Technical-economic efficiency, a question of the market

Technical-economic efficiency, a question of the market

Miguel Angel Hidalgo Gonzalez, Head of Solar Technical at EDP Renewables [Euronext: EDPR]

Miguel Angel Hidalgo Gonzalez, Head of Solar Technical at EDP Renewables [Euronext: EDPR]

The photovoltaic industry is characterized by continuous development. Photovoltaic solar energy, in particular, has been advancing at a dizzying pace for more than two decades, which forces us to be continuously updated. Countless technological options are made available on a daily basis, and these can either aid you in the fight to be more efficient or set you back entirely.

The global state of photovoltaic

Putting the market at the center of the discussion helps us to understand the current scenario in which the photovoltaic industry operates.

The solar photovoltaic market is fed by two gearwheels which are connected to each other. The smallest of these is the one that responds to the movements of the module industry. This industry strives to improve their products by increasing power and efficiency—unfortunately, not in the same proportion because efficiency does not increase as quickly. This decreases the number of modules to be installed by changing some of the physical and electrical aspects. Due to this, structure manufacturers look for solutions for the installation of the new modules with the new characteristics, while at the same time, inverter manufacturers examine their specifications to see if they should be updated or, on the contrary, if they can take the improvement. All of this information affects the price of the integrators who are trying to reduce the installation cost. We can expect this wheel to turn every four to six months.

The second wheel, the economic one, responds to the first wheel’s movements. The second wheel is responsible for the drop in price based on two fundamental factors. The first is the increase in production and consequential profit in scale to dissolve manufacturing costs. The second, which sustains the first, is the increase in demand driven by current environmental policies that support global targets for clean energy generation, causing more manufacturers to appear and compete with each other to position themselves in order to achieve reasonable market share. It is important to mention the paradigm shift in the business model.

This perfect storm produces news of record PPAs every year in the different solar energy auctions around the world. In Portugal in August 2020, we saw how the price of a PPA was improved again in an auction. The result was 0.0112 Euros per kWh.

“This fact forces companies to consider innovation as a necessity and not as an option.”

Innovation – contribution of value

For EDP Renewable, innovation is part of our strategy and it is a basic pillar of our vision as a company. For us, it is clear that in order to continue being a reference point in photovoltaic solar energy today, we have to live and breathe the culture of continuous change, constant improvement and the pursuit of excellence. This certainly plays a part in our success as a world leader in renewable energy.

Personally, I like to say that innovation seeks a future solution for a present problem. For a business, the only real motivation behind innovation is economic improvement, but what is economically improved by innovation in a solar photovoltaic plant? The answer is clear and can be divided into two aspects. The first is the decrease in CAPEX, which implies less investment per MW installed, and places less money at risk. The second leads to an increase in generation hours, which will result in a faster investment return, further increasing the financial return. We can achieve this by enhancing efficiency or improving O&M.

When it comes to putting together the technical solution puzzle with pieces manufactured by other market players, it is very important to stay close to the source. The wide spectrum of technological possibilities allows you to create clear and strategic premises to understand where the clear improvement options are, and who has the capacity to provide them to you and in which way. Therefore, proximity to the manufacturers is vital for EDP Renewables as it is important that they understand your problems and that we can count on their solutions so that the puzzle pieces fit together perfectly, starting with engineering.

To implement this philosophy on a daily basis, EDP Renewables has created an inter-departmental work team. They are responsible for making and transmitting the market information and initiatives across the different geographical platforms with the clear purpose of keeping all teams connected.

The value of the solution – each kWh adds up, every Euro counts

For an increasingly aggressive business with tight margins, it is essential to analyze the current situation carefully with as much effort as possible. This allows us to identify the weight of our technical and technological decisions and thus seek current innovations in order to minimize the uncertainties and maximize the certainties. In this way, we have a better chance of understanding where the value contribution is, to in turn identify and work on our key partnerships in order to be as competitive as possible. Every kWh adds up, every euro counts.

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