Webinar: Opportunities for captive solar in MENA

The webinar will start shortly….

Webinar: Opportunities for captive solar in MENA
In conjunction with

The webinar will start shortly….

 The format of the webinar
# Presentations Responsibility

1 Introduction - Captive solar and differences vis-à-vis utility scale solar Paul

2 Key markets in GCC and captive customer categories + installation models Synergy Consulting

3 Financial Analysis + EPC versus IPP debate Synergy Consulting

4 Regulatory environment for captive solar in key markets - UAE, KSA DLA Piper

5 Bankability + Key differences in risk matrix compared to utility scale DLA Piper

6 On ground development experience - Challenges + key considerations Yellow Door Energy

7 Case study of an executed project Yellow Door Energy

 The Q&A Feature – Remember to direct your
question at a speaker
# In your Q&A, please mention… For topic related to…

1 Synergy Consulting… Financial Advisory questions

2 DLA Piper… Legal questions

3 Yellow Door Energy… Project and Development questions

4 If you have a question for the whole panel… …They will answer at the end if possible.
 What is captive solar?
Captive solar includes:
1. On-site (or near site) applications
 What is captive solar?
Captive solar includes:
2. Off-site applications
 What is captive solar?
Captive solar can be:
1. Part of the central
grid

2. Distributed network
(ie microgrid or
offgrid)
 Benefits of captive solar
What’s the big deal?
• More Energy Efficient (vs utility scale where 30%
of electricity is lost in transmission system)
• More Space Efficient (especially in cities)
• Resilient to Grid Blackouts
• Employment Friendly
• More Government Efficient
• More Secondary Costs Efficient (new
transmission lines, large transformer station)
Webinar: Opportunities for captive solar in MENA
In conjunction with
Webinar on MENA Captive Solar
February 8, 2018

1
INTRODUCTION
CAPTIVE SOLAR – OVERVIEW AND KEY BENEFITS KEY CAPTIVE PROJECTS IN GCC
Captive solar refers to electricity generation for local use, compared to utility
scale which are installed with an objective of selling electricity to the grid
KUWAIT
On site generation, results in minimal transmission and distribution losses Ministry of
Electricity & Water
and Public Works
Buildings
Tariff certainty 1.0 MWp

UAE
Dubai Shams
Monetization of unutilized space Rooftop Solar, Dubai
22 MWp
KSA
Princess Noura Abu Dhabi Solar
University Rooftop, Abu Dhabi
~10 MWp 2.3 MWp
Savings through reduction in electricity bill
Saudi Aramco North KSA Global Solar
Park parking Lot Rooftop, Dubai
10.5 MWp 1.1 MWp
King Abdullah
Secures energy supply University of Science
and Technology Select projects with capacity greater than 1 MW p have been listed
2 MWp

Contributes to regional renewable energy target

Utility scale opportunities are far and few, compared to
captive solar opportunities which are abundant and
Reduces carbon footprint more palatable for medium sized solar developers

Sources : 2
1. https://www.thenational.ae/business/energy/dubai-makes-moves-to-install-solar-carports-1.664804); 2. https://www.solarelectricsupply.com/
INSTALLATION MODELS
COMMON INSTALLATION MODELS

1 Installations on rooftops of building

2 Installations on carparks

3 Ground – mounted Installations

Rooftop PV Carport PV Ground mount PV
installations installations installations

A BRIEF COMPARISON

ROOFTOP PV INSTALLATION CARPORT PV INSTALLATION GROUND MOUNTED INSTALLATION

• Inclined: 7–8 m2/kW

SPACE REQUIREMENT1 • 12 – 15m2/kW • 8 – 9m2/kW
• Flat: 8 –9 m2/kW

EPC COSTS • USD 0.9 – 1.2/ Wp • USD 1.2 – 1.5/ Wp • USD 0.7 – 1.0/ Wp

O&M • USD 18,000 – 21,000 /MWp • USD 20,000 – 24,000 /MWp • USD 12,000 – 15,000 /MWp

1Refers to the unobstructed and shadow free area

Though ground mounted installation seems most affordable, the opportunity cost of underlying land needs
to be considered for economic analysis

3
TECHNICAL CONFIGRATION: ON GRID AND OFF - GRID
ON – GRID CAPTIVE SOLAR OFF – GRID CAPTIVE SOLAR

Solar PV systems are installed in parallel with the utility grid, with provision They are closed loop off-grid PV systems that act as the primary source of
for bi-directional flow of electricity electricity, and operate alongside alternate generation sources like DG sets,
which fulfill load demand gap

