Why is Trine offering less investment opportunities in the Solar Home Sector?
Trine’s initial market focus on the borrower side was companies offering Solar Home Systems (SHS). The SHS market, initially intended to reach the energy poor in emerging markets, is very new, with most companies having operated for less than 10 years. The market has now reached a stage where there is more intense competition among SHS companies, which means the pricing of the products has to be competitive with reduced margins.
As a result of the lower margins, some SHS companies are taking longer than expected to reach their profitability phase. This longer path to profitability means that some companies are finding it difficult to attract equity investors. Therefore, market consolidation is going on, with some companies shutting down or being bought by larger players. Trine has not stopped lending to the sector, but is, as a result, more restrictive when deciding what companies we lend to. Instead, most of our loans are to the Commercial and Industrial (C&I) solar sector.
Making an impact at large by financing Commercial and Industrial (C&I) solar
Commercial solar may seem straightforward — solar for businesses as opposed to residential solar for homes. However, commercial solar encompasses a variety of different types of customers and projects. In addition to businesses of different sizes, from large corporations to local small businesses, “commercial” solar customers can also include governments, schools and universities, and even nonprofits. The sector comes with an immense opportunity of making a positive impact on people and the planet, hence why we’ve started lending to the sector.
Through financing solar for schools, businesses and hospitals, hazardous air pollution can be avoided by making the sector less reliant on fossil fuels. Businesses can reduce operating costs by lowering their electricity bill with the help of solar, and protect themselves against changing utility rates.
Since businesses are currently relying on an unstable grid, mainly in our main market region Africa, solar can be used as a complement to stabilise the electricity supply, or on its own, to provide a stable power supply. In turn, work hours can increase, more employment can be made, and businesses, schools & hospitals can continue their operations by avoiding power outages and continuing their operations after dark.
A stable, renewable power supply means that businesses can continue with sustainable operations, which enables economic growth, increases employment, and creates a positive impact on society as a whole.
Investing in C&I solar means that our investors can invest in mature industry players and spread their risk geographically, all this while creating an impact. Competition in the C&I solar sector exists in some regions, but the clients (businesses, schools & hospitals etc.) sign long-term contracts (Power Purchase Agreements or Leases), on an average of more than 10 years, which means they are locking in revenue for a long time.
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