CLASS OF 2016
WORLD-GENERATION FEBRUARY/MARCH 2016
24
Andrew de Pass, CEO of Conergy
shares his perspectives on the renewable
energy market.
WHAT IS DIFFERENT ABOUTTHE RENEW-
ABLES MARKETTODAY COMPARED WITH
TWO YEARS AGO?
Andrew de Pass:
I come at this from
the perspective of a solar company. Two
years ago, oil prices were higher, so it was
not as difficult to make competitive bids to
supply electricity in certain countries. Of
course today we also have the whole yield co
craze whereby long-duration cash flows are
in vogue. This has the potential, with the
launch of vehicles like the SunEdison yield
co aimed at emerging markets, to give devel-
opers like Conergy more transparency and
visibility on take-out pricing in those markets.
So one change is the fossil fuel pricing and a
second is the attractiveness of the long-dura-
tion cash flows in the capital markets.
IS ACCESSTO CAPITAL NO LONGER AN
ISSUE FORTHIS INDUSTRY?
Andrew de Pass:
The cost of capital
and availability vary at different stages from
early-stage development, mid- to late-stage
development, during the construction cycle
from notice to proceed to the commercial
operation date, and then for operating
assets. The market for operating assets is
extremely competitive, and there is price
visibility and good availability of capital. In
certain markets, construction finance
remains a challenge. For example, as we
look to finance projects in new markets like
Turkey or Mexico or Southeast Asia, con-
struction finance is more challenging and
expensive. In the US, it is available for prop-
erly structured projects.
Late-stage development capital is avail-
able and the returns have definitely been
pushed down. For example, in the UK
where we developed, constructed and oper-
ate more than 200 megawatts in the last 12
months, we were buying later-stage devel-
opment rights for a cash-on-cash return of
1.25 to 1.5 times investment, and that has
now been pushed down to 1.1 times.
The returns are still very attractive in
early-stage projects where the dollars per
megawatt to develop are low in solar,
$25,000 to $50,000 maximum, and the
returns can be multiples. But you have to
work with a portfolio because you can lose
money in any one project. The point is it is
important to differentiate among stages of
development.
WHAT ARE YOUR GREATEST CHALLENGES
TODAY?
Andrew de Pass:
Conergy has a glob-
al footprint and so the challenges vary by
country. We operate in 15 countries. One of
our challenges in the developed markets is
they are moving away from utility-scale to
distributed generation including industrial
rooftop. We expect this trend to continue
over the next five years. Distributed gener-
ation is a different business than utility
scale because you have to acquire custom-
ers, you have challenges with credit assess-
ment, you have to scale up and the projects
are relatively small. The question is: How
are we going to make money consistently
in such markets?
We are too late in the US to tackle resi-
dential, but we are a leader in solar in many
other markets where residential is starting
to take hold, and the discussion amongst
senior management and the boards is: Do
we or don’t we do this? The projections say
that residential could be 30% of these mar-
kets and then you ask, “What is the busi-
ness, and how do we do it effectively?” It is
a customer acquisition business; it is not a
technology business. What can we learn
from the best practices in the US, and can
they apply in other markets? Some do, and
some don’t. So our challenge is, in addition
to the complexity of managing a global
solar downstream company, how do we
make money consistently in distributed
generation specifically with rooftop?
WHICH COUNTRIES ARE YOUTRYINGTO
MOVE TO DISTRIBUTED?
Andrew de Pass:
In the US, we are
focused on small-scale utility as well as com-
mercial rooftop. We think in the US market
you have to have financial innovation, so we
recently closed on the first commercial PACE
deal with tax equity with the project owned
by Conergy. In the UK, we launched a com-
mercial industrial product. In Germany, we
have rooftop partnerships with utilities like
RWE and local residential players.
We are focused on batteries. Conergy
has an R&D lab focused on storage in our
headquarters in Hamburg because we think
it is critical to integrate storage into our sys-
tem offering in the medium term. Our R&D
specialists in storage used to think it would
take four or five more years to become eco-
nomical; we see the trend accelerating to a
point where we now expect batteries with a
couple hours of storage to become economi-
cal in the next two years.
In Germany, solar kits are offered today
with storage. This makes sense in Germany
because there is no residential net metering.
We have pilot projects that are relatively
small for the use of lithium ion batteries for
small utility-scale solar projects.
DO YOUTHINK WE WILL SEE AN ABRUPT
SHIFT IN PUBLIC OPINION ON CARBON IN
THIS COUNTRY?
Andrew de Pass: I do. We have to
create a level playing field and simplify.
When you compare the US to other markets
from a regulatory and incentive standpoint,
this whole tax equity thing is a nightmare.
ITC and PTC: they are a nightmare for
developers and operators to understand.
ANDREW de PASS
CEO
Conergy
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