Primary Secondary
Bidirectional Source Source
Meter

Solar Solar
Inverters Inverters
Panels Panels

Load Load
Captive Solar System Consumption Grid Supply Captive Solar System Consumption Alternate Supply

GOVERNMENT PUSH FOR ADOPTION OF GRID CONNECTED PV SYSTEMS
Regional governments have introduced regulations to allow installation of PV
systems alongside grid, to encourage local on-site generation
These regulation are aimed at promoting self generation and consumption
rather than sale to third parties
NEED FOR MINIMUM EXTERNAL APPROVALS
off – grid models are the easier to implement compared to on- grid models
primarily because they require minimal regulatory approvals
However due to lack of grid connection, they are technically more challenging,
thus some key considerations to be kept in mind for their implementation:

COUNTRY REGULATION FOR GRID CONNECTION

Availability of hourly load consumption data for a year
Dubai  DUBAI SHAMS for net metering

Abu Dhabi  Draft regulations for net metering

Minimization of curtailment losses while capacity sizing
KSA  Net metering regulations to be in force from July 1, 2018

Oman  Preliminary guidelines on net metering

Interconnection and integration with existing supply
Jordan  Wheeling regulations in force

4
 IMPLEMENTATION: CAPEX AND OPEX MODELS
CAPEX MODEL or EPC MODEL OPEX MODEL or IPP MODEL
Offtaker’s responsibility to develop, finance, construct and operate the plant. A third party developer develops, finances, constructs and operates the plant
EPC and O&M activities are typically tendered, but owner retains residual risks under a long term PPA executed with the offtaker

Project Developer Lenders

EPC Contractor KEY FEATURES Equity Debt KEY FEATURES

Financing
Agreements
EPC Contract Residual risk lies with owner
No residual risks
PPA Owner
Financing Owner SPV
Simpler to Implement
No upfront financing
O&M Contract
EPC Contract O&M Contract
Cheaper to Implement
O&M Contractor Direct Agreement
Optimized Configuration
EPC Contractor O&M Contractor

DEVELOPMENT AND CONSTRUCTION TYPICALLY TAKES 14 - 16 MONTHS PROJECT DEVELOPMENT AND CONSTRUCTION TYPICALLY TAKES 18 TO 20 MONTHS

Project Feasibility Release of RfP Selection of Signing of Project Project Feasibility Release of RfP Selection of Signing of Project PCOD
preferred bidder Agreements and Structuring preferred bidder Agreements

Release of EoI Bid Submission PCOD Release of EoI Bid Submission Financial Close

5
OFFTAKER DILEMA - CAPEX OR OPEX PROCUREMENT

PROJECT SIZE
High development costs associated with an OPEX model makes tariff for a small solar project unattractive,
1 thus CAPEX model is preferred for projects smaller than 10 MW

CAPEX VERSUS OPEX PREFERENCE

2 CAPEX model requires offtaker to finance the construction upfront compared to OPEX model,
where a third party developer finances it and in turn collects monthly payments from offtaker

RISK AVERSION
3
It is recommended for offtakers with limited in- house solar experience to opt for OPEX model, as it
allows financing, construction and operation risks for entire project term to be passed on to an
experienced third party developer

4 FOCUS ON CORE BUSINESS

Offtakers which are not in the core business of energy generation, it is recommended to outsource the solar project
construction and operation to an experienced third party developer under an OPEX model

6
 CAPTIVE SOLAR TARIFF VERSUS GRID TARIFF

Dubai Abu Dhabi KSA

58% 46% 40%

39% 23%
COMMERCIAL 12%

9%
-16%

-33%

58% 46% 39%

INDUSTRIAL 33% 39%
14% 28%
2% 0%
-28%
-46%

LEGEND Ground Mounted Rooftop Car Ports

x%
Above mapping is not to scale

% indicates the tariff discount for captive solar compared to existing grid tariff
7
1Highest tariff slab has been considered for commercial and industrial users
 CAPTIVE SOLAR PRESENTS AN AFFORDABLE SOLUTION FOR COMMERCIAL AND
INDUSTRIAL CONSUMERS
SUMMARY OF TARIFF ANALYSIS

Customers Possible Configuration Indicative Size Dubai Abu Dhabi KSA

• Medium size
Commercial • Rooftop, Carport 12.1 5.4 8.0
• Up to 10 – 20 MWp

• Large size
Industrial • All configurations 12.1 7.4 4.8
• In excess of 5MWp
LEGEND
• Small to medium size Attractive for all configurations
Government • Rooftop, Carport - 8.0 8.5
• Up to 1 – 2 MWp
Attractive for only ground mounted captive
• Small size
Residential • Rooftop 8.0 7.3 4.8
• Up to 100KWp Not attractive for any captive solar configuration

