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Ohio’s Renewable Portfolio Standard: It’s Time for a Thaw

Back in 2014, with the infamous, SB 310, Ohio became the first state to freeze its renewable portfolio standard (RPS) and halted requirements for renewable energy at 2014 levels. This means that until the end of 2016, rather than gradually increasing its renewable energy goals, the RPS has been stuck, requiring only 2.5% of energy to come from renewable sources, with a carve out of 0.12% for solar. Without legislative action, the freeze would lift on January 1. Some Ohio legislators are not so keen on a thaw, however, and are in search of another RPS ice age.

Burr, it’s Cold in Here…

SB 320, introduced in April, was one attempt at another RPS ice age. Introduced by Ohio state Senator Bill Seitz (R-Cincinnati), SB 320 would have gutted net metering, extended the freeze (again) and diluted the standard by extending eligibility to non-renewable sources. When SB 320 failed to gain much traction, Senator Seitz’s drafted a substitute bill – but it’s not any better. In fact, the new bill would remove the “teeth” from the RPS – known as an Alternative Compliance Payment (ACP). The Ohio RPS would not only be frozen again, but it would be completely voluntary, and the SREC program would cease to exist. This also means that customers who made good faith investments in solar energy before the legislature’s tampering with existing law would have to pay for this politicking – literally.

Other anti-RPS bills have also been circulated, such as Senator Kris Jordan’s SB 325, which would get rid of benchmarks all together, or Representative Ron Amstutz’s HB 554 proposal to extend the freeze until at least 2027.

Ohio, is Another Freeze Really Necessary?

OhioBlogGraph1With these bills on the table, you can’t help but ask if another freeze is really necessary. In comparison to other states with an RPS in place, Ohio’s goal of 12.5% by 2027 is already very modest.  For example, Ohio’s neighbor, Pennsylvania, has a goal of 18%. Meanwhile, states across the country continue to increase their renewable energy targets, as they see the job creation that solar energy brings (208,859 jobs and counting nationwide, 139,399 more than coal!), and increasing interest from corporate buyers to do business in renewables-friendly states. Any more changes to Ohio’s RPS would only cause Ohio to lag further behind.

On the campaign trail and since, Governor Kasich pledged to veto any freeze to the standards, but followed up by implying that the current standards were unachievable: “You can mandate anything you want,” he said, “but that doesn’t mean you can achieve it.” Are Ohio’s standards really so unrealistic? When the RPS was frozen in 2014, Ohio was already well on its way to meeting its goals.  In fact, the 2014 compliance report from the Public Utilities Commission of Ohio showed that both the renewable energy and solar compliance goals were exceeded.  The market will continue in oversupply – especially because bordering states may sell their SRECs into Ohio – even with a thaw.

A Thaw is the “Common Sense Plan”

Ohio Blog Graph2With SB 310, the Ohio solar economy took a hit. Before the freeze, Ohio ranked #8 in terms of solar jobs, but has since fallen. The fall in job ranks was accompanied by a plummet in solar renewable energy credit (SREC) prices from the $65-$70 range to the low teens, affecting homeowners and businesses who had already made good faith investments in solar and were hoping to reap the SREC benefits to pay off their solar arrays. With falling SREC prices also came falling build rates, peaking at 48.3MW in 2012, and falling to only 10MW last year.

Any legislation seeking to further a freeze or continue to weaken the RPS, would only further hurt the 89,000 Ohioans  employed across the clean energy sector involved with manufacturing, installing, developing, constructing, and financing. The job creation from the Ohio RPS is proof that it’s good bang for the buck; compliance is likely a mere 0.5% of other measures recently approved to support the state’s failing nuclear and coal plants.

Corporate buyers are also increasingly interested in large scale renewables. According to the American Council on Renewable Energy (ACORE), in 2015 alone, corporations signed renewable Power Purchase Agreements (PPA) for 1GW of renewable power from Texas, 326MW from Oklahoma, and 391MW from North Carolina. Nationwide, the Business Renewables Center estimated that corporates conducted 3.24GW of renewable energy deals, and 80% of S&P 500 Companies are now publishing sustainability reports. Worldwide, over 80 of the largest companies have committed to up to 100% renewable energy usage, with U.S. names like Nike, Microsoft, and Walmart amongst them.


Unfreezing the RPS and allowing the targets to resume would send a signal to the market that Ohio is open to renewable energy business. When Ohio’s legislature goes back into lame duck session in November, the House will have 5 days to review any bills attempting to extend the RPS winter. Make sure to reach out to your representatives and let them know that no action is the best action.  Allowing the freeze to be lifted is the best option for Ohio’s economic and renewable future.


Sol Systems, a national solar finance and development firm, delivers sophisticated, customized services for institutional, corporate, and municipal customers. Sol is employee-owned, and has been profitable since inception in 2008. Sol is backed by Sempra Energy, a $25+ billion energy company.

Over the last eight years, Sol Systems has delivered more than 500 MW of solar projects for Fortune 100 companies, municipalities, universities, churches, and small businesses. Sol now manages over $650 million in solar energy assets for utilities, banks, and Fortune 500 companies.

Inc. 5000 recognized Sol Systems in its annual list of the nation’s fastest-growing private companies for four consecutive years. For more information, please visit

Employee Spotlight: James Machulak

"Having the opportunity to lead a new department at Sol Systems and build it from scratch has allowed me to accomplish an important life goal."

“Having the opportunity to lead a new department at Sol Systems and build it from scratch has allowed me to accomplish an important life goal.”

