The installed price of solar PV systems has decreased by an incredible 70% over the past 5 years, leading many potential solar owners to question whether they should invest now or wait for further price decreases. The answer for potential beneficiaries of the Dutch SDE+ program is clear; there is no better time than now.
Install costs in solar are decreasing...
The increased price competitiveness has driven the solar industry to record installations in 2017 of a massive 80GW compared to 20GW in 2012. As a result, solar is now at grid parity in many parts of the world and we even see solar projects breaking ground in regions where there are additional taxes applied on solar as opposed to supporting subsidies. This is undoubtedly brilliant news, but it also gives rise to a common question asked by end customers; “If the price decreases so rapidly, why should I invest now? Isn’t it better for me to wait until solar is even cheaper and then invest?” There is sometimes strong merit in this argument and it can only be answered on a case by case situation per market.
“Value of SDE+ Payments decreases over 40% in 3 years”
... but so is the SDE+ subsidy.
For the Dutch market however, particularly the commercial SDE+ market, the answer is a resounding “DO NOT DELAY”. Potential owners should be absolutely utilising any SDE+ subsidy allocated or making the effort to apply during the current Autumn 2018 round due to close in October. Even considering the urgent need for everyone, individuals and businesses alike, to take action in reducing CO2 emissions to limit global warming, there is a purely economic decision to act now: acting now maximizes the lifetime returns of your solar system.
There are 4 primary factors that determine the financial performance of any solar system over a 15 year investment window. You can of course perform the same analysis over 20 or 30 years if desirable, but for the purpose of this article we take the 15 year subsidy period.
| SDE+term | SDE+rate | Self-consumption correction | Change from year 1 | Deadline |
|---|---|---|---|---|
| 2015 | € 0.096 | no | – | Signed contract within 1 year, commissioning within 3 years |
| Spring 2016 | € 0.084 | no | -12.5% | Commissioning within 3 years |
| Autumn 2016 | € 0.084 | no | -12.5% | Commissioning within 3 years |
| Spring 2017 | € 0.092 | no | -4.2 | Signed contract within 1 year, commissioning within 3 years |
| Autumn 2017 | € 0.084 | no | -12.5% | Commissioning within 1.5 years |
| Spring 2018 | € 0.062 | yes | – | Commissioning within 1.5 years |
| Autumn 2018 | € 0.056 | yes | -42.2% | Commissioning within 1.5 years |
*The SDE+ rates in this table assume the highest price brackets and standard correction rates as published by RVO. In the case of the 2018 subsidy, a self use percentage of 50% is taken into account. This number will differ between projects, but even with a theoretical self use of 0%, the maximum subsidy is lower than years before. We are looking at systems <1 MWp.
Why investments in solar should not be postponed.
These data demonstrate a compelling case to invest now! If you have a SDE+ subsidy already approved, the lost opportunity for letting this lapse in the hope of reapplying later when solar costs are lower is clearly a fallacy that is not going to turn out like you hope. Furthermore, with more parties stepping into solar, competition for SDE+ budget is getting harder, leading to smaller chances of getting your request for subsidy awarded.
Recent changes in the Chinese market have resulted in price reductions and further changes to the global supply-demand situation are possible in the coming months. We will soon cover these impacts on the European market, both negative and positive, following the final MIP decision and further clarity on tariffs in key markets like India, Turkey and the US. Even these product price decreases don’t compare with the opportunity cost of failing to act now.
Potential system owners who look at falling module prices and think waiting is the best option, can be convinced to act now by emphasizing three key points;
- Benefit and availability of SDE+ subsidy is decreasing at a faster rate.
- Improving global economics is already pushing interest rates higher. Increasing one of the major costs of any solar projects.
- We need climate action now.
If you have SDE+ customers who aren’t convinced or looking for something extra to convince them we are ready to help. Get in touch to offer a fully secured business case.