Strategies for Overcoming Barriers to #SolarDevelopment
The market for solar power is growing at a rapid pace; yet #solardevelopment, as a business, lags in profitability. While on one hand, the falling prices of oil and gas are testing the competitive position of solar, high-interest rates are making it tougher to meet the cost of capital input in solar projects. However, on the upside, there are opportunities for profit and growth, if corporates are able to overcome two major challenges in #developingsolarpowersystems:
Addressing System Design and Construction Challenges
Designing the systems for solar is unfortunately still is cost-intensive process for #SMEs, entailing high labor and production components. Although the technology is evolving rapidly, the #solarsupplychain is still rather immature. Most of the #EPC (Engineering, Procurement, and Construction) companies in the #solar development sector are small and have limited solar specific capabilities.
The need of the hour is to #developsolarpowersystems that are based on prefabricated components. Although not really perfect, these components do meet the requirements of a wide range of sites and tend to integrate easily into the legacy system on the field. In order to speed up design prototyping and come up with estimates that are more accurate, you may however have to automate a few processes and go for #aerialsiteassessments.
The up-front assessments of the ground conditions need to be improvised so as to minimize reword for trenching or pile driving. The time taken to install #rooftop and large #groundmountedsystem can be considerable reduced by using #prefabricated off-the-shelf units. This might require overhauling your existing supply chains and coming up with innovative cost-saving ideas by collaborating closely with your construction partners.
With the industry scaling up and the number of solar projects increasing, it’s time for #solardevelopmentcompanies to pay close attention to the construction aspect.
Several #solardevelopmentcompanies tend to struggle to complete their projects on time and within the pre-specified budget. The cost overruns and delays associated with construction; end up damaging their capital management and profitability. Missing deadlines can also put projects at risk.
The solution lies in creating contracting strategies that can help standardize the process of execution. You should be able to accurately capture performance data and monitor the progress of the project on a regular basis. If you are a large player you will have to implement a few lean-construction techniques to decrease your labor costs and maximize your productivity.
It is important to bring all missing pieces of the jig saw puzzle together if you want to manage your #solardevelopmentcosts effectively. You will have to create and stick to a #costroadmap so that your projects fall well within the limits of a pre-specified budget. You need to set exact targets and develop and track an entire portfolio of improvement initiatives.
Managing your capital flows and strengthening your balance sheet
Even the most prudent of all #solardevelopmentcompanies find it difficult or affordable to quickly scale up. But it is important to understand that unless you get bigger in this market, it might be difficult to bolster your financial position. The solution lies in finding better ways of attracting long-term capital from the institutional investors. In order to do this, you will have to promise them a healthy yield at minimum level of risk. Not only will this make you capital efficient, it will also enable you to forge deeper strategies for growth.
If you want to improve your capital efficiency, you need to make sure every rupee that you deploy achieves the maximum financial impact. You will have to be very careful in choosing your customer segments, the geographies that you want to play in and the parts of your value chain you would like to operate in, so that your capital doesn’t get locked up for long durations. Looking for low-cost financing options such as trade credit and project debt can also prove effective when it comes to leveraging equity returns.
Managing your cash-to-cash cycle is crucial if you want to maintain your profit margins. You may have to closely monitor the expected inflows and outflows of your cash, without giving in to the temptation of pushing ahead your payment dates.
Varchasva is a solar company that consults companies in consistently overcoming these barriers to #solardevelopment. For us, it is all about helping our clients achieve their goals, irrespective of the complications involved.