At Sol Systems, our team is the foundation of our continued success. With nearly sixty full-time staff and counting, our talented team of industry professionals have brought creative financing solutions to the solar industry for the past eight years. Giving our clients, partners, and growing staff a chance to get acquainted with the Sol family, our Employee Spotlight blog series features interviews with new hires. This month, we sat down with James Machulak, the Director of the Asset Management Team.

1. What first made you interested in the solar energy industry?

I have always been interested in the environment. As an undergraduate and graduate student, I studied economics, so having the chance to combine two of my favorite things, finance and the environment, was an opportunity I was very excited to pursue.

2. Why were you attracted to accept a position at Sol Systems?

I joined the team in October 2015, and when looking at Sol Systems at the time, I thought that it would be very interesting to join the company at such a strong and clear inflection point. With the solar industry and Sol Systems itself growing so quickly, I knew that there was going to be a lot of new and engaging work happening. The opportunity to build-out the Asset Management department was something I really looked forward  to when accepting this role. There is still a significant amount of progress going on at Sol Systems and my role continues to develop.

3. Since joining the team, what has been your favorite part about Sol Systems?

Definitely the people. The people make all the difference and here at Sol Systems they are the core of what we have been doing. Everyone here is really passionate and smart, and the organization allows them to bring new innovative ideas and perspectives to their work here. Also, the people are so dedicated to the mission of Sol Systems and the work that we are doing here.

4. What are you currently working on the Asset Management Team?

Our role continues to develop and be defined since we are still a smaller team and continue to bring on more people. Currently, Asset Management means that we manage the investments of tax equity assets for investors. For companies investing who are not in the solar industry, we make sure that we maximize the returns that they get on their investment. Additionally, since the solar industry is a little more technical than others companies may be investing in, we also manage technical performance and make sure that the stakeholders understand how their finances are being invested and any issues that may come up and impact their returns.

5. In what ways do you see the solar energy industry, and the role of asset management in the field, changing?

Since solar is still relatively new and growing rapidly, the available pool of assets is also increasing. As the industry progresses, asset management is definitely going to see a lot of growth. With this increase, asset management in solar will likely get more mature and see considerable standardization, such as more polished electronic reporting and data. Also, with more tax equity and credit options available, there will be extensions of opportunities for new tax investors who may need guidance and advice in the process of investing in solar energy.

6. Outside of Sol Systems, what do you like to do with your free time?

I actually really enjoy playing bridge a lot. I also like playing videogames when I get a chance. Walking and hiking around parts of D.C. is something I really like to do too.

Interested in becoming a member of the Sol Systems team? We are currently seeking new employees at all three of our offices, in Washington, D.C., Philadelphia, and San Francisco. To learn more about available solar energy careers with Sol Systems, please visit our careers page.


Sol Systems is a leading solar energy investment and development firm with an established reputation for integrity and reliability. The company has financed approximately 450MW of solar projects, and manages over $500 million in assets on behalf of insurance companies, utilities, banks, and Fortune 500 companies.

Sol Systems works with its corporate and institutional clients to develop customized energy procurement solutions, and to architect and deploy structured investments in the solar asset class with a dedicated team of investment professionals, lawyers, accountants, engineers, and project finance analysts.

2016: Rush Hour is Over, But…


Since the ITC extension passed, developers and host customers alike have stopped to ponder: “Why the rush?”

Q4 is always the most intense part of the year for the solar industry, as developers and EPCs rush to complete year-end deadlines. This Q4 was no different. In fact, it was even more so. Financiers all rushed to close 2015 deals. Developers rushed to lock in 2016 pipeline. MUSH hosts were rushing to issue RFPs for projects that could be built by the December 31, 2016 ITC placed in service deadline. Rush, rush, rush.

But then, everything changed.

Since the ITC extension passed, developers and host customers alike have stopped to ponder: “Why the rush?” End users that issued RFPs are asking: “Maybe I should put this project on hold and see if costs come down over the next couple years.” More often than not, we’re seeing these potential solar customers as the ones putting the brakes on a deal to retool it, or even re-shop it.

As for developers, some are noticing that in the mad rush to lock in 2016 pipeline by year-end, key diligence items were overlooked.  If you have a contract for a 2016 project and missed a key item in diligence (“Shoot, how am I interconnecting this thing again?”), by all means, use this short reprieve to take a step back and get your ducks in a row before shopping your project to a financier. But, don’t wait too long. Contracts expire, SREC values decline, and pricing may change as a result. With much delay, lenders may reallocate funds.

Similarly, if the end user is asking for more time to see where the market goes, tell them there is no time like the present. Since 2010, the cost of a solar electric system has gone down by 70% according to Sunshot. Moving forward, the most potential for dramatic costs declines will come from soft cost reductions (permitting, financing, O&M, customer acquisition, etc.) that are challenging to predict.  Moreover, who ​knows if the cost of capital will continue to drop or begin to climb as interest rates rise and YieldCos pause many of their actions in the market.

Solar has some great momentum right now, but remember: there are many unknowns. As the saying goes, a bird in the hand is better than two in the bush. Rush hour is over, but don’t get left behind.

