What 2015 Means for Cleantech Projects and Financing in 2016

Project financing availability will rise, while battery storage costs continue to come down, in 2016, according to Nick Blitterswyk, CEO of UGE International. And solar power will continue its rapid expansion around the globe, he adds.

Blitterswyk is in position to know, since his company develops distributed renewable energy projects, including solar and wind, for businesses and governments around the world. New York City-based UGE has a current focus on five markets: the northeastern U.S., Canada, Panama and the Philippines and China. UGE is also developing solar-plus-storage projects in the U.S., Dominica, Jordan and the Philippines.

In the northeast, the company won a grant through RISE:NYC to install microgrids throughout New York City, to help power relief efforts and resiliency for businesses after Hurricane Sandy. Each NYC microgrid project is valued at about $300K, says Blitterswyk. UGE has partnered with Alpha Energy to scale microgrids and recently launched a new service, UGE onDEMAND, which combines Samsung’s lithium-ion battery technology, Princeton Power Systems’ energy management technology, and UGE’s project financing and system design expertise.

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UGE is also lining up financing for new microgrid projects and is having conversations with investors, Blitterswyk says.

In China, UGE has teamed up with Blue Sky Energy Efficiency, an Asia-focused financier, to use PPA financing to develop “no money down” distributed solar projects for businesses. And in September, the company partnered with Jones Lang LaSalle to bring distributed solar systems to many of the thousands of JLL-managed corporate and industrial sites across China.

Fundraising opportunities

Last March UGE raised $1.5 million in an equity private placement, following that with a small equity raise in September.  The new capital will be used to fund deployment of projects already signed with customers as well as for general working capital purposes, according to the company.

UGE also received $1.8 million in debt financing from the Bank of China to acquire Endura Energy Project Corp, a Toronto-based renewable energy company.  UGE intends to use Endura’s experience to expand its capabilities in China and the Philippines, as well as growing its focus in Canada.

The company has project financing lined up for projects in its key markets, but “are always on the lookout for cheaper sources of capital,” Blitterswyk says. And UGE is being strategic in terms of raising capital to fuel its growth, according to Blitterswyk, who says there may be additional investment opportunities available in the future.

We asked Blitterswyk to share his thoughts on the key trends to watch for across the industry in 2016. Here’s what he had to say.

2015: a monumental year

It’s no exaggeration to say that 2015 was a monumental year for cleantech. From the historic agreement signed at COP21 to the much-celebrated tax credit extensions for wind and solar in the U.S., the industry seemed to undergo a total evolution last year. Here’s a look at the trends we watched over the last 12 months — and what those trends mean for 2016.

Rapid price declines for energy storage  

In 2015, energy storage emerged and started to drive the conversation about what renewable energy can do. Tesla’s debut of its Powerwall home energy product helped bring solar-plus-storage into the national spotlight. In the commercial sector, we launched UGE onDEMAND, our full-service solution that allows customers to save money on their energy bills with no money down, while maximizing their use of solar and increasing resiliency during outages.

According to GTM Research’s Energy Storage Monitor, the U.S. deployed 108 megawatts of storage in the first nine months of 2015. The report estimated that the number may have hit 192 megawatts by year-end, which would be nearly triple the amount deployed in 2014. Worldwide, those numbers could be close to half a gigawatt installed during 2015 alone.

It seems clear that storage will remain niche this year in terms of market penetration. However, as economies of scale drive down costs quickly, we will start seeing the users change from early adopters and grant-based projects to more mainstream consumers, especially as project economics begin to stand on their own by the end of the year.

As rate structures change in response to an evolving grid, solar and storage become ever more compelling. Utilities move slow, yet the pace of change in the industry is completely unprecedented. Expect more pushback from utilities in 2016 as they continue to be squeezed on all sides; meanwhile, distributed generation and storage will become ever more compelling, leading to more hints of ‘death spiral’ in the media.

Record growth for solar worldwide

Without a doubt, 2015 will go down as one of the most crucial years for the expansion of solar. In the USA, concerns over the Investment Tax Credit (ITC) cliff seemed to loom over the entire industry. Just in time for Christmas, we were gifted with a five year extension.

While overall the extension was hugely positive, it will lead to a decrease in installations from what had been projected for 2016. By removing the previous sense of urgency, we expect component prices to fall more quickly than projected, putting pain on suppliers.

The real story here is that 2017 and beyond will see rapidly increasing installation rates. We expect prices for solar panel prices, and for other components, to continue to decline, faster in fact than had been projected, as suppliers can no longer hold 2016 delivery dates over developers’ heads.

Though the U.S. market provides almost limitless upside, the rest of the world provides even greater opportunity, which is why we’re developing projects in places like China, the Philippines, Panama and Canada. The logic is this: right now solar is mainstream in five per cent of countries around the world. However, simply based on near-term economics, our expectation is that this will grow rapidly to 75 percent by 2020. These downstream businesses need to be built in these countries, so look for international companies such as UGE to enter new markets throughout 2016.

Project finance create compelling economics for investors and business owners alike

The global search for yield means more and more capital will flow towards sources of long term cash flow.  Renewable energy projects are attractive to investors because they create opportunities for predictable, long term, and relatively high yield cash flows. Bloomberg New Energy Finance predicts that the solar industry will see investments of close to $4 trillion by 2040.

Financing opens up the value of distributed solar for business owners around the world. In 2015 we introduced China’s first major commercial solar PPA offer, which we believe will crack open the rooftop solar market in that country. For this year, we expect adoption of these models to scale quickly.

 

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