SunEdison is the world’s largest renewable energy development company, currently managing over five gigawatts of solar and wind assets worldwide. Under SunEdison’s Social Innovation business unit, the company seeks to bring renewable energy to the 1.3bn people in the world without access to electricity by solving the technical and financial equations, whilst understanding the social and cultural aspects. The business has two arms; the foundation, which is a strategic charity, and a for-profit rural electrification business. SunEdison recently announced a partnership with community power pioneers OMC Power in India, leveraging cell sites as anchor tenants.
TowerXchange: Please introduce SunEdison to our readers – where does your company fit into the telecoms infrastructure ecosystem?
Alakesh Chetia, President of Social Innovations, SunEdison:
As the world’s largest renewable energy development company, SunEdison is seeking to transform the way energy is generated, distributed and used.
SunEdison has a presence in 35 countries worldwide. We finance, install, own and operate solar and wind power plants, enabling us to provide predictably priced electricity to residential, commercial, government and utility customers.
SunEdison now manages over five gigawatts of solar and wind assets. Our development side of our business has grown at a compounded annual growth rate of 94% since 2009. Last year alone, we developed over 1 GW of projects and we anticipate the business will double this year.
In terms of strategy, we have had a shift in philosophy whereby we now retain a majority of the projects we develop versus selling them to third parties. With this shift, we primarily see ourselves as an energy company – developing and holding long term, low risk, high quality assets and selling energy. SunEdison has been part of the telecom infrastructure ecosystem for some time through our distributed generation and communication business, for example, we installed solar on MSC sites for Bharti Airtel in 2013, saving 26,000L of diesel per year. We are extending our scope of work to support telecom towers in off grid and under-electrified areas, reducing the cost of energy to operate these towers.
TowerXchange: Under what business model do you feel the RESCO proposition is most compelling?
Alakesh Chetia, President of Social Innovations, SunEdison:
SunEdison is the pioneer of the Power Purchase Agreement (PPA) business model for solar generated electricity. A PPA allows operators to sign a contract to buy electricity at a specified rate for a fixed period of time (at a saving versus what the operator is paying today). Once the PPA is signed, SunEdison will do the rest: build, design, and finance the systems at no upfront capital expenditure to the PPA counterparty. This model has provided a very compelling value proposition (savings plus no upfront expenditure) and has driven the growth of our renewable business.
TowerXchange: Please explain SunEdison’s unique financial model, why it was set up, and how you see current attitudes to investment in cleantech.
Alakesh Chetia, President of Social Innovations, SunEdison:
SunEdison’s success is illustrative of current positive attitudes to investment in cleantech. Having built 1,000s of MW, we’ve moved from an initial phase in which the customer had to invest in us, to figuring out our own way to raise project financing. To date, SunEdison has raised more than $10bn in capital to execute these projects.
Today, SunEdison is publicly listed on the New York Stock Exchange with a current market US$7bn + valuation. In addition, we control another publically traded company called TerraForm Power, which has a market capitalization of US$5.3bn. The structure divides our business into two distinct pieces. At the parent company, SunEdison, the focus is on the development of new renewable projects and providing ongoing asset servicing of those projects. TerraForm focuses on acquiring highly quality operating projects with long term contracted cashflow, which it passes along to its investors in the form of dividends. As an owner and sponsor of TerraForm, SunEdison receives a large portion of TerraForm’s dividends which allows us to reinvest and growth the business.
TowerXchange: How has the cost of clean energy come down relative to the cost of diesel for distributed energy networks such as cell sites and community power initiatives?
Alakesh Chetia, President of Social Innovations, SunEdison:
Even with the recent fall in oil prices (which I believe is a temporary blip), the cost of distributed solar generation in off grid, rural remote areas is almost always cheaper than diesel. The total cost of diesel power is a lot more than the cost of diesel burned in DGs – delivery costs, pilferage, equipment maintenance and replacement – the operating costs soon add up.
In the past three years the cost of solar energy has nearly halved. For example in large scale generation contexts, where we’re selling power to the grid at a kWh rate, we’ve seen a 40-50% drop in prices depending on local market conditions.
TowerXchange: Congratulations on your recently announced partnership with OMC Power to develop 5,000 rural projects across India, representing 250 MW of electricity. What is the vision behind this project? What are you seeking to achieve?
Alakesh Chetia, President of Social Innovations, SunEdison:
OMC Power has piloted a model which we like and which fits with our PPA business model for telecom towers combined with community power.
As with many community power initiatives, OMC Power’s pilots were built with equity, but to scale you need to bring in debt. SunEdison will use our project financing expertise to scale OMC Power’s model to 5,000+ power plants, reducing the cost of energy for off grid and under electrified towers and reducing the cost of energy to over 10mn Indians who live near these towers.