This is an excerpt from our January edition of SOURCE: the Sol Project Finance Journal, a monthly electronic newsletter analyzing the solar industry’s latest trends based on our unique position in the solar financing space. To view the full Journal or subscribe, please e-mail


Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 410MW 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 and project acquisition, to debt financing 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

“Commence Construction” Conjecture for the Solar Investment Tax Credit


The “commence construction” concept in solar dates back to the 1603 Treasury Grant program

No one can predict the future of the solar industry after 2016 – but don’t let that stop you from trying. If a full extension or gradual step-down of the thirty percent investment tax credit (ITC) is out of reach, the next best compromise may be an extension for those projects that are under construction when the 2016 step-down to a ten percent ITC occurs. At the Novogradac Financing Renewable Energy Conference in Las Vegas this past April, Keith Martin of Chadbourne & Parke predicted a “better than 50/50” chance that a form of “commence construction” language is passed, while Michael Novogradac went on record as being “cautiously optimistic” that we will see commence construction language as part of an extensions package. Why the optimism, and how might this work for the solar industry?

The “commence construction” concept in solar dates back to the 1603 Treasury Grant program, which allowed investors to take the thirty percent ITC as an upfront cash grant instead of applying it towards their tax bill (particularly convenient in a recession). Created in 2009 as part of the American Recovery and Reinvestment Act (ARRA), the 1603 Treasury Grant program expired on December 31, 2011, but with one key exception – projects that started construction before the end of the program could qualify for the cash grant until the expiration of the thirty percent ITC in 2016.

Commence construction language for 1603 grants sounds simple – and for projects that were unequivocally under construction, it was. But for projects in development rushing to qualify for the extension, the guidelines became quite technical. If a similar provision is passed for the thirty percent ITC, we should expect an equally meticulous process determining which projects do – and don’t – qualify before ‘the cliff’.

What can we expect if commence construction language is applied to the thirty percent ITC? With the 1603 program, we saw specific guidance surrounding 1) how a project qualifies as under construction, 2) the sale of “safe-harbored” projects, and 3) the final deadline for interconnection.

      1. How can a project qualify as “under construction”? Under the 1603 program, a project could use one of two methods. The owner could either incur five percent of construction costs before the end-of-year deadline, or begin “physical work of a significant nature” on site – with no interruptions of work between beginning and completing construction. The first method proved most popular, since it did not require the permits or approvals otherwise necessary for commencing construction on a site, and did not bring up potentially vague questions of “significance”. (“Physical work of a significant nature” is generally interpreted as pouring concrete pads for inverters or beginning installation of racking; site clearing, grading, and geotechnical work do not qualify; anyone who’s seen a site undergoing site clearing as opposed to the infrastructure for a pad pour might disagree, but the line has to be drawn somewhere.)Incurring five percent of costs, by comparison, is a relatively easy matter. Land acquisition costs and legal fees do not qualify, but most system equipment does. If equipment is ordered, it must be delivered within three and a half months of payment, providing that the accounting method of the solar company incurring the cost books the expenditure upon payment and not delivery. Just one more wrinkle: the five percent cost calculation must be on the final, eligible cost of the system used as basis for the tax credit – not the cost as estimated when the equipment is purchased. In other words, if cost overruns are likely, a company would be wise to overestimate their five percent safe harbor by a comfortable margin.
      2. Can projects be sold once they have commenced construction? In short, yes – though a tax attorney specializing in solar tax credits should sign off on any transfer of the project assets to avoid losing the safeharbor qualification.  Sales to a related entity (with greater than twenty percent common ownership) are easier than sales to unrelated parties. Similarly, sales of project companies are easier than assignment of individual assets (like the PPA and the safe harbored equipment) so long as the project company is a “real” project company, and not a shell LLC company created specifically for warehousing safe harbored equipment without any additional project assets (like a PPA, permitting, or an interconnection agreement). But be wary – with the 1603 program, the longer the wait between the expiration of the credit and the placed in service date of the project, the greater the likelihood that the full expected value of the credit is jeopardized due to haircuts applied by the IRS.
      3. How long of a runway will projects have before they are required to be placed in service? The 1603 program allowed safe harbored projects until the end of 2016 to reach completion, in line with the thirty percent ITC step-down. A five-year term is more than sufficient to benefit fully from commence construction language. Of course, an extension term for safe harbored thirty percent ITC projects is very much up in the air, since the impending step-down is a permanent change – with no additional milestone or change on the books that might serve as a de facto final deadline.

If we do see commence construction language similar to the 1603 program, we can expect to see equipment orders from project owners seeking to safeharbor their deals flood an already tight supply situation. Considering the veritable juggernaut of projects rushing for completion by 2016, delivery schedules will likely feel the crunch. One question everyone should be asking is – it’s June of 2015, do you know where your equipment supplier relationships are?

The primary benefit of the commence construction language would be to reduce the frightening risk that a project misses a December 31, 2016 deadline and loses the key to its value proposition. The importance to investors of this safety net cannot be overstated. However, it would also introduce a layer of complexity to deals that would increase transaction costs and risk for projects hoping to qualify for the thirty percent ITC well after 2016. Our takeaway if a commence construction clause is passed? Build in a little something extra for legal fees – our blog won’t serve as a definitive authority if you get audited.


Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for over 200MW of distributed generation 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 and project acquisition, to debt financing and SREC portfolio management. For more information, please visit

Sink or Swim in Rhode Island: Another Year of Renewable Procurement in the Ocean State

Starting on June 15th, 2015, National Grid will once again be accepting applications for the latest version of the RE Growth Program in Rhode Island. National Grid initially launched the RE Growth program in June 2011, with a goal of reaching 40MW of renewable energy procurement in Rhode Island by the end of 2014. The 2015 program plans to allow customers to sell generation under long-term tariffs at fixed prices. The program is open to solar, wind, hydro, and anaerobic digesters.

