The ability of service and solution providers like us to be able to deliver this level of solution has caused several positive knock-on effects with wider market ramifications.
By Wessel Wessels, head of sales: alternative energy at NEC XON
Financial instruments have been created specifically for the market so people are no longer limited to liability cover, for example. They can now also get yield cover and others.
Yield cover is a game changer. Plant designs that promise a number of kilowatt hours per month but fail to deliver for whatever reason, such as inclement weather, see shortfalls covered. That’s huge. Theft and other factors also influence power delivery. Yield cover is typically charged at 1% of revenues so this really is a no-brainer.
The engineering phase of any energy project is probably the riskiest. In the past, people would get bogged down by trying to get the cheapest deal possible and a few people still do. But the market is maturing and many more customers, vendors and providers know they must weight the levelised cost of energy (LCOE) much more heavily because the LCOE is more important than price per watt.
People partner with reputable companies
We’ve made active gains in mitigating remaining risks around these projects with others in the industry. Establishing standards around operational asset maintenance is a key one. We have decades of experience applying the global industry standards around ICT and telco equipment across projects throughout Africa.
Their robust standards, best practices, proven methodologies and reliable frameworks are readily deployable procedures that we have transitioned to mature the sector.
It makes it easier to unlock financial debt vehicles in those regions because you’re dealing with a known entity.
It also means partners are dealing with an established business. People are comfortable partnering with reputable companies with a history of successful projects.
The challenges really begin to slip away when you combine those with commitments from governments, such as the Japanese government, to provide financing.
Banks have come on board in a big way. They realise that there’s a lot more opportunity in financing more than just the jockey. They have cottoned to the fact that the agreements between the union of suppliers, solution providers, and customer are key because there is a lot of value in their viability.