Is the investment in a solar park a business of the future? 

Solar energy is considered the new “gold rush”, and many are now trying to enter this field. Already, almost 3% of the total electricity generated in the US is solar, and an enormous percentage of 12.2% of the electricity in the EU came from solar panels in 2022.

The current solar energy market looks good globally and is estimated to reach approx. €205 billion by 2026. This represents a compound annual growth rate of over 20% compared to 2018. Solar energy is in demand in developed and developing countries around the world, with many governments subsidizing production and offering rebates for installing solar panels as a way to reduce the degree of environmental pollution.

In developing countries, incomplete infrastructure and insufficient electricity grids have led to a demand for solar energy to compensate for unreliable or non-existent electricity supply, especially in rural areas. An increase in the degree of awareness of climate change and gas prices in the developed world has contributed to a more conscientious consumption of energy, generating a continuous demand for renewable solar energy.

Solar energy is considered by many to be the cleanest and most abundant source of renewable energy available, and the biggest economic powers seem to have the biggest resources. Storage options are improving rapidly, making solar storage more efficient and cheaper than ever.

So, now is definitely a good time for solar energy, almost anywhere you are, but starting a company in this field will come with many obstacles. The first is common to all startups is the cost.

There are numerous approaches to solar business and each will come with its own cost. First of all, there are two main ways to generate solar energy: photovoltaic cells and concentrated solar energy. Both will have different customers and therefore completely different business models. We will focus on photovoltaic panels, this being the most common.

Solar energy producing companies can be from the smallest to very large companies, and the investment can vary according to the size of the company, from 10,000 EUR to 3 million EUR. The good news is that this type of business is suitable both for small businesses with limited funds and for the most ambitious with access to funds, for whom the sky is literally the limit. Plus, every year, the cost of solar equipment goes down, making it always a good time to get started.

Assuming the choice of a standard configuration, of average efficiency and reasonable costs of authorization and connection to the network, an investment in one MW of energy would be between 800,000 EURO and 1,000,000 EURO with approx. 45-50% of costs directed towards the purchase of photovoltaic modules and inverters, support structure, cables, etc.

But there are other costs that you must consider before entering this market. Costs related to permits, financing, solar installation, and indirect costs such as customer acquisition costs, which can be significant in the industry. All these costs affect both the amortization period of the investment and the sale price of the energy produced and can be very difficult to identify.

Fortunately, modern software improvements increase the power of marketing and lead generation and result in savings that can be passed on. Skilled human resources are also a growing resource that promises to contribute to these prospects in a similar way. As more industries become familiar with solar energy, the infrastructure adapts in turn.

The first thing you need to do is a business plan. You need to know why you are going into it, how much work it will take and what your approach will be. The business model will affect the rest of the steps in implementing the business idea, so keep this in mind before you start and be ready to modify or change it depending on what you discover during the analysis. Then follow these steps:

1. Build a business plan

This document will be your guide and will record all the key information you will need to know how to run your business. A good business plan must include information about the market and existing regulations, the main competitors, suppliers, customers, necessary expenses and expected income, the profitability threshold, etc.

In building the business plan, both financial and technical experts are needed to determine the potential of the land on which the park will be located.

For example, depending on the typology of the terrain (flat/sloped), positioning, proximity to the network, type of panels installed, etc., a land of approximately 1-1.4 ha is required to install a MW. Also, in order to reduce the number of approvals and authorizations required for the authorization of the park, it is recommended that the land be located in the inner city or outside the city with a low level of soil fertility. Otherwise, it might be necessary to draw up a PUZ and a pedological study, or, in certain situations, the investment could not be made on the respective land.

2. Register the company or enter the CAEN code

After drawing up the business plan, you should know exactly what your entity should look like and how it will go forward, and this should give you answers to the question of how to register it properly. If this already exists, you may only need the authorization of the necessary CAEN code, respectively Electricity Production – 3511.

3. Look for financing

If you need more money to get started, now is a good time to look for it. There are many sources to choose from – the first of these should be the non-reimbursable funds provided by the state, as you don’t have to pay them back. But the banks also started showing increased interest and offering better and better conditions for the companies active in the field of renewable energy. Once again, a well-developed and realistic business plan will be necessary to be able to obtain financing both from non-reimbursable funds and from financial institutions.

The approach you choose will depend on what you are willing to sacrifice, and this choice essentially boils down to financial risk or company direction.

4. Start the business

Once the necessary funds are secured and you have a well-established plan (suppliers, equipment, human resources, etc.), you can start the investment. This stage can be daunting or exciting, but it is a necessary step and the point where your business becomes a reality. The rest depends on you and on the success of the marketing strategy you outlined in the business plan.

Dazz Management Consulting offers assistance in the field of solar energy. Our consultants can help you both with the development of the business plan and in the process of obtaining project financing. Also, through our collaborators, we offer technical assistance, both for the evaluation of the potential of the land, the optimal technical solution, the technical approval for connection, etc.

For more information you can contact us here…