Previous Voyages

Starting off slow, the first two procurements of 2014 only totaled 4.5MW of renewable energy. The third procurement, however, totaled about 11MW, bringing the total amount of renewable energy to 15.5MW, split among 18 contracts.

2014 Procurements 1 2 3
Contracts Awarded 3 3 12
Total Capacity 1.9MW 2.6MW 11MW

The more successful third procurement pushed the total for the 2011-2014 procurements to 38.6MW, just shy of the 40MW goal. While both wind and medium solar (26-250kW) exceeded their target allocations of 1.5MW each, small (<25kW) and large (1-5MW) solar did not meet their targets of 500kW and 8.5MW, respectively. Small hydroelectric and anaerobic digestion were also very under-represented. There were no hydroelectric systems and only one anaerobic digestion facility awarded a contract in 2014.

One change to note is that during the 2014 procurements, the amount of contracts awarded in the third round was 12, compared to the first two rounds with 3 contracts each. The weighted average price awarded for solar also rose from 16.7 cents/kWh during the first procurement to 20.076 cents/kWh during the third. Because the program was not filled, those who did enter received higher pricing.

What’s Keeping People Out?

Why hasn’t Rhode Island’s latest incentive program been overwhelmed with applications? Non-participation could be due to a number of factors such as program structure, difficulty in finding sites, or lack of knowledge of the program. Developers may have also migrated to more cash rich Northeastern states such as Massachusetts, where they could build a larger or more lucrative pipeline of projects. Still, with development stalled in Massachusetts, don’t cross this state off from your list; it has the potential to be a great market to fit in a couple, although smaller, bonus projects each year.

Setting Sail for 2015

Announcing the RE Growth program structure for 2015, National Grid set new annual targets starting with 25MW for 2015, increasing to 40MW each year for 2016-2018, eventually reaching a total of 160MW by 2019. Pursuant to recommendations from developers and stakeholders, National Grid has changed the contract terms from 15 to 20 years, hopefully making the program more appealing and projects more financeable. The new program will also be implemented through a tariff rather than contracts. In an innovative move reflecting recent German practices as they transform into a scheme with more customer participation, and reminiscent of recent Massachusetts legislative proposals, qualifying facilities can be directly paid the tariff or integrate these tariff payments with net metering for the kWh value of their usage.

Selection Process

National Grid will be accepting small-scale solar applications on June 15th, and then will accept applications for the remaining classes between August 3 and August 14. For the 2015 enrollment period, the Distribution Generation Board set ceiling prices and capacity targets. (see table.) Small-scale and medium solar projects will receive a Standard PBI and will be selected on a first come, first served basis. Large and commercial-scale projects must submit a competitive bid at or below the ceiling price. These projects will be selected by lowest-price first. If any projects bid the same price and would exceed the specified target capacity, National Grid will select the project(s) that appear to be farthest along and that are most likely to be deployed.

Classes and Targets Applicable to the 2015 Enrollment

 Renewable Energy Class

(Nameplate kW)


Enrollment Target (Nameplate MW)

Ceiling Price/Standard PBI



[20-yr Tariff Terms except *]

Small-Scale Solar – Host Owned

(1-10kW DC)



(*15-yr Tariff)

Small-Scale Solar – Host Owned

(1-10kW DC)


(*20-yr Tariff)

Small-Scale Solar – 3rd Party Owner

(1-10kW DC)


Small-Scale Solar

(11-25kW DC)




Renewable Energy Class (Nameplate kW)


Target (Nameplate kW)

Standard PBI

applicable to Medium Solar only (cents/kWh)

Ceiling Price w/ITC (cents/kWh)

Ceiling Price w/ PTC (cents/kWh)

Ceiling Price w/o ITC/PTC (cents/kWh)


of Service (years)



(26-250 kW DC)

4,000 24.40 24.40





Scale Solar

(251-999 kW DC)









(1,000-5,000 kW DC)








Fair Winds and Following Seas?

While the Rhode Island market has been understated in the past, highly creditworthy utility off-take and above-market rates will continue to appeal to investors, providing sufficient capacity can be won or aggregated in either the current program or future RE Growth Tariff program. We expect for this market to remain especially attractive to developers looking for opportunities as the Massachusetts market has stalled, and New York has fallen short of expectations.

Interested developers should contact our project finance team at or (888) 235-1538 ext. 2 to see how Sol Systems can help secure financing for Rhode Island solar projects. Sol Systems has previously facilitated financing for solar projects in Rhode Island with feed-in tariff contracts.


Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for nearly 200MW of distributed generation 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 and project acquisition, to debt financing and SREC portfolio management. For more information, please visit 

This Post is Powered by Wind

Sol Systems' Washington, D.C. headquarters is now powered by 100% wind energy

Sol Systems’ Washington, D.C. headquarters is now powered by 100% wind energy

Sol Systems’ Washington, D.C. office now runs on 100% clean energy. Through our Clean Energy Partnership with Arcadia Power, the energy used at the company headquarters is offset through the purchase of wind renewable energy credits (RECs).

Arcadia Power is the first nationwide Clean Energy Utility option, and provides business and homes with 100% pollution-free energy via local utilities. Through this partnership, Sol Systems and other partners support sustainable values through their monthly utility bills by decreasing demand for fossil fuels, combating climate change, and promoting a better future for the planet.

