By Jason Deign
Electronics giant Sharp is pinning its hopes on no-brain financing to gain an uptick in underperforming US commercial and industrial (C&I) energy storage sales.
In September the company, which is an important solar panel maker, introduced a new financing programme for commercial SmartStorage energy storage systems sold with PV.
The no-money-down finance offer is provided by an un-named lender with capacity for up to USD$25m in project funding, equating to around 12MW of installed capacity over the next 12 months.
The financing packages are designed to give C&I customers a saving of at least 5% of annual utility costs, with no upfront investment.
The customer signs an energy service contract similar to a power-purchase agreement, explained Carl Mansfield, general manager and founder of Sharp’s Energy Systems and Services Group.
Assigning ownership to a third party
Once Sharp has installed the system it assigns the contract and ownership of the assets to the funding party. “It’s not too dissimilar to a typical tax equity fund that finances solar, for example,” Mansfield said.
“There’s a third-party company managing the fund. They attract tax equity, debt and equity investments from a variety of partners and then they purchase the system from us.”
Sharp’s installations come with a full maintenance programme and include a 10-year performance guarantee. “Technically we are providing O&M [operations and maintenance] services to the owner,” said Mansfield.
Sharp, which has been pondering financing packages for more than a year, is rolling out the no-money-down funding offer after sales of C&I systems failed to catch on as expected.
In April 2015 the company told Energy Storage Report it was aiming for $100m in US C&I sales within two years. “It’s moving slower than that,” Mansfield admitted. The business is “not as large as we would like it to be,” he said.
Finding it hard to close C&I deals
Part of the problem is that Sharp has found it hard to close C&I deals quickly, despite having “a huge number of commercial and industrial projects in our pipeline that have good economics,” according to Mansfield.
On average it can take 12 months to close a deal.
“The fundamental challenge with the business right now, and part of the reason that up until recently we’ve been moving slowly with those projects, is the lack of turnkey financing has been a real barrier,” said Mansfield.
“Most of the target businesses like the economics of the project, but when it comes down to how they’ve got to finance it the timeline for a close on a commercial sale is pretty long.”
Mansfield said he hoped the new financing package might cut that sales cycles down to six months. He confirmed no financing deals had been signed yet, although several were “in progress.”
Loath to fund non-viable projects
Another factor that has potentially prevented Sharp from bumping up its sales figures is that the company has been loath to fund non-viable projects, which Mansfield said might not always be the case with some of Sharp’s competitors.
With some other companies, he said: “Progress to date is based on equity venture-type economics.
“For companies like that, where you’re trying to build a market share and equity in the company, there’s a lot of incentive to ignore short-term economics and potentially lose money on several projects you build early on.”
Sharp’s outlook is “fundamentally different,” he said. “We have to establish viable business economics on a much shorter timeframe.
“When you see a system being deployed by us it is fundamentally profitable, or it would not be happening. We’re building a profitable business here, so you won’t hear as many loud claims from us as you would out of others.”
First solar-plus-storage deal
In September Sharp was involved in New Mexico’s first commercial solar-plus-storage project.
The contract, to provide two 30kW SmartStorage units linked to a 366kW rooftop solar array for Roadrunner Food Bank, a charity organisation, was also Sharp’s first foray into the New Mexico energy storage market.
It should allow Roadrunner to save $30,000 a year from an annual $180,000 electricity bill, equivalent to 150,000 extra meals for needy citizens of New Mexico.
More recently, Sharp reseller HelioPower announced it had installed a 120kW SmartStorage unit at Blisterpak, a packaging manufacturer in California. The system was expected to save $42,000 a year on energy bills.
Despite these wins, it is clear that Sharp’s sales are not booming as much as the company would like. But Mansfield was quick to quell any suggestion that Sharp might abandon its foray into energy storage.
A lot of time and money
“I can tell you that Sharp has spent a lot of time and money to enter the energy storage market,” he said.
“Sharp is committed to greatly expanding its energy solutions business in the US market and views energy storage as a key piece of this.”
Also, he said: “Sharp rolled out its SmartStorage system with long-term objectives, which is why it is backed by Sharp’s 10-year performance guarantee.
“As long as there’s an energy storage market, Sharp will be part of it.”