Insights from Large Scale Solar Southern Europe Conference 2023
solar development
July 25, 2023
Glint Solar’s key takeaways from the solar conference in Athens.
Grid capacity, energy crisis, risk mitigation, and price cannibalization
Glint Solar recently attended the Large Scale Solar Southern Europe (LSSSE) conference held in Athens 4-6 July 2023. Here is a summary of the key learnings that we want to share with you!
Grid capacity
Grid capacity constraints continue to be a meaningful problem for the solar industry and in many markets, the economics of solar are so attractive that any capacity the grid provider can make available quickly gets absorbed by solar projects submitted into the pipeline. We saw this most clearly in Greece and Bulgaria, where many solar developers are focusing on maturing the projects they already have established rather than prospecting for greenfield projects. There were signs of interesting markets that have favorable economics and grid capacity like Romania. Overall, this is a lesson for solar developers to pay attention to the ability of the grid to sustain the solar market over various time horizons.
A new stage of the energy crisis
When Russia invaded Ukraine the energy crisis took on a new shape and the economics for energy projects meaningfully changed as a result. Increased energy prices lead to a significant increase in demand for projects. Developers were able to easily find off-takers for their projects and the economics of projects were positive most everywhere you looked.
Now the market has shifted. Off-takers for projects are not as common, the economics of projects have normalized, and people have to sharpen their pencils. Negotiations between developers and off-takers have a different point of leverage. During the energy crisis developers were in a better position to find favorable terms for the price of their projects. Now, off-takers are in a position to negotiate better terms for the acquisition of projects. Developers and off-takers alike mentioned that the effects of this shift are still being sorted out as the industry comes to terms with this new reality.
A license to connect is not enough
Developers trying to sell projects are increasingly being asked to help reduce the risk of the projects for the new owners. Multiple asset owners and late-stage developers said the risks of project failure far outweigh the benefit of an attractive price or moving quickly. The new standard is digital recording of all transactions with every local authority prior to an acquisition.
Solar has to contend with its success
According to Jenny Chase, Solar Analyst at BloombergNEF, the decreasing module prices in the solar industry do not necessarily translate to an increase in demand due to certain limitations. In an interview at Intersolar 2023, she highlighted the challenges posed by grid connection and labor supply limits. Despite solar power becoming the cheapest form of energy in history, these constraints hinder the growth in demand. The increasing deployment of solar energy has resulted in price cannibalization, where solar projects in the same region compete and drive prices down, sometimes even to zero or negative levels. This phenomenon requires developers and asset owners to consider fluctuating capture prices as solar power becomes a larger portion of the energy mix.
To address prize cannibalization, many developers are exploring solutions such as incorporating batteries or hybridizing projects with wind energy. Even though co-located solar and wind may cannibalize each other's capture price at times, having a wider time window of when the project can generate revenue, plus getting to share development and O&M costs, is leading more developers to look into hybrid projects.
Summary
The LSSSE conference highlighted key insights for the solar industry. Grid capacity constraints persist, and developers should consider the sustainability of the grid. The energy crisis has shifted dynamics, with off-takers having more leverage in negotiations. Risk mitigation is crucial, with the demand for digital records increasing. Solar's success has led to price cannibalization, and developers are exploring solutions like hybrid projects. Adapting to these factors will be critical to the continued growth and success of the solar industry.
All in all, the event was very exciting and informative. And since we were there, we didn't want to miss the opportunity to share a snapshot of the Acropolis. Thanks to Solar Media for putting on such a great conference!
Evan