The learning curve in sustainable energy

Solar energy is now available and financeable for large numbers of people. Entrepreneurs who have a strong capital position and above-average entrepreneurship are needed for more complex forms of sustainable energy, such as biogas and geothermal. These views were stated by Hans van den Boom, Sustainable Energy Sector Manager at Rabobank, upon the announcement of Rabobank’s latest theme update for sustainable energy in the Netherlands.

It is hardly surprising that entrepreneurs in sustainable energy need to have strong abilities in the field of financial and operational management. The sustainable energy theme update, which looks ahead to 2020, provides an overview of both proven and brand new forms of sustainable energy, cost price developments, technological developments, subsidies and raw material costs. It also looks at how sustainable energy competes with fossil energy when it comes to cost price. While cost price developments and subsidies are the most decisive factors for determining which technologies have the greatest potential, technological progress (or a lack thereof) could change the picture.

Interconnection

The theme update is the first report to take an interconnected view of all these aspects with respect to all forms of sustainable energy. It provides a compact overview of key developments for all businesses (SME, mid corporates and food & agri) that want to make their energy consumption more sustainable or want to set up additional business activities. Sustainable energy is a strong growth market. The Dutch government is aiming for sustainable energy to grow from the current level of 5% to 14% in 2020. Rabobank is the Netherlands’ largest financier of sustainable energy.

‘We view all developments in interconnection: many people look at wind, or at solar or at geothermal,’ says Van den Boom. ‘These different forms are not often viewed in interconnection, also not in relationship to fossil energy. And this is important because we will need all those forms of sustainable energy in order to achieve the targets we have set for sustainable energy in the Netherlands.’

Joan van den Boogaart, who together with his wife Rian runs a dairy farming business in Gilze near Tilburg, is an entrepreneur who looks at the interconnections. He created an e-mail address containing the text ‘Sustainablejoan’ seven years ago because even back then being a sustainable business was his top priority. That’s why he invested in a completely new cubicle barn for his cows. After it became operational three years ago, he began exploring various forms of sustainable energy. He studied the possibilities of solar panels and small wind turbines on the roof and manure fermentation. He looked at the potential income, expenditure and risks. He made a conscious choice for solar panels. ‘Solar energy is the energy that can be generated easily without a subsidy, additional work or extra maintenance.’ The maintenance and warranty for the solar panels have now been set up in the same way as for much of the other equipment at his business.

Virtually zero risk with solar energy

The development solar energy is currently undergoing illustrates how things can turn out. While many people in the Netherlands today hardly give a second thought to having solar panels placed on a well-positioned roof, the future did not look so bright for solar energy around five years ago. Solar energy was also expensive in those days and it was surrounded by uncertainties. Van den Boom: ‘There is virtually zero risk with solar energy today. The equipment comes with a 25-year warranty, the technology is reasonably mature, the cost prices of the equipment has fallen sharply in recent years and there are good arrangements for supplying energy to the grid. The only risk lies in whether the sun will shine more or less.’

Green financing

Rabobank launched a promotion in the summer of 2013 in the Netherlands for agricultural entrepreneurs that offered an interest rate discount on green financing for solar panels. The local Rabobanks and Rabo Groen Bank work in partnership within the context of this promotion. Dairy farmer Joan van den Boogaart is the 100th customer in six months to take advantage of this scheme. The financial picture for investments in solar panels was already bright and the discount on the financing made it even brighter. Van den Boogaart will have recouped his investment within about nine years, while the estimated lifespan of the solar panels is around 25 years.

Rabobank’s specialists say wind energy on land, solar energy and geothermal energy are the forms of sustainable energy that offer the greatest prospects in the Netherlands. But while solar energy and sometimes even wind turbines on land have now become relatively straightforward processes, the same does not apply to other forms of sustainable energy such as geothermal, wind on sea and biogas. Large, complex projects require a lot of capital and are characterised by numerous uncertainties such as the operational reliability of the technologies, the availability of necessary subsidies and the permits that are complex and take a lot time to obtain. This all has consequences for the financing.

Learning curve

Rabobank does not see this report as a reason to start looking differently at the sector. Van den Boom says the opposite is more likely to be the case: the report reflects the experience Rabobank has gained in these sectors. ’We have acquired numerous far-reaching insights that allow us to assess projects more effectively and to provide entrepreneurs with good advice. And we can project the experiences we have gained so far onto sustainable technologies that are now in their infancy at the beginning of the learning curve.’

Entrepreneur Van den Boogaart is already well underway on his learning curve in sustainable energy. He is gaining experience with the solar panels and being self-sufficient in electricity. And he is now already thinking about the next step. He uses gas, for example, to warm the calf milk. If he could warm this milk electrically, there is certainly enough room on the barn roof for another row of solar panels.