On September 14, 2020, CEE Legal Matters reported that Sorainen had advised Sunly City on the implementation of a new business model for electricity consumers and on the development and drafting of customer contracts for solar energy solutions. CEEIHM spoke with Marek Sakk, Project Manager at Sunly City, to learn more.
CEEIHM: What is Sunly City?
Marek: Sunly City was created a year ago knowing that the prices of the solar systems are lowering while grid costs are rising and we wanted to test if this makes it possible to use more diverse business models in Estonia. So we spent the first year exploring the market and were convinced that energy production is also interesting for customers directly. By "customers" we mean companies whose main business is not energy production, but also apartment buildings and individuals. We noticed there are two common reasons why renewable energy projects are not carried out in these segments: a lack of willingness or resources to invest and not enough know-how to make the right technological choices. Sunly City offers a solution to both problems with our solar power purchase agreements and roof rental business models. These models have succeeded in other countries -- but they are new in Estonia.
CEEIHM: According to the CEE Legal Matters article, you implemented "a new business model for electricity consumers." What does this new model look like and how do you expect it will shape the market?
Marek: Usually one can become a solar energy producer by self-financing the solar panels and installing them on one's roof or land. In this case, the building or landowners take on the full liability of the cost in mounting and maintaining the solar PV systems, resulting in high upfront costs.
We are offering solutions where Sunly City makes all the investments instead of the client. This can be done in two different ways: by a solar power purchase agreement (PPA) or roof rental. Both of them have no initial cost to the customer and, in both cases, it is the customer’s roof or land where the solar panels are installed.
In the PPA model, the cost for the customer is the agreed price per kWh produced by the PV system. As the produced energy goes directly to the consumer’s consumption there are savings in grid costs which is the biggest motivation for the customers to enter into PPA contracts.
In the roof rental option, a customer has monthly fixed payments and gets access to the solar systems. The installation, operation, and maintenance side of things are still part of Sunly City’s job but the energy trading, in this case, is the customer’s role. Of course, it is worth mentioning that solar systems pay off the best when most of its production is consumed at the production site.
Both models have quite long-term contracts but at the end of the PPA contract the customer becomes the owner of the solar panels and, in the case of roof rentals, the client has the option to buy out the PV system.
Even though the models may seem like financing models they are still business models since they create value for the customers in several ways through a mix of access to financing, operations, and maintenance services. Sunly City does not only remove customers’ upfront costs but also selects and installs the technology, secures permits, and takes care of operation and maintenance of the PV systems and, in PPA’s case. also energy trading.
We hope the usage of these new business models will make renewable energy accessible for a larger audience and anyone who wants to become an energy producer can do so, regardless of their savings or expertise/experience in the energy field.
CEEIHM: From a legal standpoint, what was the most challenging aspect of rolling out this new model?
Marek: For us, it is important that our clients can focus on their main activities and can rely on energy matters being addressed by us. So we tried to see the cooperation from both ends by finding the pricing and termination principles that would be fair to both sides. As the roof/land belongs to the customers and solar panels belong to us we had to dig deep in terms of where one's rights and obligations begin and where they end.
CEEIHM: What was Sorainen's mandate exactly? What specific aspects was the firm tasked with assisting on?
Marek: Sorainen was tasked with preparing the customer contract and with drawing our attention to all the influencing factors. We had several broad and detailed discussions and Sorainen was supporting us by thinking both strategically and also microscopically from a legal perspective.
CEEIHM: Why did you turn to Sorainen in particular for this implementation?
Marek: It is always about the people! Our people have a long-term business cooperation with Sorainen’s experts so they already know how we think and where we want to go.
Originally reported by CEE In-House Matters.