Sol Systems strives to continually meet and enhance our sustainability goals, and our partnership with Arcadia Power is just one small step we’re taking. Other actions include a recent composting partnership with a local restaurant, encouraging emission-free commutes to the office, an energy audit through Green Impact Campaign, and ongoing support for local organizations in our community through our Giving That Matters program.  In 2012, Sol Systems was the winner of the D.C. Mayor’s Sustainability Award .


Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for nearly 200MW of distributed generation 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 and project acquisition, to debt financing and SREC portfolio management. For more information, please visit 

Financing Partnerships Drive North Carolina’s Solar Boom

Sol Systems, National Cooperative Bank, and Strata Solar Add Another 18MW of Solar

Sol Systems, National Cooperative Bank, and Strata Solar Add Another 18MW of Solar

Three new utility-scale solar farms have been added to North Carolina’s energy mix, propelled by a partnership between Washington, D.C.-based solar investment and financing firm Sol Systems, National Cooperative Bank, and Strata Solar. The projects are located on rural farmland in Erwin, Efland, and Hickory and total 18MW of solar capacity which equals the reduction of automobile travel by approximately 24 million miles.

This second deployment for the partners follows on the heels of another 18.2 MW earlier this year. Sol Systems managed the investment on behalf of an international bank as part of the firm’s tax equity initiative to produce secure, sustainable solar investments for banks, insurance companies, utilities, and Fortune 100 clients. Strata Solar developed the project opportunities provided EPC services, and National Cooperative Bank served as the lender in the transactions.

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If C&I Solar Projects Were Thanksgiving Dinner


With a little bit of digging (and an active imagination), we found plenty of parallels between a commercial and industrial (C&I) solar project and Thursday’s familiar feast.

A well-executed solar project can be almost as satisfying as Thanksgiving dinner; the only difference is that you are still left hungry for more.

With a little bit of digging (and an active imagination), we found plenty of parallels between a commercial and industrial (C&I) solar project and Thursday’s familiar feast.

  1. Deal Structure: Good meals start with a great recipe. Whether you’re taking on a project with a PPA, lease, or cash purchase will affect every other piece of the deal. When developing a project, we encourage our partners to think ahead and select off-takers and materials with the deal structure in mind.
  2. Modules: Obviously, the center of the meal is the turkey. Just as the turkey is the centerpiece of the meal, modules drive the project’s value in producing clean, secure solar energy. While there remain alternative brands in the space, we typically recommend sticking to a familiar brand in order to avoid additional steps of diligence (the blog author has a personal aversion to tofurkey as well…). Tier 1 turkey, anyone?
  3. Inverters: Just like with mashed potatoes, the question with inverters is how to distribute them. If placed correctly, they boost the performance of all other components.
  4. Mounting Type: The variation in racking is reminiscent of stuffing/dressing. There are a lot of options here—numerous manufacturers combined with options for tracking, carports, etc. mirror the countless ways that your Thanksgiving chef can stuff their bird.
  5. Contracted Revenue: Let’s be honest with ourselves: the entire Thanksgiving meal is essentially a carrier for the gravy. Investors are flocking to the solar space for the long-term cash flows that solar project assets deliver. The value statement for solar remains stronger than ever.

In sum, Thanksgiving is much like a C&I solar deal: they both require careful preparation, essential ingredients, special knowledge, and hard work. The comparisons between solar projects and Thanksgiving dinner are as endless as our appetites. However, getting a project built is not as easy as pumpkin pie, particularly in under-served market segments.

As 2014 comes to a close, it’s a good time to reflect on what’s gone well this year and how we’ll add to it in 2015 (or hustle to finish projects by the end of the year). Only a few weeks are left in what’s been an incredible year for the solar industry—let’s bring it home strong!

About Sol Systems

Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 171MW distributed generation solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. It has over $550 million in assets under management as of October 2014.  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 and project acquisition, to debt financing and SREC portfolio management. For more information, please visit

What Game Theory Can Tell Us about Middle Market, C&I Solar

The decisions made along the path of solar project finance and development have major implications for the growth –or stagnation—of the commercial and industrial solar market.  How does a developer choose the right financier for their project, or an investor decide to interact during contract negotiations? Together, what impacts do these decisions have on the value chain?

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Come on & Feel the Illi-Noise: Why 2015 Will be a Big Year for Illinois Solar


On September 29, the Illinois Power Agency released its draft 2015 Procurement Plan and a “Supplemental” Procurement Plan for Solar PV

Prepared in collaboration with Sol Systems Intern Mark Noll

On September 29, the Illinois Power Agency released its draft 2015 Procurement Plan regarding renewable portfolio standard (RPS) compliance for the state’s two regulated utilities, ComEd and Ameren – and then, on the very same day, decided to release a second “Supplemental” Procurement Plan for solar PV. The two plans both share great intentions for the best of interventions – and could bring projects with the right entrepreneurial conditions to glory.

Both plans call for the Illinois Power Authority to procure solar renewable energy credits (SRECs), but that’s where the similarities end. They differ with regard to funding, project eligibility, contract lengths, system requirements, and other factors. Sound confusing? It’s OK. We’re here to clear up the confusion.

The First Illinois Plan: Of the Four Procurements, Only Three Matter

The first, “regular” plan sets out the IPA’s 2015 plan for procuring power from renewables for those customers of the state’s two main utilities who have not “shopped” for electricity (most of Illinois’ residents actually have shopped for energy on their own, thanks to electricity market deregulation, and rely on their retail electricity suppliers for compliance). In addition, the IPA has set up a procedure for spending the hourly “alternative compliance payments” (ACPs) the agency has collected from retail suppliers. This is because unlike in many states, some amount of these ACPs are collected each year whether or not the suppliers are otherwise in compliance. It proposes to use ~ $13M of this funding to procure ~80,000 SRECs in one-year contracts.

