2015: la Cina si incorona regina del fotovoltaico

China is also the biggest market for solar installing a massive 10.5GW last year but it is still does not have the largest installation base for solar. That accolade still rests with Germany which had 36.8GW of installed solar capacity at the end of 2014as opposed to China with 29.6GW. This however will change following China’s National Energy Administration (NEA) announcement this week of their goal to install 17.8GW of solar this year. This would give China an installed base of 47.4GW making them solar king in every way.

And thanks to the growth in China this year global solar installations are likely to hit 55GW this year which will put it ahead of wind, coal, gas, oil and nuclear in terms of new power generation installations. Meanwhile back in Europe and the US companies like GE, Alstom and Siemens who have dominated power generation for a hundred year have still no clear strategy for solar. As to China they were right to focus on dominating solar. Not only is it good for the Chinese economy, it is good for the environment and thanks to solar millions of people across the world who do not have access to electricity will get it. As to Germany they may not dominate the solar industry anymore but they still have world class businesses such as SMA Solar, Wacker Chemie, Von Ardenne, and research institutes such as the Fraunhofer. And they have lots of zero marginal cost solar in their system which is driving huge changes and innovations in the power markets.

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Vendere l’efficienza energetica alla direzione aziendale

Often, industrial facility managers must convince upper management that an investment in system efficiency is worth making. The problem is that sometimes communicating this message can be more difficult than the actual engineering behind the concept. A corporate audience usually responds more readily to cash flow impacts than to a discussion of best efficiency points. By adopting a financial approach, the facility manager can relate system performance and efficiency to corporate goals and “win over” the senior management who make the final decision on capital investments in system upgrades.

In order to overcome the obstacles often encountered in the process of convincing upper management that a given investment in energy efficiency is worth making, you should consider the following points:

1. Gain some insight on/understand corporate priorities

Corporate officers are accountable to a chief executive, a board of directors, and an owner (or shareholders, if the firm is publicly held). These officers must generate revenue that exceeds the cost of owning and operating the facility. Plant equipment—including system components—are assets that must generate an economic return.

Plant capacity regularly has top priority, relate process improvement to capacity increase possibilities.

Finance officers seek investments that are most apt to demonstrate a favourable return on assets. When faced with multiple investment opportunities, these officers will favour options that lead to the largest and fastest returns.

This corporate attitude might lead industrial decision makers to conclude that system efficiency is a luxury that they cannot afford. This difference frequently exists between purchasing (equipment) and plant operation.

Many organisations consider only the initial purchase and installation costs of a system. However, plant designers and managers will benefit from evaluating the life-cycle cost of different solutions before installing major new equipment or carrying out a major overhaul. Plant operations can be a significant source of savings, especially because energy efficient equipment can minimise energy consumption and plant downtime. Make use of the concept of “total costs of ownership”.

It is also important for the company/corporate management to subscribe to Responsible Care/Sustainability principles; to be truly engaged in meeting environmental standards; and to be serious about OSHA aspects, among other things.

2. Measure the cash flow impact of the system efficiency

System efficiency and performance improvement projects can move to the top of the list of corporate priorities if proposals respond to corporate needs. Corporate challenges are many and varied, and this in turn opens up more opportunities to “sell” system efficiency as a solution. Opportunities for upgrading existing systems can be found in the inefficiencies that develop over time—such as changing system requirements, routine wear and tear, and poorly optimised controls. Once selections are made, the task becomes one of communicating the proposals in corporate (cash flow) language.

The first step is to identify and evaluate the total cash flow impact of a system efficiency measure. One proven way to do this is through a life-cycle cost analysis, as stated earlier. The result— a net gain or loss on balance—can be compared with other investment options or with the anticipated outcome of doing nothing.

The various aspects of plant efficiency interrelate. Energy efficiency , degree of automation, operational procedures, yield on raw material and waste production, process control, all these have their own and interrelated impact on plant efficiency. The best projects are those that combine these aspects.

3. Present the finances of system improvements

A simple (and widely used) measure of project economics is the payback period. This is the period of time required for a project to “break even” in terms of costs—the time needed for the net benefits of an investment to accrue to the point where they equal the cost of the initial outlay.

The simple payback equals the initial investment divided by the annual benefit. It is not an exact economic analysis as it doesn’t consider the time value of money, but is easy to use and understand. More sophisticated analyses take into account factors such as discount rates, tax impacts, and the cost of capital. One approach involves calculating the net present value of a project, which is defined in this equation:

Net present value = present worth of benefits – present worth of costs

Another commonly used calculation for determining the economic feasibility of a project is internal rate of return (IRR). This is defined as the discount rate that equates future net benefits (cash) to an initial investment outlay. This discount rate can be compared to the interest rate at which a corporation borrows capital.

Many companies set a threshold (or “hurdle”) rate for projects, which is the minimum required IRR needed for a project to be considered viable (if you don’t know this, it is important to find out before presenting your case for investment). Future benefits are discounted at the threshold rate, and the net present worth of the project must be positive in order for the project to be a “go”.

Besides the payback criteria, other arguments can be used to put a project up for approval, e.g. permit requirements, safety issues, product quality, etc.

4. Relate system efficiency to corporate priorities

Saving money in itself should be a strong incentive for implementing an energy efficiency project. Still, that may not be enough for some corporate decision makers. Some suggestions for interpreting the benefits of energy cost savings include the following:

  • A new source of permanent capital: regardless of how the investment is financed—borrowing, retained earnings, or third-party financing—the annual savings will be a continuing source of funds.
  • Added shareholder value: shareholder value is the product of two variables: annual earnings and the price-to-earnings (P/E) ratio. Multiplying the earnings increment (annual savings) by the P/E ratio yields the total new shareholder value attributable to the system efficiency improvement.
  • Improved reliability and capacity utilisation: the efforts required to achieve and maintain energy efficiency will largely contribute to operating efficiency. By improving system performance, the facility manager can improve the reliability of plant operations.
  • Improvement in the bottom line: energy savings are cost reductions and thus improve the operating profits of the company.

