5 Reasons Small & Mid-Sized Renewable Energy Developers (SMDs) Are The Key To The World’s Transition To A Green, Low Carbon & Sustainable Economy
Summary:
Small & Mid-Sized developers (SMDs) build projects for SMEs that comprises the majority of businesses in any given economy.
SMDs have the local expertise, relationships and knowledge needed to unlock the potential of their respective local markets.
Small scale projects could add significant value to investors.
SMDs could engage the wider community and build a better ecosystem for renewables.
SMDs are already succeeding, but they could do much better.
Small and Mid-Sized Renewable Energy Developers (SMDs) are typically local developers, focused on the much-needed small scale, distributed energy or community renewable energy projects. Those projects do not meet the large investment size requirements that qualifies for low-cost funds from institutional investors or lenders (typically $50M+ is needed to qualify), putting SMDs in a competitive disadvantage (higher cost of capital) that limits them from achieving their full potential that, consequently, limits the growth potential of small and distributed renewable energy projects.
We have started eDGe Renewable Partners with a mission to help SMDs find the right financing, technology and development partners; we believe that SMDs are key to the world’s successful transition into a green, low-carbon and sustainable economy for the reasons below. (To learn more about our services and strategies, follow us on LinkedIn)
1- Developing Distributed Energy Resources (DERs) & Off-Grid Renewables:
Large scale developers and investors are usually not interested in the development of small scale or distributed energy projects due to it's small size (unless it is a portfolio of small projects that brings the total investment size back to the large-scale investments area).
This means that small-mid sized enterprises (SMEs) - that comprises the majority of businesses in any given economy - interested in decarbonizing their operations would face a challenge procuring affordable renewable energy from their local providers.
We need small scale developers to build projects for SMEs in their respective communities.
2- Local Knowledge, Experience & Relationships
The policies and regulations governing the renewable energy market differs significantly in every geographical area. This sets a limitation for large scale developers/investors, who will only dedicate resources (time, personnel and capital) to build the necessary expertise in a large, proven and scalable markets. SMDs are usually local players who possess deep understanding of their respective local markets.
We need small scale developers who could unlock the potential of their local markets.
3- The Economics Work
Small scale projects usually have a higher return (IRR) as they face less competition compared to large scale projects. Furthermore, a portfolio of small-scale projects could provide a superior risk-return profile due to diversification, lower fixed/soft costs per project, and lower value at risk per project.
Small scale developers could add significant value to investors.
4- Community Impact and support
Small scale projects have the ability to engage the wider, and more diverse, community, where each project is built, avoiding the concentration issues of large-scale projects, and building a healthier ecosystem for renewable energy.
SMDs could engage the wider community and build a better ecosystem for renewables.
5- Its already happening, but rather inefficient
SMDs are currently building projects of different sizes and types, however, they are far from achieving their full potential as they either have to wait for many years to build the necessary experience, pipeline and balance sheet before they are qualified for low-cost institutional funding.
Alternatively, they could sell their projects (or partner) with a larger developer who already secure institutional funding. In the later scenario, these types of partnerships typically face redundancy & overlap of roles, responsibilities and decision making. Also, it causes squeezed margins for the small-scale developer, as now two or more companies need to get compensated for their work on the same project.
SMDs are already succeeding, but they could do much better.
To learn more about how eDGe Renewable Partners helps SMDs find the right financing, technology and development partners, follow us and message us on LinkedIn or via email samy@edgerp.ca
