Every month, Sol Systems distributes a newsletter, the SolMarket Project Finance Journal, to our community of solar developers and investors. The journal features solar finance statistics, trends, industry news, and information about SREC markets that we garner from our relationships and experience aggregating SRECs and financing commercial and utility scale solar projects via SolMarket.
We have included excerpts from our October SolMarket Project Finance Journal below. If you have any questions about this information, wish to receive our monthly newsletter via email, or have a solar project for which you are seeking financing, please contact the SolMarket team at email@example.com. We would love to hear from you.
Project Finance Statistics
- $2.7 Billion Available on SolMarket
- Over 280 Projects on SolMarket
- 43.5 MW in Capacity of Projects Funded
- 427 MW of Solar Pipeline Seeking Funding
Characteristics of “Hot Projects” on SolMarket
Definition: “Hot Projects” are the projects that have piqued our investors’ interests
Capacity: 149 kW – 3,000 kW
Average capacity: 1,134 kW
Average (all-in) costs
- < 500 kW: $3.21/W
- 500-750 kW: $3.13/W
- 750-1.5 MW: $3.00/W
- 1.5+ MW: $2.90/W
- 3+ MW: $3.00/W
Locations: DE, IN, MA, NC, NJ, NY, RI
- DE: 9.9 cents/ kWh (20 year term; 2% escalator)
- MA: 9.2 cents/ kWh (20 year term; 1.4% escalator)
- NC: 6 cents/ kWh (20 year term; no escalator)
- NJ: 10.8 cents/ kWh (15-year term; 3% escalator)
- NY: Feed-in tariff 22 cents/ kWh (20-year term, no escalator)
- RI: Feed-in tariff 32.2 cents/ kWh (15 year term; no escalator)
Characteristics of Recently Funded Projects
Capacity: 100 kW – 12,000 kW
Average capacity: 1207 kW
Average Cost (all-in): $3.38/ Watt
Locations: AZ, CA, CO, DE, GA, MD, MA, NJ, NC, OH, PA, TN, TX
Trends and Observations
Safe Harbored Panels – An Asset or Liability?
With the recent October 1, 2012 application deadline for the Section 1603 Grant, we saw a flurry of activity as developers tried to assign incurred project costs to specific projects so that those projects would qualify for safe-harboring. By assigning costs (predominantly panel) to specific projects, these solar developers ensured that they would receive the Section 1603 grant-in-lieu of the Federal Investment Tax Credit (ITC) and have thus avoided the need to find a tax equity investor for their projects. However, developers without safe-harbored projects should not despair.
Certainly, it may seem “easier” for developers to access the 1603 Grant, as opposed to finding an investor who could monetize the 30% ITC, but we have seen that developers without safe-harbored projects may actually be at a competitive advantage. Developers that placed advance purchase orders for solar panels in order to safe harbor their projects faced a panel cost of approximately $1/Watt, but meanwhile, panel prices have continued to decline rapidly. Current panel prices are nearing $0.60/Watt. In other words, if developers are able to expend less than $0.40/Watt on their efforts related to finding a tax equity investor, they will be in a better position than those developers who safe harbored panels back in 2011. If developers utilize SolMarket to find tax equity investors for their projects, they should most certainly be able to beat this threshold.
Investors Getting Involved Earlier in Development Process
As it becomes more apparent to the investor community that there is growing competition for the “good” solar projects, we have seen some investors try to align themselves with developers earlier in the development process. For example, some investors are signing onto financing arrangements before the developer has even secured local incentives, such as Feed-in-Tariffs, Production Based Incentives, or long-term SREC contracts. More specifically, the developers are in the queue to receive local incentives, and the financing arrangements are contingent on the developer being awarded the local incentive.
These types of financing arrangements allow the investor to get involved with “good projects” early without taking on additional financial risk. Most developers also prefer to arrange financing earlier rather than later. Of course, the same standards for “good” projects still apply: projects that are over 500 KW, have strong PPA rates, escalators above 2%, low installation costs, and good offtake and host credit.
Projects in The Big Apple Draw Interest
Thanks to the NYSERDA and LIPA programs, the New York market seems to be heating up. If you are developing a solar project in New York that is in queue or has already qualified for a local incentive, please reach out to the SolMarket team. We can help identify a qualified investor partner for your project.
In October, Sol Systems decreased pricing in several markets, including Pennsylvania, New Jersey, Washington D.C., and Maryland. D.C. differs from the other markets, however, in that fixed price strips have decreased not because of oversupply, but because of fluctuating spot market prices. In fact, an aggressive solar carve-out with the RPS positions the District to be largely undersupplied in the next several years, which will contribute to higher SREC prices.
If you are a developer and would like more detail on the factors behind these price movements, please join the SolMarket community to view historic SREC marks and model future marks using Sol Systems’ own market assumptions. To utilize this supply and demand model, please visit www.solmarket.com/srec_prices. Sol Systems also posts our quarterly SREC clear prices at www.solsystemscompany.com/sol-brokerage.
SREC Price Increases
Sol Systems did not increase pricing for any fixed price strips this month.
SREC Price Decreases
Sol Systems decreased pricing for 3 and 5-year strips in Maryland and DC due to fluctuating spot market prices. New Jersey and Pennsylvania strips have also declined due to the consistent oversupply in the market.
SREC Markets with Flat Prices
Thanks to relatively stable market conditions, SREC pricing in 3-year, 5-year, and 10-year strips have remained unchanged since last month in Massachusetts and Ohio.
About Sol Systems
Sol Systems is a solar finance firm and a leader in financial innovation in the renewable energy industry. Since its inception in 2008, Sol Systems has partnered with 350 solar installers and developers to bring over 3,000 solar projects from conception to completion by offering innovative financing solutions for residential, commercial, and utility-scale projects.
Sol Systems’ financing programs catalyze investments for a broad set of solar projects by simplifying their origination, diligence, and financing processes. Developers seeking financing for solar projects can access over $2.5 billion in capital through the Sol Systems investor network.
In addition to providing financing, Sol Systems also offers project due diligence, deal structuring, and asset management services – all designed to reduce overhead and transaction costs and quicken project development timelines.
For more information, please visit www.solsystemscompany.com.