Solar DAO is determined to control a 5% share of the global solar energy market or to build solar power stations with output capacity of 1.4 GW in the next 5 years, the company’s founder and CEO Dmitry Solodukha told Invest Foresight. Admittedly, all of this is easier said than done on the extremely competitive market, especially considering the rather high prices that Solar DAO charges for its power stations.
Solar team
Solar DAO is a closed-end fund that invests in solar energy projects. The fund was established by father and son team of Oleg and Dmitry Solodukha together with lawyer Alexander Ulanov. Oleg Solodukha has supervised construction of solar power plants in Russia, Spain, Czech Republic, Portugal and Germany, and is the member of the Solar Energy Expert Council of the Russian Ministry of Industry and Trade. Dmitry Solodukha is the cofounder of Krasnodar-based company UNISOLEX, which produces solar panels. According to the available information, Dmitry controls 50% of the company, and his brother Konstantin Solodukha holds the other 50%. In 2011, Solodukha Jr. was employed by Rusenergoinvest investment company that worked on the solar power projects, and was introduced to potential investors in this industry. This gave rise to the idea of creating a separate platform that would finance the construction of such solar power plants. The new fund promises investors generous — perhaps, impossibly generous — dividends: starting from 24% in US dollars over the course of 25 years.
Right now, Solar DAO is holding the pre-ICO and plans to raise $500,000. Pre-ICO will last until August 31, and as of August 24, the fund raised $360,200 from 518 investors. The company’s white paper specifies even greater ambitions — to raise $80 mln or issue 80 million tokens with a nominal value of $1. A 10-megawatt solar power plant can be built for $4-6 million — and Dmitry Solodukha says that it’s quite a large facility. The company’s white paper states that it plans to use the funds raised through the ICO to acquire 2-3 existing solar power stations in Europe with an aggregate capacity of up to 200 kilowatt, and to build additional solar plants.
Solar plans
Solar plants are currently operated in 143 countries of the world. Over the last 16 years, the aggregate capacity of all of the world’s solar plants has grown by more than 170 times: from 1.4 GW in 2000 to 237.3 GW in 2015. According to the latest forecast of the US Energy Information Administration, in the near future solar energy will become the primary source of renewable energy, accounting for over 50% of all new capacities that will come online between 2030 and 2040. But in Russia, solar energy is slow to take off, and the Russian businessmen invest in this industry’s growth beyond its borders.
Kalmykia’s Minister of Economy and Trade Zoya Sandzhieva offered the following perspective to Invest Foresight: “Kalmykia has the highest level of insolation in the country. But in order to build a solar power plant, the Ministry of Energy has to issue a quota for the sale of electricity on the Federal Wholesale Electric Power Market. It’s a complicated procedure. We are ready to provide assistance in this process, but when investors, especially foreign ones, see the course of action, they lose interest. The situation is different in Europe where producer of renewable energy can directly sell it to the consumers.”
The principal idea of Solar DAO is to continuously ramp up the aggregate capacity of the solar plants managed by the fund, which should lead to the growth in token value.
The project’s team already spent $3.2 mln to build a 4-megawatt solar plant in Ukraine. Three or fourth months after construction is completed and the plant is commissioned, it can be sold to portfolio investors for $8.4 mln. Following this logic, the proceeds of the sale can be used to build two more 4-megawatt solar plants — or a single 10-megawatt one. Considering that the normal construction period for a 4-megawatt solar plant does not exceed 3 months (and it often takes just 2), and taking into account all the possible delays with the plants’ commissioning and sales, pessimistic forecasts envision commissioning of 2-4 such solar plants a year. Subsequently, this method allows the fund to increase the aggregate capacity of its solar plants by 4-8 times each year. The commissioned solar plants can also be used as collateral for bank credits, while their owner will continue to reap profits from their operation.
“The construction cost of $3.2 mln for a 4-megawatt solar plant is on par with the market. But when it comes to selling the plant for $8.4 mln, I don’t quite see why the investor would buy the project at more than twice its market value, especially since construction only takes 4-5 months, and there are plenty of contractors. For the investors, the final cost of 1 watt of installed capacity will exceed $2, and this is when the average price on the international market has already fallen below $1/W. All of this makes for a dubious investment and a lengthy payback period, – says the owner and CEO of Neosun Energy Ilya Likhov. – We can build such power station and sell it to the investor for $3.2 mln, because [we manufacture the solar panels ourselves and] our construction costs are lower.”
Commencement of operations
Solar DAO plans to start its operations in Portugal or Ukraine — wherever it reaches the quickest agreement with the grid operators. Solar DAO also plans to build solar plants in Israel, Kazakhstan, and India. In addition to having high levels of insolation and high network electricity costs (starting at $0.1/kWh), these countries also offer the opportunity to directly sell electricity to the end users. In addition to this, all of these countries have a special tariff for renewable energy, which usually remains in force for 20-25 years. Payments for electricity are made by the market participants through the grid operator, as the state does not subsidize the “green” tariffs. In Kazakhstan, this tariff equals $0.1 and $0.2 per kWh, depending on the equipment’s location, while grid electricity costs about $0.05/kWh. In Portugal, the special tariff equals 0.095 euro/kWh, while the grid tariff is 0.075-0.085 euros/kWh. In Israel, the tariff is $0.15-0.16/kWh, and between $0.1 and $0.17 per kWh for the grid electricity, depending on the city and district.
“We charge the special tariff while it lasts, which is usually 20 years. Afterwards, we’ll charge the same tariff as the grid,” explains Solodukha.
In five years, Solar DAO plans to build solar power plants with an aggregate capacity of 1.4 GW. Such project requires about $1 bln. The company wants to raise this money by ramping up solar plants’ capacity, selling them and refinancing the next steps.
Solar DAO offers investors a chance to partake in construction of solar plants and receive an income in the process. It should be noted that there are already solar energy projects that utilize blockchain to create a trading platform that will allow everyone, including households, with excess (or deficit) of electricity to sell and buy it directly (Power Ledger and SunContract).
Written by Natalya Kuznetsova