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Ohio Opposition to Renewables & Solar Energy Mounts

Proposed fee could cost AEP customers $2.00 on their electricity bill.

Proposed fee could cost AEP customers $2.00 on their electricity bill.

Sacrificing renewables promised reduced prices for customers; but now could end up raising the bill for Ohioans.

Ohio’s electrical market structure has long been based on market forces such as varying supply and demand, rather than by political regulation. But recently, moving away from an economy driven, market based structure, to one driven by political whims, has not benefited OH ratepayers.  The result of this style of decision making has caused a change of heart on a previously supported energy initiative. Ohio’s recently elected conservative Senate, along with Gov. John Kasich, agree that renewables are too expensive to continue funding.

On June 13, the Senate passed Senate Bill 310 and effectively froze Ohio’s Renewable Portfolio Standard (RPS) and immediately halted all projects that solar developers and investors were working on. Not only did the construction of solar arrays freeze, but the prices of Solar Renewable Energy Credits (SRECs) associated with solar electricity production also plunged. Prices went from a prosperous and positive-trending $70/SREC to $30/SREC, and have not rebounded since. The SREC market in Ohio was not the sole victim of a market freeze; it also knocked the value of surrounding States’ (Indiana, Kentucky, West Virginia, Virginia and Michigan) market prices.

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A Sixth YieldCo Goes Public as the Asset Class Has its First Anniversary

Today TerraForm Power Inc. (TERP), a spinoff from SunEdison (SUNE), had its IPO making it the sixth yield corporation or “yieldco” to go public since NRG Yield (NYLD) became the first yieldco one year ago.  High dividend yields and rising stock prices have encouraged a wealth of investment in these new companies. However, investors should be aware of the differences that exist between yieldcos and longer term risks associated with the application of this new corporate structure to the power generation industry.

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Ohio Becomes the First State to Freeze its Renewable Portfolio Standard

The passage of Senate Bill 310 (SB310) has frozen Ohio’s Renewable Portfolio Standard until 2017, making Ohio the first state to roll back renewable energy and efficiency measures.

The passage of Senate Bill 310 (SB310) has frozen Ohio’s Renewable Portfolio Standard until 2017, making Ohio the first state to roll back renewable energy and efficiency measures.

With the signing of Senate Bill 310 (SB 310), Ohio has become the first state to “freeze” its Renewable Portfolio Standard (RPS). Ohio Governor John Kasich signed the bill into law on June 13th, effectively halting the state’s mandates for efficiency and renewables until 2017. Come 2017, these mandates will pick up where they left off when the freeze occurred, as opposed to the annual increases in renewable energy and efficiency measures that would have occurred with the RPS.

SB310 will significantly harm Ohio’s solar industry by driving SREC prices down in both the Buckeye state as well as the surrounding states such as Kentucky, Pennsylvania, West Virginia, Indiana, and Michigan that sell their SRECs into Ohio. The bill faced tremendous opposition from health and environmental coalitions, as well as a group of 70 businesses and organizations, including Honda and Whirlpool, who urged Governor Kasich not to sign the bill.

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Sol Systems Seeks Renewable Energy Intern

Position: Solar Analyst Intern (position beginning in January 2014) targeted towards undergraduates

Description: The Solar Analyst Intern will assist with registration processes, administrative duties, and research tasks, and will be expected to provide clearly defined deliverables. The position will require attention to detail, excellent record keeping, and efficient allocation of time and resources.

Through this position, the Solar Analyst Intern will gain familiarity with solar legislation, solar finance mechanisms, industry news, and industry vocabulary, as well as new product development in a fast paced, start-up environment. This position provides a fantastic launching pad for a career in renewable energy. 

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Reaching Beyond the Roof: Three Strategies for Corporate Investments in Solar

The Compelling Solar Asset Class

There are many options available to corporations interested in investing in solar projects. The market for investing in solar projects is an expanding financial sector that provides corporate investors with an opportunity to diversify their investment portfolios and develop or expand tax credit platforms. In 2012, the volume of solar projects being installed in the United States grew 76 percent year over year, with 3,313 MW of projects built at an estimated value of $11.5 billion. These solar projects will provide enough electricity to power over 350,000 households in the United States. In 2013, it is projected that the asset class will grow by an additional 29 percent across residential, commercial and industrial, and utility scale solar projects.

Retailers and other corporations invest in solar through a variety of financing structures.

Retailers and other corporations invest in solar through a variety of financing structures.

Many corporations are joining retailers, tech companies, utilities, and major financial institutions in the solar space with investments both on and off their properties. In numerous locations, the rooftops of Staples, Best Buy, Wal-Mart, IKEA, Kohl’s, and others within the retail industry feature solar arrays. These retailers, as well as many other solar investors, secure reduced energy costs, tax benefits, and clean electricity for their stores, which further company-wide sustainability efforts and appeal to consumers.

Strategies for Solar Investments

There are three primary strategies for corporations to invest directly in the solar asset class and realize the benefits of solar energy: (1) purchasing electricity from an on-site or nearby solar project through a Power Purchase Agreement (PPA), (2) directly purchasing a solar project to provide free renewable energy to a company’s buildings or property, and (3) strategically investing in solar projects to secure long-term cash flows and significant tax benefits. Each is explored below.

