Rethinking transactionS
Unlock the Transactions door to achieve ‘Well below 2 cents’
Main players
The key to successfully accomplishing the mission:
SIMPLIFY AND ADAPT THE TRANSACTIONS
To succeed in achieving the renewable energy transition, the first step is to decrease radically the cost of renewable power (E), in particular solar power, to initiate the energy intelligence revolution (I).
While hard costs have provided most of this reduction so far and economies of scale are reaching their limits, efforts must now focus on the reduction of soft costs. This will require market standardisation and market innovations, based on the standardisation of processes and data.
Off-balance sheet
financing techniques
Off-balance sheet financing techniques are very sound and are necessary to reach scale. They imply, however, complex contractual schemes and arrangements to manage and allocate risks properly and to create trust between a large number of parties. They therefore entail high transaction costs which are detrimental and sometimes fatal to an operation.
Scaling solar power deployment requires the simplification and automatisation of these transactions.
Open Solar Contracts
WHAT WE DID
In 2016 TWI and the International Renewable Energy Agency (IRENA) joined forces and federated tier 1 international law firms, investment banks and industry associations to develop an entire suite of contractual templates, the Open Solar Contracts.
Open Solar Contracts aim to simplify transactions and set the basis of international contractual standards for on-grid solar power generation, in order to reduce transaction costs significantly and contribute to more efficient risk management at project level.
Digitalisation of the
transactional chain
Digitalisation can dramatically improve the efficiency of the market to deliver lower cost renewable power but will require newly-designed information flows.
The environment should provide at least the following seven functions:
1. Compliance
- Assists all candidates in accessing the ecosystem, including provision of technical assistance and templates (advisory services);
- Manages access and the ‘licence’ for all participants in the environment (including investors) on a permanent and 360 ‘Know Your Counterpart’ basis;
- Manages compliance of all processes with all applicable rules and requirements in the environment;
- Issues certificates of compliance from time to time
2. Demand
- Provides demand-side support, aggregation and management, project preparation
3. Guarantee
- Manages the process of de-risking the demand-side parties from first contact with de-risking providers to issuance of the de-risking instruments to the benefit of the lenders and all claims and counterclaims arising from the de-risking instruments
4. Contracting
- Manages energy producer/buyer contracting under any contracting process (public tender or other public supported schemes, corporate procurement …);
- Manages all key contractual relationships between the energy producer and its contractors based on standardised documentation and processes;
- Offers all participants an accelerated and cost-efficient alternative dispute resolution solution
5. Permitting
- Manages all permitting of the assets over their lifetime
6. Financing
- Provides all information on projects and assets for financial structuring, investing, asset and securities management
7. Data sharing
- Manages data related to the energy assets over their lifetime in a virtual data room and its publishing in various formats for the purpose of the various stakeholders, data control and management
WHAT WE DID
With the support of IBM and KPMG, TWI explored an end-to-end functional platform for this new form of market to interconnect more than a dozen types of users efficiently.
And you,
what would you do?
Next mission
Rethinking financing
The obvious challenge is to shift the affordable institutional trillions to the new energy system, starting with renewable power generation but followed closely by energy management and storage.
Rethinking leadership
Creating a systemic approach and developing collective solutions to set up a new market framework.
Rethinking uncertainty
Because uncertainty cannot be evaluated and priced, what we need is a leap of faith: the necessary strong commitment we need to make when everything is a blur, to federate all the stakeholders.
Rethinking communication
Sustainable energies are generally misunderstood and underestimated. A simple and federative narrative is necessary to change people’s perception and gather everyone around a common goal.
Rethinking Policy
Essentially decentralised and close to demand, the renewable energy system empowers people. It requires clear policies and symbolic political messages.
Rethinking regulation
Achieving a ‘well below 2 cts’ target can only happen if cash is available at the right price, in the right quantity, for the right tenure, in the right location.
Rethinking transactions
Scaling solar power deployment requires the simplification and automatisation of transactions. After having radically decreased the cost of renewable power, we need to focus on the reduction of soft costs.
Our final report
This 200 pages report provides a summary of nearly four years of work carried out by TWI to accelerate the transition to affordable, reliable, sustainable and modern energy for all, starting with solar power.
0 Comments