Turnkey purchases, while costly upfront, present the most straightforward option for companies to invest in renewable energy, provided the company has technical expertise and the physical space required. Turnkey purchases can offer benefits including significant cost-savings, a streamlined process compared to engaging in PPAs, and the ability to market a highly visible renewable energy investment. Additionally, when policies or regulations might prohibit PPAs, or REC-based programs are unavailable, turnkey purchases can be the best option to invest in renewable energy.
Main Points
- A turnkey purchase involves a corporation directly investing in a renewable energy asset on or near its own facilities.
- While this procurement method requires physical space, technical expertise, and upfront investment, it presents significant cost-savings and can be relatively simple to execute from a legal standpoint.
- A turnkey purchase can sometimes be referred to as a self-generation project, CAPEX model, or corporate ownership.
First, Read About Turnkey Purchases
A common option for corporations to invest in renewable energy is through a turnkey purchase. In this method, companies are responsible for building, owning, and operating their own electricity system, typically on-site.
A turnkey system is one where customers pay for and own the system themselves—referred to in this way because customers are essentially able to “turn the key” and use the system. To purchase a turnkey system, customers must have access to sufficient cash and/or credit. Customers can either pay up-front with cash, finance the system through a loan secured from a bank or other financing institution, or a combination of the two (lenders often require a minimum cash investment). Under the turnkey structure, customers own all the electricity the system generates. Once any loans are paid off, customers’ costs are comprised almost exclusively of low operations and maintenance (O&M) costs for the system. Turnkey customers normally contract with solar O&M specialists to monitor and maintain the system, but O&M costs are generally low given that PV systems have no moving parts or fuel costs. Almost all standard solar modules are warrantied for 25 years. Inverters may need to be replaced after 10–15 years.
Read Excerpt: Renewable Energy Procurement Guidebook for Colombia by Allotrope Partners, NREL, and WRI.
Now, See This
Turnkey purchases can offer corporations a wide range of benefits, including financial, operational, marketing, and environmental. However, they also pose some challenges.
Read Excerpt: Page 10 of Policies for Enabling Corporate Sourcing of Renewable Energy Internationally: A 21st Century Power Partnership Report by NREL.
Suggested Actions & Next Steps
- Think it over: Think through a turnkey purchase. Have you heard of any companies building their own renewable assets in your region? Does your company have technical expertise and the ability to secure upfront capital? Has your corporation ever considered installing solar PV onsite?
- Write it down: Based on your initial thoughts and impressions, make a pros and cons list for this procurement method.
- Reference: Philippines Procurement Guidebook, Renewable energy snapshot: Vietnam, Colombia Procurement Guidebook, Taiwan market briefing, REC overview in China, Japan market briefing, Australian market report and USA Procurement Guidebook.