Disruptive technology risk

Solar PV Solar PV

Description (What is the Risk)

The risk that a new emerging technology unexpectedly displaces established technology used in solar PV projects.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The power purchase agreement does not contemplate a change of the Feed-in-Tariff in case that the new technology has emerged, which reduces the costs of power generation, and the change of technology is not permitted under the power purchase agreement. Therefore, neither the Private Partner nor the contracting authority will be entitled to require a change in the Feed-in-Tariffs under the power purchase agreement.

Comparison with Emerging Market

The risk of disruption is increasing due to higher efficiency modules, new inverter technology and a general trend towards "smarter" renewable energy generation. Private Partners may have some level of protection through change in law provisions.

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Description (What is the Risk)

The risk that a new emerging technology unexpectedly displaces established technology used in solar PV projects.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Private Partner takes the risk of disruptive technology.

Where the solar PV plant has been constructed and is operating there is no risk of disruptive technology, as the Private Partner at the time of constructing the solar PV plant would have been required to comply with specific minimum standards which it included in its bid and to provide a specific amount of electricity into the local grid.

Where the solar PV plant has not yet been developed or bid, disruptive technology becomes more applicable, especially where the cost of technology is directly linked to the tariff in a competitive bidding process. In this scenario, disruptive technology at a lower price may be a benefit to the Private Partner.

In certain cases, where the solar PV market 'is more developed' increasingly the Government Authority, is capping the tariff that the Private Partner is entitled to bid based on the fact that the Government Authority is aware of new and more competitive technology which can drive the cost down. This requirement places additional constraints on the Private Partner and the possible profits of the project.

Mitigation Measures (What can be done to minimize the risk)

Private Partner may seek to place positive? obligation on contractors and suppliers to upgrade technology during the procurement process.

Comparison with Developed Market

Contracting Authorities may impose requirements on the Private Partner to incorporate new technology into the project as it becomes available, particularly where this reduces overall systems costs. For example, a requirement to install cloud monitoring equipment or more responsive inverters which can provide system support.

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