Sparx Group President: Renewable Power Sources Will Become Very Valuable After FIT (2)

2018/04/21 15:33
Kenji Kaneko, Nikkei BP Intelligence Group, CleanTech Institute
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Continued from Sparx Group President: Renewable Power Sources Will Become Very Valuable After FIT (1)

Similar to selling cabbage salads to retailers

Q: Is the feasibility of the business ensured without the currently incorporated long-term and fixed purchase prices?

Abe: It is estimated that the sale price of solar power for business use under the FIT scheme will drop to 18 yen/kWh in fiscal 2018, but we think there are still many locations where business feasibility is ensured at this sale price because the system costs and design/construction costs have been decreasing. Meanwhile, the electrical charge for residential use is 20 yen/kWh and the unit price of electricity stored in dry batteries is higher than the price by one to two digits.

If the power generated by renewable energies is sold directly to consumers by conversion to the "B to C" business, without wholesaling the power to power companies, we will be able to make a sufficient profit at the current power generation cost. It is similar to selling cabbage salads to convenience stores at higher prices instead of selling cabbages to the wholesale market.

When we have 200 sites, next-generation business models like this will come into sight. The current business scale, which is approximately 200 billion yen (approx US$1.86 billion) with 25 sites, will expand to 2 trillion yen when the sites increase to 200. If they are incorporated into funds, many power consumers can invest in the projects.

Q: As for the 25 renewable energy power generation sites that you developed and are operating, did you have the vision in mind when you selected the locations?

Abe: I got ahead of myself and might have exaggerated the plan; it is actually impossible for small or medium-sized enterprises like Sparx to develop renewable energy sites strategically aiming for 200 sites from the start. We are now steadily developing power plants one by one and increasing the number. In developing each plant, we aim for a power plant that is high in quality and ensures a stable return to investors (Fig. 2).

Fig. 2: A mega solar power plant developed in Chiba Prefecture by the Sparx Group (source: Nikkei BP)

If we continue to steadily increase the sites one by one and the number reaches 100 or 200, an energy business different from the current business based on the FIT scheme will come into view.

Because the power industry is controlled in various systems by regulations, no one can map out a detailed view of the future business at present. However, I imagine that "renewable energy power plants scattered throughout various regions" will create great value; such a thought is perhaps because of my sense as an investor. This kind of expectation will be reflected in transactions of renewable energy power plants as an option after five to six years.