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California Solar Incentive Alert: Re-MAT Feed-in Tariff Program

On October 1, 2013 California IOUs will begin accepting Re-MAT applications for qualifying facilities.

On October 1, 2013 California IOUs will begin accepting Re-MAT applications for qualifying facilities.

Pursuant to Senate Bill 32 of 2009, the California Public Utilities Commission (CPUC) implemented the Renewable Market Adjusting Tariff (Re-MAT) program on July 24, 2013. The Re-MAT program is a Feed-in Tariff (FiT) through which customers can sell electricity produced by qualifying facilities* directly to the utility at a set rate for a term of 10, 15, or 20 years. The bill also raises state renewable energy targets from 500 MW to 750 MW, and increases the size cap on qualifying energy facilities from 1.5 MW AC to 3 MW AC. All investor owned utilities (IOUs) in California with more than 75,000 customers must participate in the program. Although all qualifying facilities are eligible to participate in the program, it is clear that solar will play a large role given the amount of attention the program has already gained with developers in the state.

The first round of solicitations for the Re-MAT program will begin on October 1, 2013, and will continue every two months thereafter until it is fully subscribed. The amount of time it takes for the program to become fully subscribed will depend on the ability for projects to be financed at the set energy price, which is one of the more unique aspects of the program. The base price is currently set at $89.23/MWh, pre-Time of Delivery (TOD) adjustments. This price is subject to adjustment after every solicitation depending on program participation.

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Renewable Portfolio Standards Face Stiff Opposition Across the Country

Renewable Portfolio Standards across the nation are under re-examination by state lawmakers, aiming to diminish or eliminate these Blog-Image-2-Feb-10-2012programs. Despite benefits to local economies and environments, some politicians and lobbyists feel the programs are unimportant. To date, a number of proposals have reached State Senate and House floors throughout the country. Many lawmakers hold that RPS programs across the board create unduly costs for electricity consumers and taxpayers in order to support an industry that should be able to stand on its own. However, organizations funded by oil and gas interests like the American Legislative Exchange Council (ALEC), the Heartland Institute, and others have also played a strong role in fostering anti-renewables legislation across the country. Our company has been tracking the movement in many states and provides an overview of legislative progress thus far.

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S-REITs – The Closest Option to Public Solar Financing?

Solar finance is not a new concept, but it’s predominately controlled through private and business to business transactions. The limited availability of capital, combined with the risks associated with a still maturing solar market, leave developers with a higher transaction costs in the search of  financing for solar projects. Platforms such as SolMarket attempt to mitigate the challenges of solar finance by matching projects with an appropriate network of pre-qualified investors.

In the search for new sources of capital, topics of “real property” and REITs (Real Estate Investment Trusts) have arisen within the solar community. A REIT, as defined by the Securities and Exchange Commission, “is a company that owns – and typically operates – income-producing real estate or real estate-related assets.” REITs act similar to exchange traded funds where public investors can participate in a diversified pool of real estate investments without owning or purchasing property. Investors would earn a share of the income produced through the commercial site through dividend payments. Currently, there are two tests for REITs. First, the income test requires that 95% of income must come from approved sources (usually rent). Second, the asset test requires that 75% of its assets must be real property.

If the property definition for solar PV systems is changed through tax code reform, investors could begin to explore the potential world of S-REITs (Solar Real Estate Investment Trusts). S-REIT’s would allow for a more transparent, secure, and competitive method of financing solar projects. The pool of investors would expand beyond private investment funds, to retail investors and even pension funds. One of the most attractive features of a REIT is its exemption from corporate taxation, as long as it distributes 90% of income to investors. In the case of solar, the main challenge arises with the income test. Unfortunately, the qualifications of a power purchase agreement as a form of rent are, at best, questionable.

Of course, even if solar fulfills the requirements of a REIT system through PPA installments, PV systems are still considered personal property. A change in the property tax code has to occur in order for S-REITs to exist. One important definition by the Internal Revenue Service regarding real property includes “land or improvements thereon, such as buildings or other inherently permanent structures thereon,” (Section 1.856-3(d) of the Income Tax Regulations) while personal property is essentially everything else that you own.

While solar energy systems can be physically moved, they are often fixed for periods up to, and beyond, 25 years. The main inhibitor to establishing solar as real property is the concept that solar panels operate in a system.  That is, if the inverter or mounting is removed from a solar installation, the array’s functionality is reduced or completely eliminated.

The National Renewable Energy Laboratory recently wrote a detailed report on S-REITs.

S-REITs are yet another innovation of the solar finance community. However, like other facets of the solar market, S-REITS face the challenges of complex state regulations and tax codes. While the concept may never come to fruition, the idea signals a greater demand for a more transparent, liquid, and stable solar market.

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 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 the origination, diligence, and financing processes. Developers seeking financing for 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

Life After the 1603 Grant: the Road Ahead

The following is a mutli-part series on the Cash Grant and the Road Ahead. It is part of Sol Systems‘ continuing efforts to provide the industry with the information and ideas (where we can) that we believe it needs to continue to succeed. For additional resources on project development, we recommend you join the SolMarket community, which provides a number of informational resources and the SolSmart suite of legal documents.

In February of 2009, the federal government passed ARRA, and the 1603 Investment Tax Credit (ITC) Cash Grant program with it. The Program effectively transformed what was traditionally an investment tax credit into a cash grant, awarded by the treasury, within 60 days of commercial operation. It was perhaps the single most important piece of legislation for solar in recent history, spurring huge growth in the sector, recently estimated to be 69% year over year. In January of 2012 the 1603 ITC Cash Grant will expire, and with it the ability for developers and investors to secure the cash grant in lieu of a tax credit.

