Solutions Ltd 2012
Supplier Selection: 3 Stage Process
1. MCS Suppliers/Installers -> Mandatory for FiTs 2. Short List:
– Seek Recommendations – Local Case Studies
– Financial Position (Companies House / Credit Check) – Telephone Interview
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© Sustainable Opportunity Solutions Ltd 2012
Supplier Selection
3. Tender List: - Customer Site Visits & Feedback - Review of Contractual Terms: “Ownership” - Rigourous Assessment of Assumptions - Benchmark to industry averages (EST)
Selection: Installer that remained committed, & managed risk 9
© Sustainable Opportunity Solutions Ltd 2012
De-Select Suppliers
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Flawed Assumptions - 90% proportion for Own Use - Incorrect Feed-in-Tariff Rates
- Optimistic System Yields
Lack of Transparency
© Sustainable Opportunity Solutions Ltd 2012
Financial: Investment Models
! Reflect Savings of Energy Efficiency Energy for Own Use (~60%) System Degradation (20%) Seasonality
! Impact of Loan on Weighted Cost of Capital
! Net Present Value – Discount Rates: Benchmark @ 10% , Project Specific @ 5%
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© Sustainable Opportunity Solutions Ltd 2012
! Tax: Capital Allowances – Solar PV ineligible for Enhanced Capital Allowances – Annual Investment Allowance (General P&M) – £25K at 100% Allowance in Year 1 – £5k Cash saving
! Value Added Tax – Must have export contract to recover VAT paid – £100k System = £20k “cash saving” in next return.
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© Sustainable Opportunity Solutions Ltd 2012
! Financing: Energy Saving Scotland Loan – Only for SMEs, landlords – 5% interest rate – Loan Up to £100,000 repayable over 8 years – 100% LTV – Solar PV Income covers 67% Repayments
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© Sustainable Opportunity Solutions Ltd 2012
Financial: Managing Uncertainty
At 4th Feb 2012 Option 1 Option 2 Energy Yield (kWh) 33,500 37,000 Carbon Saving (KG CO2e) 18,250 20,150 CAPEX £’000 98 111 Low FiTs: 15.2p (NPV @10%) 54 45 High FiTs: 32.9p (NPV @10%) 85 88 . Additional CAPEX Funds 0 11
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© Sustainable Opportunity Solutions Ltd 2012 15
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System Performance Since March 1, 2012
Generation: Expected 14,600kWh Actual 15,700kWh Export: Expected 8,700kWh Actual 6,500kWh Own Use: Estimated 60% Actual 59% Income Up 15%
© Sustainable Opportunity Solutions Ltd 2012
Key Messages for Business
✓ Optimise ROI: Avoid >
Efficiency > Renewables
✓ Uncertainty requires
robust Financial models
✓ Balanced Assessment of
Multiple Benefits
Key Messages for Installers
✓ Commitment Wins
✓ Realistic Assumptions &
Transparent Quotes
✓ No longer a “No-Brainer”
✓ Engage with Accountants
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© Sustainable Opportunity Solutions Ltd 2012
Thank you for your time
Paul Adderley Managing Director:
Tel: 0845 475 1275 / 07917 372573
Web: www.sos4business.uk.com
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