PV Talk: Kaveh Ertefai, chief executive, Activ Solar

Saudi Arabia is about to open bidding for solar under its KA CARE programme. Will you be taking part?
We’re eyeing that; it’s going to be very competitive. But we’re also eyeing opportunities outside of the bid, and these are basically utility-scale hybrid solutions that may reduce electricity bills for users of electricity like corporates, manufacturers and others.

How do you try to give yourself the edge over your competition?
We try to cover the full chain: we like to play a role as developer; we typically manage the EPC process and we’re also able to provide O&M services. But the main area where we really differentiate ourselves is the financial structuring and sourcing of finance for projects. Unlike our competitors we have a strong in-house team of ex-bankers and financiers who are only really focused on coming up with new or innovative solutions to mobilise projects. It’s one of the key enablers for our larger scale projects.

How do you put together finance for a big project in a market where no one else has been?
The key is to understand the market and the investor base for that market. If you are playing a pioneer role it’s more difficult to get a traditional PV investor into a new country than to get a traditional country investor into PV. So we focus more on those investors that are comfortable with the country risk and environment and then try to sell the whole bankable PV story to them.

How much do you work with development banks?
Development banks play a major role in emerging markets, but we haven’t worked with them much – simply because it takes a very long time to get them on board. They’re quasi-sovereign organisations so there’s a lot of bureaucracy you need to go through. But given the volatility we’ve seen in the pricing of solar systems, you don’t always have a lot of time to wait. So we may go for more private sources of funding, which typically come at a premium compared to development banks but allow you to close a project much earlier and you’d benefit from more production from the project – an additional year or two years.

How important is it to be light on your feet in securing projects?
The industry is getting increasingly competitive. You have over 5,000 companies in the EU who have less and less to do given the changes to the regulatory environment, and they’re very actively looking at opportunities outside of their home market. So it’s important to be fast in order to grab opportunities and benefit as a first mover.

With more European companies looking abroad, are you in a more advantageous position because you’ve always had that international focus?
A lot of the European EPCs are going through difficult times right now, because they have been overexposed to their traditional PV markets. But those that have taken steps towards internationalisation, towards emerging solar markets, are doing very similar things to us – trying to extend their successes in their home markets into new markets.

The more established ones have a lot of technical expertise they can bring to the table. The way we differentiate ourselves is that within our segment of utility-scale there are only a handful of players who have the experience we have. We’ve built two of the largest PV power stations in the world over the past couple of years [the 105MW Perova and 83MW Ohotnikovo power stations in Ukraine]. Increasingly the bigger projects in new markets are being tendered out through competitive processes. So track record and experience plays a huge part in winning that business.

Do you work with a core group of suppliers for your projects?
We’re agnostic about suppliers. But we do have a core – for the past couple of years we’ve relied heavily on modules from five to six names for the majority of our projects, and for inverters on a smaller number of suppliers. I’d prefer not to name them. But in terms of module supply, they’re mainly Asians – Chinese and Korean – and then the rest of our procurement is primarily European.

Will the EU-China tariff row have any knock on effect for you as an operator outside that space?
There isn’t a huge effect on us, because we can work with any supplier. But my view is that it's not really a good thing. I’m more in favour of open, free-market competition. If we want to see the industry mature and grow up we need this competition to take place and to allow for casualties to occur and salvation to take place in order to move up that learning curve towards economic viability.

Do you see your model changing to adapt to new markets, for example in Africa, where off-grid is said to be a big new opportunity for solar?
We do. We see utility scale as our entry point into markets. And then that market position could evolve in different directions – smaller utility scale for commercial applications, and of course off-grid applications are very attractive. Currently, where there is demand for off grid energy the economics are really attractive, but the cost of acquiring customers is very high, and the cost of execution is very high. The technology still needs a bit of work, and a lot of the demand is in markets where players are just not there or the infrastructure and logistics just aren’t developed. These are important considerations.