Jinko Solar: Due to the Brexit vote many UK projects are not economically viable anymore
“On last Thursday evening (June 23) end of business after two very successful days at Intersolar we were expecting a very significant PV module order volume from the UK market for the coming months to supply all the grace period projects which were supposed to be built between now and end of March 2017. 12 hours later on Friday morning (June 24th) right after getting up this order volume had partly evaporated and all Friday long our team was busy evaluating with our UK partners what had happened over night.
Negative consequences of GBP exchange rate collapse
There is a short-term and a longer term impact of the Brexit decision on our business/ industry. Short-term due to the GBP exchange rate collapse versus the USD or Euro many planned PV projects are not economically viable anymore. The projects generate return in a devaluated GBP currency, but a big part of the investment cost (modules, inverters, etc.) is on a USD or Euro basis, which means the tight IRRs have melted down significantly or cash flows have even become negative for some projects. Some of our customer who have not hedged the currency before the Brexit decision or who have projects with too tight IRR calculation will have to write off the development activities and lose a fortune.
Reallocation of investment capital
Such development will also have a significant longer-term impact. Investors, for whom an uncertain investment environment is the worst, will start to reallocate their investment capital away from UK and more into other country markets in continental Europe or completely outside Europe.
Crucial EU Renewable Energy Directives
The big question for the UK energy market is if, after a Brexit, the UK Government will stick to the EU Renewable Energy Directives or not. Without a Pan-European renewable energy policy and grid interconnections UK might easily decide to get back to conventional energy sources like coal or nuclear (Hinkley Point) provided foreign investors can be found to invest into such infrastructure with the decreasing value of the GBP.
The only positive aspect of the recent development is that after a Brexit the UK PV market would not be affected anymore by a counterproductive EU Minimum price for Chinese modules, which will significantly reduce PV investment costs. However, by the time the Brexit will actually become effective we hope that the EU Minimum Price will have been cancelled anyway”, Niendorf from Jinko says. (HCN)