Solar Finance

Capability Statement, Key Experts & References

Lighting the World

Every day, the sun sends 10,000 times more energy to the earth than the entire world population consumes per day. Sun radiation is renewable, freely available all over the world and the process of turning it into other forms of energy does not cause harmful emissions. Making use of the sun's energy is thus a very clean, cheap and sustainable way to satisfy the increasing global energy demand.

Transforming Sunshine into Electricity

The Solar Photovoltaic technology (PV) is the most prominent solar power technology. It is based on the photovoltaic effect which is the process of converting light into electricity.

The technology is not very complex neither does it require sophisticated technical knowledge for its installation and maintenance. PV systems are designed in sets of modules, this makes them easily scalable and therefore suitable to cater for different energy needs. Thus, they can serve limited energy consumption of private households as well large scale commercial energy consumers.

Nowadays, the PV technology has become very cost-efficient and a viable power supply solution for areas without connection to power grids.. Such solutions include single systems to be installed per household as well as so-called mini-grids consisting of a larger system to which a whole neighbourhood of businesses or residential houses are connected. In other areas where a power grid is available but prone to outages, PV systems can serve as a reliable and cheap main or back-up power solution and therewith serve to reduce the dependency on the supply of fossil energy sources.

PV systems can easily be combined with conventional power generation systems, e.g. diesel generators. In such a hybridised system, solar power can significantly reduce the consumption and costs of diesel.

The output of PV systems directly depends on the availability of sun radiation or the storage thereof during the night or at cloudy weather conditions. As battery systems are expensive and require regular maintenance and replacement, they are a major cost driver. Integrating adequately sized and high-quality battery solutions into the PV system and ensuring adequate usage and maintenance thereof is a core factor for the system output.

Benefits of PV Systems

1: CO2 reduction
2: Reduced fuel dependency
3: Saving costs
4: Power supply in remote areas
5: Easily scalable technology
6: Easily combinable with other technologies
7: Short lead time to deply technology

Capability Statement in Solar Finance

In view of the growing need for electricity in developing economies and the correlated demand for simple power supply solutions, the need for financing such solutions is steadily increasing. In this context, banks, and MIFs are assessing options whether and how to introduce so-called Green Finance products to adequately serve their clients or attract new customers.

As a specialised advisory company with strong background in strategic and hands-on operational banking, LFS has strong expertise in the development and implementation of new financial products as well as portfolio and risk management. Our team can draw on that expertise when advising on a new green business strategy, conducting the design of new solar finance products or developing action plans for the entire product granting and recovery cycle. Our comprehensive understanding of banking operations and risks in developing economies is particularly useful for the assessment of PV system business cases which typically require large investments and thus longer financing terms in environments where businesses are prone to many kinds of external and internal risks, fluctuating cash flows and limited collateral.

LFS sees two major business cases for bank customers who want to invest into solar power solutions: “own consumption” and/or “produce to sell”. Both cases can be applicable to commercial businesses (B2B) and Individual clients (B2C).

On the business side, solar finance purposes are multi-fold. Typical examples are the installation of a smaller-scale PV system to power lights, refrigerators or entertainment systems in a sales shop or bar or larger PV systems to power the manufacturing processes in a factory, water pumps or irrigation systems in agricultural businesses or even the power supply of an independent power provider.

To adequately serve the different client segments and financing purposes, LFS recommends to further differentiate the financial products by delivery models. As such, in some cases a conventional term-loan with a large upfront investment and ownership will be the right option, in other cases leasing or rent-to-own will be a more adequate solution. For low-income households it may be the best option to go for the Pay as you go (PAYG) model in which the energy consumer pays according to his energy consumption. The different models are illustrated in the next section.