Finance

What’s behind technology diversification in solar PV


24 July 2015 by Jason Deign, Solarplaza

A number of factors are driving renewable energy companies to look beyond their core technology competencies.


Diversify

Companies such as SunEdison and Gamesa are leading a growing trend for diversification in renewable energy, in a bid to tap into new revenue streams. Both businesses have initiated forays into new technology areas in the last year.

Most spectacular has been SunEdison’s move into the wind business.

The US solar giant, with interests spanning manufacturing, project development and asset management, entered the wind business with a bang in November last year when its yieldco subsidiary TerraForm Power bought First Wind.  

The USD$2.4 billion purchase, which closed in January, gave SunEdison a 500 MW wind portfolio and made it the largest renewable energy developer on the planet.

In March, the company took another step towards technology diversification with the purchase of Solar Grid Storage, a grid-scale battery storage business.

The company expects to realise significant synergies and opportunities for growth by integrating energy storage into its global finance, project development and asset ownership platform,”

said SunEdison in a press release.

Since then SunEdison has continued to pursue new opportunities outside solar. In June, for example, it snapped up Continuum Wind Energy, a Singapore-based wind power developer with 242 MW of existing plants and a pipeline of more than 1 GW.

In the meantime, however, the Spanish turbine maker Gamesa has been moving into the solar business. This July it confirmed plans for 10 MW of solar development in India.

“Gamesa's business plan contemplates analysis of businesses that complement its traditional business, such as solar power and off-grid, with the idea of exploring these synergistic markets to add value from 2018,” said the company in a press statement.

It is not the first wind company to step into the solar market.

Pattern Development, the project development arm of Californian wind asset company Pattern Energy, last year announced the creation of a 104 MW PV plant, Conejo Solar, in Chile’s Atacama Desert. It is not known whether the project achieved financial close.

Meanwhile, utilities and independent power producers have long sought to build diversified project portfolios.

One example is Tata Power, which holds almost 1.4 GW of renewable energy assets including solar, hydro, wind, geo-thermal and waste-to-energy plants. In most cases, such moves are all part of sustaining business growth, according to experts.

“SunEdison is proving to be a fantastic money raising and making machine,” said Guy Auger, chief executive of the renewable energy asset management company Greensolver. “You cannot do that just with solar. There are not that many large solar projects.

“Eventually you will see them moving into things like offshore wind. They are so successful at making money that they need to spend it somewhere.”

In Gamesa’s case, he said: “They are not only an original equipment manufacturer but also a project developer, since the best way to feed a turbine market is to build the projects yourself. A lot of investors are in solar, too, so it’s a natural step.”

Haresh Patel, chief executive of the solar energy investment platform Mercatus, commented: “Solar and wind-focused companies are diversifying their holdings while utilities are reorganising around renewable and distributed generation technologies as well.

Diversifying helps mitigate technology-specific risks, particularly those related to government policy. In the US, in particular, competition amongst solar companies is driving diversification as it becomes harder to access high-return projects if limited to a single technology.”