5. Approach

A proposal for a system improvement project can be made attractive to corporate decision makers if the facility manager does the following:

  • Identifies opportunities for improving system efficiency
  • Determines the life-cycle cost of attaining each option and which external requirement will benefit from the action
  • Identifies the option(s) with the greatest net benefits or prioritise the options
  • Collaborates with financial staff to identify current corporate goals
  • Generates a proposal that demonstrates how the energy efficiency benefits will directly respond to current corporate needs
  • It will also work the other way around : from the opportunities in the process on one side and the various demands on the other plant manager can choose beforehand which projects they should start giving the available staff and money

Il Sole ha già vinto (lo dice Deutsche Bank)

Deutsche Bank says solar market is massive, will generate $5 trillion in revenue by 2030. It describes solar plus storage as next the killer app, and says even in India there will be 25% solar by 2022.

india_solar_1

Deutsche Bank has produced another major report that suggests solar will become the dominant electricity source around the world as it beats conventional fuels, generates $5 trillion in revenue over the next 15 years, and displaces large amounts of fossil fuels.

In a detailed, 175-page report, the Deutsche analysts led by Vishal Shah say the market potential for solar is massive. Even now, with 130GW of solar installed, it accounts for just 1 per cent of the 6,000GW, or $2 trillion electricity market (that is an annual figure).

But by 2030, the solar market will increase 10-fold, as more than 100 million customers are added, and solar’s share of the electricity market jumps to 10 per cent. By 2050, it suggests, solar’s share will be 30 per cent of the market, and developing markets will see the greatest growth.

“Over the next 5-10 years, we expect new business models to generate a significant amount of economic and shareholder value,” the analysts write in the report. Within three years, the economics of solar will take over from policy drivers (subsidies),

Their predictions are underpinned by several observations. The first is that solar is at grid parity in more than half of all countries, and within two years will be at parity in around 80 per cent of countries. And at a cost of just 8c/kWh to 13c/kWh, it is up to 40 per cent below the retail price of electricity in many markets. In some countries, such as Australia, it is less than half the retail price.

The case for solar will be boosted by the emergence of cost-competitive storage, which Deutsche describes as the “next killer app” because it will overcome difficulties in either accessing the grid or net metering policies. “We believe reduction(a) in solar storage costs could act as a significant catalyst for global solar adoption, particularly in high electricity markets such as Europe,” it writes.

“As we look out over the next 5 years, we believe the industry is set to experience the final piece of cost reduction – customer acquisition costs for distributed generation are set to decline by more than half as customer awareness increases, soft costs come down and more supportive policies are announced.

“While the outlook for small scale distributed solar generation looks promising, we remain equally optimistic over the prospects of commercial and utility scale solar markets.

At utility scale, parity is also drawing near. Just four years ago, the ratio of coal-based wholesale electricity to solar electricity cost was 7:1. Now, says Deutsche Bank, this ratio is now less than 2:1 and it could likely approach 1:1 over the next 12-18 months. In some markets, it already is cheaper. And in India, that ratio could fall to 1:1 this year, with major ramifications for coal projects such as those in the Galilee Basin.

deutsche solar rise

“We believe utility-scale solar demand is set to accelerate in both the US and emerging markets due to a combination of supportive policies and ongoing solar electricity cost reduction. We remain particularly optimistic over growth prospects in China, India, Middle East, South Africa and South America.”

The Deutsche Bank report follows recent reports such as that by Agora Energiewende, which found that solar could fall below 2c/kWh by 2050. This week, the Abu Dhabi National Bank said that based on recent solar prices, even an oil price of $US10/barrel could not compete with the technology.

Gas needed a price of less than $5mmmbtu to compete, and that wasn’t happening anywhere. Last month, fossil fuel consultancy Wood McKenzie said solar farms were cheaper and displacing planned gas-fired generators in the US, despite the low cost of gas in that country.

Still, Deutsche Bank reported that while it is becoming increasingly clear that solar is now competitive with conventional electricity generation in many global markets, there is still some policy uncertainty that could impact investor sentiment and overall supply/demand fundamentals.

“That said, we believe the dependence on subsidies has decreased significantly compared to a few years ago and demand drivers are also increasingly more diverse as well as sustainable.

“We expect solar sector’s dependence on subsidies to gradually decrease over time, policy outlook to become more supportive and economics to take over politics over the next 3 years.”

Deutsche Bank said that despite the 30 per cent compound annual growth over the past 20 years, the solar industry is still roughly 1 per cent of the 6,000GW or $2 trillion electricity market.

“Over the next 20 years, we expect the electricity market to double to $US4 trillion and expect the solar industry to increase by a factor of 10. During this timeframe, the solar industry is expected to generate $5 trillion of cumulative revenue.

“By the year 2050, we expect global solar penetration rates to increase to 30%. We also see solar penetration rates increasing more rapidly in developing economies. India for example has recently announced targets to reach 100GW of solar capacity by 2022.”

If that occurred, solar would account for 25 per cent of total capacity in India. “We believe the opportunity would be even bigger if companies start adding services to the solar PV offering and venture into adjacent markets such as wind and hydro.”

Another two of the big markets are in the Middle East and central and south America. There, solar is already at grid parity in the wholesale market, And in areas where there is no grid, then solar is the obvious option.

“Even today, (with about) 20% of the world’s population does not have access to grid electricity,” it notes. “Due to declining costs and ability to deploy the technology without really developing the grid, we expect policy makers in developing countries to proactively promote solar .”