1Highest tariff slab considered for commercial and industrial, while lowest considered for residential

PROBABLE OFFTAKERS AND INSTALLATION MODELS

Malls Rooftop + Carport Warehouses Rooftop

Office spaces Rooftop
Manufacturing Units All configurations
INDUSTRIAL
COMMERCIAL Airports All configurations
SEGMENT
SEGMENT Heavy industries Rooftop
Ports Ground mounted

Car showroom Rooftop Food industry incl. animal farms Rooftop + Ground Mounted

Schools and universities Rooftop

8
 OPPORTUNITIES FOR CAPTIVE SOLAR
IN MENA COUNTRIES

February 2018
Confidential

www.dlapiper.com Confidential February 2018 0

Contents

1. Global Experience
2. Regulatory Environment in UAE and KSA
3. Risk allocation
 How do captive solar transactions differ from
conventional projects?
 Region-specific risks

www.dlapiper.com Confidential February 2018 1

Global Experience
USA
 First significant corporate PPAs came out of the US, where Google
set a precedent in 2010 in buying the majority of the power
produced by a wind farm in Iowa
 Since then, other major US corporations have followed:
 Microsoft;
 Apple; and
 Walmart

UK and Europe
 Attraction of fixed power prices and the ability to improve their
carbon footprint attracted corporates to consider PPAs in UK and
Europe
 Acted for OX2 in respect of Google's first corporate PPA in
Europe and Scandinavia – given the Nordic region's shared
electricity market and grid system, Google could buy the output
of a wind farm in Sweden and consume the same amount of
power at its data centre in Finland
 Acted for Lloyds Bank in relation to an arrangement where the
Bank could purchase enough renewable power (from landfill
gas plants) to power 1700 branches for the next ten years
www.dlapiper.com Confidential February 2018 2
Global Experience
Asia Pacific
 Australia has national legislation, the Renewable Energy
Target, which requires that more than 20% of electricity
generation be provided through renewable sources by
2020
 Growing market in Asia – Apple announced that it has
entered into a corporate PPA for the supply of clean
energy for its Singapore headquarters
 In China, the National Energy Administration set a target
for 3% of China's total electricity consumption to be sold
through direct sales agreements

www.dlapiper.com Confidential February 2018 3

Global Experience
Middle East
 Traditionally significant barriers limited the roll-out of
renewable energy projects on a distributed basis
1. National electricity markets are typically structured
mainly made up of electricity markets where the offtaker
is government-owned around a vertically integrated
utility power company that owns a large fleet of power
plants
2. Electricity prices charged by national utility power
companies have been heavily subsidised and so little
incentive to look at captive deals. Prices being offered
by developers to corporate offtakers must be attractive
enough to encourage them to take the risk in investing
in a private renewable energy facility. Low market
prices also present a test to developers who will want to
achieve a certain level of profitability.
 However, the past few years has seen substantial
legislative development in order to encourage solar power
generation facilities. We have seen a greater focus on
renewables – real push - oil price has caused a focus on
diversification – Sakaka in KSA.

www.dlapiper.com Confidential February 2018 4

Regulations - UAE
Dubai
 Dubai Electricity and Water Authority (DEWA) created the "Shams
Dubai" solar programme at the end of 2014
 Aim of the programme is to encourage building owners to install PV
solar panels to generate electricity from solar power and to export
surplus power to the grid – goal to have solar panels on every roof
by 2030
 Regulations permit surplus power to be exported to the grid, with an
offset mechanism against a customer's future bill
 Electricity generation and consumption must be on the same site
(i.e. no "wheeling")
 DEWA has been actively promoting the initiative-reports that some
conditions are being relaxed
Abu Dhabi
 Regulation and Supervision Bureau (RSB) in Abu Dhabi has
announced intention to roll out regulations and published a guidance
document in 2017
 Similar offsetting mechanism to Dubai contemplated
 Last month reported that there are 44 rooftop PV solar systems in
Abu Dhabi and that total capacity of rooftop solar panels has
reached 6 MW – expected to increase substantially

www.dlapiper.com Confidential February 2018 5

KSA

 Small Photovoltaic Solar System Regulations introduced in

2017
 The regulations apply to installations of no more than one
MW capacity – the customer is able to export surplus
energy to the grid and a similar offset system to the Dubai
Shams Initiative
 No wheeling
 Regulations covering installation of up to five MW expected
to be introduced shortly

