Real green energy delivered
directly to the consumer

by Dario Gallanti / partner Our New Energy

CORPORATE INTEREST IN GREEN SOLUTIONS COMES IN DIFFERENT SHAPES ALL WITH DIFFERENT LEVEL OF ADDITIONALITY. ONE WITH A STRONG LINK TO THE ENERGY TRANSITION IS THE LARGE PRIVATE-WIRE INSTALLATIONS – A FAST GROWING NICHE ALSO IN THE ITALIAN MARKET

While Italian permits for large solar and wind assets on agricultural land have been stalled for the last couple of years – lost in the country’s bureaucracy and local politics – corporate interest for sourcing green energy in the country has boomed, thus creating a unique situation in the energy sector. Among the on-site installations, rooftop solar assets up to 1 MW have traditionally seen the largest appetite from developers and investors in the Italian market.

In this asset class, the complexity derived from lack of economies of scale is usually more than compensated for by more attractive returns – secured through long term on-site PPAs (up to 20 years) by means of which the investor and the final consumer share the financial benefit of the asset and consumption co-location. Also, for Italian assets of this size, the 20-year two-way CfD subsidy scheme from GSE currently provides a competitive revenue stream for the excess grid-fed volumes – further enhancing the bankability and attractiveness of the initiatives.

There is more to it though. With Italy being one of Our New Energy’s core markets and given our broad portfolio of clients seeking PPAs for their assets we are seeing more and more solar assets of 10+ MW, either rooftop or ground mounted, benefitting from private wire access. Such initiatives not only carry the highest level of additionality for the corporate but also further increases the level of attractiveness of market parity: long term agreement carry a competitive price levels, on top of which come in this case the savings from the partial avoid- ance of grid fees on the volumes consumed through private wire.

Also, larger on-site initiatives, especially when ground-mounted on unused industrial land, meet strong local community support – with an even stronger impact for the corporate image. In some more innovative cases we are also seeing them directly coupled with storage or electrolyzers, further increasing the complexity as well as the potential benefits. Having been working on several of these opportunities over the past 24 months – our role being to structure the optimal commercial set-up to ensure maximum value creation – it is important to point out the complexity behind the structuring of this type of behind-the-meter solutions. Regardless of their size, private wire PPAs differ greatly from conventional off-site PPAs, due to the different uses of the energy – which is consumed both on-site and off-site.

As the larger size of the asset rarely results in high matching rates between physical production and physical consumption, this requires added contemplation by means of an additional layer of a financial PPA for volumes injected into the grid. In other words, the energy is not only physically exchanged between the investor and the corporate through the direct connection (e.g. during day hours) but the excess – physical injected in the grid – can also be virtually bought back by the same corporate in non-matching hours (e.g. at night).

The following natural step is the one of the “cross-sites PPA”, meaning that by taking advantage of the co-location of a single renewables asset with one consumption facility, the corporate can possibly extend such benefit of buying long term cheaper and truly green power to their other facilities across the country. From an energy system perspective, these initiatives are further pushing the distribut- ed generation paradigm while, contrarily to other conventional on-site set-ups, they are still profusely using the grid to make the best use of the energy produced in unmatching hours. With the system and grid fees components of the energy bills spiking over the last years and the growing corporate appetite for truly green products to achieve decarbonization, we are sure this trend has only just started.

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