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16th January, 2014

Guest Blog: Project Liquidity in the PV Industry, Andrew Carryer at Milk The Sun

Developers and Investors should understand the importance of project liquidity if the industry is going to become more nimble and responsive.

This article seeks to explain the ways in which having illiquid fixed assets can harm even the most diligent solar developers. For those not versed in finance speak, liquidity is the ability of an asset to be sold without it affecting the assets price. It is characterised by a high volume of transactions concerning the asset (known as its ‘volume’), by which a high number of transactions shows the assets realisable cash value and its high liquidity. Assets that have low liquidity are harder to transfer back into cash, harder to sell and generally pose a higher risk to the investor (e.g. an Airport).

When relating to companies themselves ‘liquidity’ concerns the ability of the company to meet its payment obligations. If it has too much of its capital locked in illiquid assets the company can find itself in a position that it is asset rich but cash poor. If the company has racked up debt, or has been hit by unexpected cash flow problems, it will default and face bankruptcy.

Historically, the main issue for solar developers has been obtaining the necessary investment and equity in order to proceed with a project or avoid insolvency, but as the PV industry  has became more developed there has arisen a stronger division of labor during the implementation of PV projects. This is fast becoming the new major challenge for the industry in that the growing number of players.

Currently, there are an estimated 2 million installed PV systems in Europe alone. If a menial 1% was sold as part of the secondary market the market could be worth more than €1.5 billion. Companies like Berlin based Milk the Sun are trying to place themselves in this niche by harnessing this secondary market. The company does this by creating an open online platform that allows investors to view global projects directly; their price, income, size, FIT Rates, permissions etc can all be viewed online. All negotiations are done directly between the investor and the developer with no complicating middle man. 

We have found over the past couple of months that the solar industry is largely beholden to the whims of the politicians that control the incentives by which it is supported. If the industry is going to be a proactive member of the new economy it must find innovative ways to become truly competitive.


Andrew Carryer is an employee at Milk The Sun GmbH, a Berlin-based company dealing in the international trading of photovoltaic project rights and installed PV-plants.