The focus of photovoltaic financing in emerging markets is gradually shifting

The growing popularity of solar investment means that financing issues for photovoltaic developers in emerging markets are increasingly focused on the creditworthiness of the off-takers, rather than the project.

For example, in West Africa and other regions, “there are many offtakers with poor credit,” said Ragnar Gerig, head of energy for Africa and Asia at the German Investment and Development Corporation. “The development environment facing the solar industry is becoming more and more challenging.”

Ragnar pointed out that although financing for many emerging market projects is still difficult, "at present, solar energy is the easiest energy to invest in in any country. In the past 10 years, the cost of solar power generation has dropped by nearly 90%. The equipment is also quite competitive.

Complicating the risk assessment of emerging markets is that in many countries, including major markets such as South Africa, the electricity prices in power purchase agreements are often paid in local currencies, which may expose project owners to currency fluctuation risks.

While taking these factors into account, local lenders in emerging markets are increasingly accepting solar energy, and developers are paying more and more attention to more attractive project financing methods, successfully attracting important new investments to the market.

According to the REN21 "2015 Global Renewable Energy Status Report", in fact, "solar power generation was the industry that received the most financing in 2014, accounting for 55% ($1.496 trillion) of all new investment in renewable energy and fuel power generation. "

The popularity of solar energy has been supported by many initiatives. For example, the International Renewable Energy Agency (IRENA) plans to cooperate with local financial institutions in Africa and India to improve the photovoltaic investment environment.

IRENA Knowledge, Policy and Finance Director HenningWuester said, "In addition to strengthening due diligence and project preparation, developers can also cooperate with public financial institutions through on-lending or joint loan programs to reduce perceived risks."

Developers can also take another measure to reduce the risk, that is, the use of practice-tested technology. If the technology is reliable, it will help to consolidate the business, LuxResearch solar analyst Mark Barineaux said.

In recent years, the "yieldco" financing model without potential risks and cumbersome procedures has become more and more popular. For example, the listing of the "Terra Form Power yieldco" platform on NASDAQ brought its parent company SunEdison a net income of US$533 million.

This financing model is suitable for development projects where local banks have not dared to set foot in the region, or will become an important part of the financing of future renewable energy projects in emerging markets.

In short, the belief that investing in solar energy in an immature market is risky will quickly become obsolete, said Jigar Shah, founder of SunEdison and current Chairman of GenerateCapital.

On the contrary, considering project investment in certain emerging markets, Shah said, “The past 5 years have been rife with currency and political risks, so the real question is how to attract investment in the next 20 years, not solar energy itself.”