Diagram of risk allocation in an IPP model
Thanks to Quintal & Co services, a new business model now enables Rackam's customers to directly purchase the heat produced by solar thermal installations, without having to invest in the purchase of a plant. This IPP model (Independent Power Producer Model) is indeed very promising, because Rackam's customers can now access the production of the cleanest thermal energy in the world without any initial investment. They can thus directly integrate this new source of energy with their energy bills - a little revolution that will enable more investment and development in the renewable energy sector in the near future, especially in the field of industrial process heat.
How does it work?
When a customer wants to purchase solar heat to power its processes, Rackam turns to Quintal & Co and their network of investors to fund the purchase of the equipment. Once gathered, the investors form a Special Purpose Vehicle (SPV) and finance the construction of the solar plant via the SPV. Once the project is built, the customer will purchase the energy produced by the plant from the SPV for a predetermined rate and period of time.
This more sophisticated business model than that of the direct sale of equipment, involves significant benefits for all parties involved in the transaction. The IPP model allows Rackam's customers to stabilize the cost of their energy consumption over time, by fixing the terms of the purchase of energy for a long time. They additionally gain access to an energy supply source among the cleanest in the world.
In addition, the signing of a supply agreement avoids any initial expenditure and therefore, the use of client capital. This advantage is important because the capital can be otherwise invested into the customer's other strategic purposes.
Finally, the IPP model shares the risks among the established stakeholders. In fact, in an IPP model, Rackam guarantees the technical risk by ensuring the functionality and performance of its equipment. Investors; they assume the financial risk associated with the project, while the customer assumes the commercial risk by guaranteeing the purchase of energy. Risk allocation facilitates access to the project for each stakeholder.
Mathieu Chagnon, the president of Rackam: "Currently, we are in the process of evaluating a dozen international projects using this financial model. This makes great opportunities for growth and deployment available to Rackam. "
Solar thermal energy on the trail of the photovoltaic industry
The IPP model is already widely used by the renewable energy industry, especially for solar photovoltaic panels, whose installation by companies or individuals has experienced a great expansion for over 10 years now, thanks to this model. Legislation based on the country where financial transactions take place already widely encompasses this practice in the world of energy production.
Interview with Maria Rabiasz, financial services specialist at Quintal:
Rackam: Is the IPP model is appropriate for Rackam's customers?
Maria Rabiasz: The IPP model for the Independent Production of Power allows energy to be produced locally and sold directly to the customer, using the principle of decentralized power generation. This principle allows the production of energy directly where it is to be consumed. This is the way of the future. And it is in this way that Rackam's customers now have the opportunity to take part.The IPP model offers Rackam's customers and other small and large companies another option to gain access to an inexpensive and efficient energy supply. Quintal's financial services therefore propose this financing model to Rackam's customers, for projects which sometimes can be worth in excess of 10 million dollars and which could otherwise not ever see the light of day without such a financial arrangement.
Rackam: Is the Concentrated Solar Parabolic technology developed by Rackam competitive in the renewable energy market?
MR: Yes, for example in the gold mining industry, and in the case of very remote locations, with an IPP funding model, Rackam's energy solutions would be 50% more economical than existing similar solutions which use photovoltaic panels.
By replacing traditional fossil fuel energy sources with those using solar thermal heat, Rackam's technology stabilizes the cost of energy and improves industrial processes. In the specific example of the elution step of a gold mine's process, Rackam's technology could allow a company to save up to $ 100,000 or more a day. Its solar concentrating technology makes it possible to accelerate the preheat cycle and the elution tanks and therefore process more ore in comparison to when using a furnace system powered by fossil fuels. This kind of economy varies of course, according to the specifications of the various systems evaluated.
For more information about IPP and Rackam, please contact Jacques-Alexandre Fortin.