www.dlapiper.com Confidential February 2018 6

Risk Allocation
Risk Conventional Utility Project
Attracting funding • Tried and true precedents
• Largely settled risk allocation
• Large ticket projects
Counterparty Risk • Generally state-owned power
companies as Offtaker
Tenor 15 – 20 years
Change in Law/Political Risk allocated to party best able to
Force Majeure take it – generally, the Government
counterparty
www.dlapiper.com
Captive Solar Project
• Small size of deal
• Lack of precedent/higher transaction
time
• Focus on strength of corporate offtaker
• Concern that corporate might terminate
PPA if it finds a cheaper source of
electricity
• Parent Company Guarantees/Credit
Support
Generally 10 years or less
• Query who is in the best place to take
the risk
• Funders unlikely to support a "to be
agreed" solution
Confidential February 2018 7
Risk Allocation
Risk Conventional Utility Project
Electricity Output • Agreed parameters for supply
Existing Structural • Greenfield site
Defects • Size of deal encourages site
surveys
Site Risks • Greenfield site allocated for
construction of facility
Superior Interests in Land • Government land leased for
purposes of the project
www.dlapiper.com
Captive Solar Project
• Corporate offtaker will generally only
want to pay for what it needs
• Risk of under-supply
• Who takes benefit of surplus power?
• Who take the risks that the roof is
sufficiently robust?
• Neighboring properties
• What happens if neighbouring
construction hampers performance of
solar panels
• Restriction in any lease?
• Is the building mortgaged?
• What happens if underlying lease is
terminated or the property is sold?
Confidential February 2018 8
www.dlapiper.com Confidential February 2018 9
 WEBINAR:
Opportunities for
Captive Solar in
MENA Countries

February 8, 2018

1
1 Company
Profile

2 Challenges
& Solutions WEBINAR:
Opportunities for
Captive Solar in
MENA Countries
3 Case
Studies
February 8, 2018

2
About Yellow Door Energy
The market leader in the Middle East for solar leasing
solutions.

Solar Lease
Energy Consumption
Utility Bills
Greenhouse gas Emissions
Energy Savings
Contract

3
What is a Solar Lease?
Capex or Solar Lease: You can either make a big capital
investment to purchase and manage the solar plant
yourself, or lease the plant through a third party.

1 2 3 4 5
Design
Yellow Door Energy Assess Review & Operate
Procure Handover
Responsibilities Opportunity Sign Lease Maintain
Build

Customer Review & Pay Monthly Take

Responsibilities Sign Lease Utility Bill Ownership

4
Our Customers
The following companies recognize the importance of
energy efficiency and the sustainable energy transition.

5
Challenges and Potential Solutions
Captive solar provides many benefits to customers.
However, there are some challenges to be addressed.

CHALLENGES SOLUTIONS EXAMPLES

Policies and Net Metering; Shams Dubai;
Regulations Wheeling Wheeling in Jordan
Financial No Upfront Investment; YDE Funds Installation Costs;
Challenges Known Solar Tariff Agreed-upon Solar Tariff
Technical Hire Solar Experts with YDE’s Technical Team;
Challenges Relevant Experience Approved Contractors and Suppliers
Business Entrust to Third Party YDE’s Services
Focus

6
Case Study: The Specialty Hospital & Istiklal Mall

Customers:
The Specialty Hospital
Istiklal Mall
Amman, Jordan

Key Numbers:
+4 MWp wheeling system

Ground-mounted system

Large reduction in power cost

10-20 years of risk-free solar

7
Case Study: Unilever Middle East

Customer:
Unilever Middle East
Personal Care and Liquids Plant

Key Numbers:
1 MWp solar system

Ground-mount installation

1,632,806 kWh of clean energy

15 years of risk-free solar

816 tons of CO2 offset

8
 Case Study: AMI Middle East

Customer:
AMI Middle East
Jebel Ali Freezone, Dubai

Key Numbers:
615 kWp solar system

Rooftop installation

984,679 kWh of clean energy

25 years of risk-free solar

733 tons of CO2 offset

Photo credit: AMI

9
 Case Study: Al Nabooda Automobiles

Customer:
Al Nabooda Automobiles
Dubai Investments Park

Key Numbers:
6.2 MWp solar system

Rooftop installation on carpark and

office building

10,086 MWh of clean energy

20 years of risk-free solar

5,300 tons of CO2 offset

Image credit: ALEC Energy
10
Summary

1 Solar Power
& Benefits
2 Challenges
& Solutions
3 Solar Lease
& Benefits

11
Jeremy Crane
CEO and Co-Founder
Yellow Door Energy Thank You!
www.yellowdoorenergy.com

12
Click here to download the MENA New Energy
2018 Brochure to get full insights from + 60
speakers