TowerXchange: I understand OMC Power’s business model uses a mobile phone tower as the “anchor tenant”. With over 70% of India’s mobile phone towers owned by independent tower companies rather than MNOs, how can solar energy be scaled for a business model that is predicated on the predictability of peak load at a site, whereas the demand for community power is notoriously difficult to predict?
Alakesh Chetia, President of Social Innovations, SunEdison:
SunEdison built our first rural mini grid in India in 2011. The plant has operated continuously since then, and we’ve built dozens more since, so we’ve learned tremendously. We understand the community side of these projects, we’re better able to anticipate their power needs, but that strategy is aided by the modularity of solar – we don’t have to be able to accurately predict peak load 10-15 years from now. When you build a mini grid, you can only have certainty about demand at a certain time – technology can give us the required flexibility.
TowerXchange: Quoting one of the towerco CEOs on TowerXchange’s advisory board “The problem is that there is a finite amount of GLA (Gross Leasable Area) at a site. A hybrid solar array already needs ~35sqm to supply a single tenant, add a second tenant and the space savings are minimal – you still need ~66sqm, 97sqm for a third.” How can solar power be made scalable and space-efficient so that towercos can add multiple tenants?
Alakesh Chetia, President of Social Innovations, SunEdison:
This comment seems to be predicated on the premise that the solar generating asset needs to fit inside the cell site compound, whereas SunEdison’s approach is to acquire land and build a plant in close proximity to maybe two towers within 500m to 1km. So we acquire our own land and we retain our independence – we’re not limited by the area the telcos or towercos have in their cell sites. Co-locating generation with the cell sites causes problem for RESCOs, and makes it difficult to provide community services.
TowerXchange: Please sum up SunEdison’s value proposition to towercos, telcos and to the community.
Alakesh Chetia, President of Social Innovations, SunEdison:
We have different value propositions for towerco/telcos and for the community.
For towercos and telcos, the primary benefit is economic – we provide energy at a lower cost than diesel at off grid or under-electrified sites (sites receiving less than three hours of usable electricity per day). Another benefit to towercos/telcos is that we help them meet their own sustainability quotas and targets. We are not only going to reduce costs but reduce the logistical headaches of diesel. Power is core for towercos and telcos, but it is not their core business. Power is SunEdison’s core business – we take away the complexity and offer reliable, cheaper power under Service Level Agreements (SLAs) guaranteeing 99.5% uptime or above – indeed our partnership with OMC Power has a 100% uptime operating history.
We can provide a cleaner source of energy at a lower cost than communities are spending on kerosene and diesel. In addition to the economic and health benefits, electrification helps with education, enabling children to study after dark, enabling entertainment, and powers small commercial endeavors
SunEdison’s value proposition for off grid and under electrified communities is focused on the replacement of kerosene and diesel generators to meet their electricity needs. Kerosene is not just expensive, but the smoke and solid pollutants can cause health problems. We can provide a cleaner source of energy at a lower cost than communities are spending on kerosene and diesel. In addition to the economic and health benefits, electrification helps with education, enabling children to study after dark, enabling entertainment, and powers small commercial endeavors such as milling and machine-handicrafts.
TowerXchange: What are the main challenges to be overcome in driving to scale a RESCO project like SunEdison’s with OMC Power? What needs to change to enable similar rural electrification projects of scale to succeed in Africa?
Alakesh Chetia, President of Social Innovations, SunEdison:
The main challenges driving a RESCO to scale are site acquisition, zoning permits, recruiting and retaining skilled staff, and the day to day logistics of organisation.
Sometimes we encounter enabling regulatory and policy environments, sometimes the regulations can be more challenging. A positive example is India, where rural energy is unregulated so anyone can setup distribution and generation plants without requiring a license, and the tariff is not regulated. Often, the cost of renewable energy must be higher than national grid electricity or grid-tied solar, but if it can still be provided at a lower cost than kerosene and diesel, then we can create tremendous economic value. Where RESCO pricing is tied to grid prices, we encounter more difficulties.
TowerXchange: Finally, please sum up how you would differentiate SunEdison’s proposition from the many other RESCOs trying to achieve scale.
Alakesh Chetia, President of Social Innovations, SunEdison:
One of our key differentiators as far as TowerXchange’s readership is concerned is that SunEdison has no captive model of co-location within cell sites, which enables us to provide other services and scale whilst not adversely affecting tower companies’ GLA.
SunEdison’s RESCO proposition is combined with community power. PPAs with towercos and telcos enable us to raise project finance as such entities are considered bankable customers whereas rural domestic users typically are not. On the other hand, the addition of community power reduces the price of electricity for towercos/telcos. Each customer group is making significant savings compared to kerosene and diesel and one is helping the other.
SunEdison is making a commitment to rural electrification, driven by economics but also driven by the desire to have a positive social and environmental impact. So when we look at new business models and partnerships like the one we have announced with OMC Power in India, we’re driven by a combination of economics, social, and environmental considerations – a triple bottom line.
