Investing in Solar Power Plants: Benefits and Financing Strategies

Sergiy Zinkevych , specialist in solar energy, COO of SUNSAY NRG.

The current energy system situation is pushing Ukrainian businesses to seek alternative energy sources to ensure uninterrupted operation. Solar power plants can be a viable solution. They not only help reduce electricity costs but also promote a company’s sustainable development.

Today, let's discuss the economic benefits, challenges, and future prospects of installing solar power plants (SPPs). We will also explore various financing options for such projects.

What are the economic benefits of SPPs for businesses?

In 2021, businesses in Ukraine began focusing on energy-efficient solutions such as solar power plants. Previously, electricity costs were significantly lower, and the payback period for SPPs was 6-7 years. After the increase in the cost of electricity on August 4, 2021, the payback period decreased to 5 years. Today, due to the further increase in the cost of electricity and the decrease in the cost of technology, the payback period is 2-3 years depending on the configuration. This is roughly three times shorter than before 2021.

The main economic advantage of SPPs is that the business does not pay an external supplier for part of its electricity consumption. In our latitudes, the best performance is that about 40% of the consumed resource can be sourced from solar energy. With a quick payback period, the business can recoup its investment in 2 years and then use the SPP for another 30 years without paying for the consumed and produced electricity.

Moreover, modern technological innovations further reduce the cost of SPPs. In 2021, it seemed that the technology had reached its minimum cost. However, it turned out that the price of raw materials, particularly silicon, also affects the reduction in solar panel prices. On one hand, technologies help produce more energy from 1 square meter of panels. On the other hand, improved production of components for manufacturing equipment also reduces the overall cost of SPPs. This means that businesses need fewer investments for such projects, and the payback period continues to shorten as electricity prices rise.

Stages, challenges, and risks of SPP projects

Building SPPs involves projects at the intersection of construction and electrical engineering solutions. One of the key stages is designing. It is crucial to correctly calculate and assess the energy efficiency of the system and its financial attractiveness for the business. Subsequent stages include constructing the plants following all norms and standards, which is essential for the equipment's operational lifespan, typically around 30 years.

SPPs are great because they are like an adult's construction set, allowing for incremental expansion. Businesses can develop a strategy for 5-10 years to increase the number of panels. This does not require additional financing for re-equipping or rebuilding the plant - new panels are simply added. Therefore, there are no significant challenges in building SPPs.

To minimize any risks associated with SPPs, it is crucial to adhere to general construction norms and standards, including fire safety. Ultimately, a solar plant string passes 1000 V, which is a substantial power that needs to be well-protected.

What are the financing options for SPPs?

Businesses are keen to grow with borrowed funds, often considering loans or leasing. A great opportunity is grant assistance, which means funds that do not need to be repaid. Grants can cover 30-70% of SPP project costs, although they involve long-term competitions that can delay the funding process by six months to a year.

International financing is available for enterprises that are improving and moving forward, especially in line with European Union standards. This includes sustainable development, environmental care, and involvement in combating climate change. These actions are vital for a democratic society. Businesses adhering to these principles have a good chance of receiving grant assistance from European countries. Additionally, they can enter the EU market, as their products meet European manufacturers' standards.

In Ukraine, companies looking to install SPPs can use the state program "Affordable Loans 5-7-9%". Some of our clients have used this program to fund their solar energy projects.

There are also programs that allow businesses to expand their energy-efficient solutions, such as net billing. This mechanism enables businesses to sell excess electricity produced to the grid, receive funds for it, and use those funds to pay for future electricity needs if necessary. This model is already operational in Ukraine.

The future of solar energy for business

The rising cost of electricity is driving businesses to actively implement and use solar power plants. Although the world has long chosen alternative energy sources — not just solar, but also wind, geothermal, and more. I am sure that this trend, rapidly developing in Europe, will develop even faster in Ukraine.

In time, Ukraine will adopt legislation that encourages businesses to switch to clean energy. Such norms already exist abroad. For example, in Berlin, there is a requirement for residential, commercial, and industrial buildings to use solar energy. The law mandates that 30% of the roof surface be allocated for solar panels. Without this, a building cannot be commissioned.

Currently, businesses need to understand that solar energy is a profitable investment that saves money. Additionally, sooner or later, the requirement to switch to alternative energy sources will be mandatory for everyone. So why not do it now, recoup the system within a few years, and then enjoy the produced energy without extra costs?