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We have experience executing on sub-500kW projects, but not all projects that come across our desks in this size range make the cut

Sol Systems reviews all types of solar projects for investment, from small non-profits up to large utility- scale solar farms, and everything in between. Sample projects include a 197kW apartment building in Baltimore, a 658kW church in San Jose, and even multi-megawatt solar farms in North Carolina.

While we have experience executing on sub-500kW projects, not all projects that come across our desks in this size range make the cut. Here are a few factors to keep in mind to increase the likelihood your small commercial solar project attracts investment.

So, your project has some issues…

With these types of projects, interconnection problems, transaction costs, and other issues can have a disproportionally large impact on the price or value of a <500kW project as opposed to something that’s 1MW or more. Longer document negotiations, or issues with interconnection may be more easily absorbed by a larger commercial project, while the same costs, because they are generally fixed no matter the size, would make a small project un-financeable. Even a project with strong economics can struggle if lots of legal, engineering, and diligence resources are required to complete the project.  Small projects may see also more drastic variation in price than a large project as incentive levels change. In other words, get the project done quickly and efficiently to avoid these costly deal killers. Time kills all deals.

One of the best ways to reduce the impact of these costs is to include the small project in a portfolio of similar or near-identical projects. If there is only one form of a PPA to review, for five projects with the same design, the fixed closing costs for the deal get amortized across more watts, creating a larger effective project.

So, you’ve got questions about credit…

A sub-500kW project with an investment grade off-taker like a Fortune 500 company that is publicly rated, or an off-taker with a strong balance sheet such as a municipal water utility, will be more likely to move along than an off-credit project like a standalone church or an independent apartment building. Investors will demand higher returns for lesser credit to account for the additional risk the credit brings to a project. The already tight economics of a small project can fail to pencil at a higher return target necessitated by an off-credit off-taker.

Underwriting to a parent company or umbrella organization can also be a successful route. If a portfolio of churches, for example, can be backed by their entire diocese’s credit, it may fare better than with just the church’s individual financials. If an off-taker doesn’t have a publicly available credit rating, Sol Systems will generally review 3 years of audited or CPA reviewed financials. Strong financials will often qualify off-takers like non-profits or private schools that are unlikely to have investment grade ratings from any rating agencies.

So, you need a solution…

Essentially, everything is tighter with smaller projects. Small variances, even those out of a developer’s direct control, can render the project un-financeable. These variances may include unexpected construction costs, site control negotiations, or incentive uncertainty. Bringing a complete portfolio of projects with solid, unwavering economics and credit-worthy off-takers is the best route to success.

Sol Systems has a proven track record of bringing small and sometimes difficult projects across the finish line. The smallest we’ve financed to date is 159kW, though generally, projects at least 300kW in size will be given higher consideration, especially if a developer can establish follow-on pipeline. And for projects in SREC states, we can provide an SREC contract no matter the size.

By financing with Sol Systems, you tap into our knowledge base and experience in portfolio aggregation and standardization that help sub-500kW deals get done quickly and efficiently.  We work with partners to identify issues upfront, and we collaborate with our partners to implement expedient and direct solutions.

For more information, contact finance@solsystems.com or 888-235-1538.

ABOUT SOL SYSTEMS

Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for over 400MW of solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. Sol Systems provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. The company’s tailored financial services range from tax structured investments, project acquisition and SREC portfolio management. Inc. Magazine named Sol Systems on its annual Inc. 500 list of the nation’s fastest-growing private companies for a second consecutive year, ranking it No. 6 in the nation’s top solar companies in 2014. For more information, please visit www.solsystems.com.