So what’s next?  Well, let’s take a look.

Part I: Looking Back

Under the Emergency Economic Stabilization Act of 2008, a 30% tax investment credit for qualifying renewable energy projects was extended through 2016, allowing owners of solar projects to offset 30% of a solar system’s cost through tax credits.  So long as a system owner had enough tax liability over the course of 5 years, he or she would be able to deduct 30% of the system’s gross cost from their federal taxes.

Because most solar project companies or developers working on commercial and utility-size PV projects do not generate enough taxable profit on their balance sheets to utilize the 30% tax investment credit (ITC), they had to seek a financial intermediary with the necessary tax liability to buy a stake in the project company and monetize these tax credits, what is commonly referred to as “tax equity investors”.  Tax equity investors are effectively companies with large balance sheets, traditionally banks and more recently larger corporations, which purchase tax credits to shelter otherwise taxable income, while also providing an essential financing tool for large renewable projects.

In 2007, the Solar Energy Industries Association (SEIA) estimated there were up to 28 tax equity investors, primarily financial institutions led Morgan Stanley, JP Morgan and others.  However, the collapse of Lehman Brothers and the financial crisis of 2008 effectively ended most of these companies participation in the tax equity market for renewables.   Several companies, such as AIG and Prudential, departed the tax equity market entirely because of bankruptcy or uncertainty about whether they would have sufficient taxable income.

II. The 1603 Program

In response, President Obama approved the Section 1603 Cash Grant Program (as part of the American Recovery and Reinvestment Act of 2009), to effectively stabilize renewable energy market by providing $1.9 billion of cash grants in lieu of tax credits.  Under the 1603 Program, owners of a renewable energy system could simply apply for a cash grant to cover 30% of the system’s cost, regardless of their tax liability.

The 1603 Program catalyzed the solar market, with approximately 80% of solar projects opting for the cash grant, driving growth of 104% between 2009 and 2010 in the United States. As of mid-August 2011, 87% (2,095) of the 2,410 cash grants awarded under the 1603 program were provided to solar energy projects (although only 27% of the nominal value if these grants). Since October of 2010, the federal government has invested over a billion dollars in solar projects through the 1603 Grant Program.

Unfortunately for the solar industry, the Section 1603 Program is set to expire at the end of this year, and it appears highly unlikely that it will be renewed again.   With the expiration, interested parties without the necessary tax liability will again have to rely on tax equity investors to fully monetize the ITC.   The problem is twofold: (i) the tax equity market has not yet fully recovered and there are only an estimated 10 to 15 investors looking for tax equity deals and (ii) integrating tax equity into deal structures will significantly increase transaction costs, raise the costs of development, and potentially limit smaller deal sizes.

The result will be a bottleneck in 2012-13, where a substantial number of solar developers and other interested parties look to construct or own commercial-sized solar system, but only a select few can secure the requisite tax equity financing. This will mean a number of projects will not be developed, and those projects that do secure tax equity will see increased yields. Some projects are likely to seek safe harbor under the 1603 Program by securing 5% of the total costs of the system, but this strategy brings with it its own challenges.

So now, as we look towards the horizon, what’s next? What will happen to this 80% of the industry opting for the cash grant? Companies like Sungevity, Sanyo and Vivent are quickly lining up tax equity for the upcoming year, and some believe market growth will slow by up to 50% in the second half of 2012. Might these challenges be mitigated by solar modules priced below $1.10/watt? What creative solutions will our industry implement to meet these financing challenges?

Please join us(and others) next week for Part II of this Series: “Life After the 1603 Grant: Looking Ahead”

Sol Systems featured on AOL Energy!

Sol Systems’ Andrew Gilligan was featured in AOL Energy! Check out the article below.

Hope Shines Through Bankruptcy Clouds for US Solar Sector

A spate of bankruptcies in US solar manufacturers is not a sign of imminent industry collapse, but the inevitable result of competition in a new and evolving market, according to industry representatives.
Solar manufacturer Solyndra announced its intention to file for bankruptcy on the final day of August, following bankruptcy filings by Evergreen Solar on August 15 and SpectraWatt on August 19. The three firms’ failures prompted a flurry of commentary about the challenges facing US solar manufacturing, and prospects for the sector’s survival.
But solar industry representatives suggest that this is just part of the inevitable weeding out of firms that are unable to compete as the market landscape changes. Solyndra’s bankruptcy was “an anomaly…That’s one of the gazillion technologies out there for solar. Some are going to make it, and some aren’t,” founder of American Council on Renewable Energy (ACORE) Mark Riedy told AOL Energy at the Georgetown University Energy and Cleantech conference on September 2, 2011.

All Eyes East

Competition has intensified for solar panel manufacturers as cheaper Chinese modules have become more widely available. Manufacturing costs are lower in China, due in large part to relatively cheap labor and low-cost loans from China’s state-dominated banking system.

“It’s not like they’re making huge profits either, but they can probably take on more”, said Andrew Gilligan, an associate with solar finance firm Sol Systems.

Another factor that has driven down costs is a reduction of feed-in tariffs in some European countries, according to Gilligan.

“The demand they thought was going to be there in Europe for solar has drastically been reduced in 2011,” he said.

Solar manufacturer and project developer SunPower‘s investments in Italy were hit when the government reduced feed-in tariffs in response to debt crisis, according to project development analyst Brian Bailey.

“SunPower basically lost a major market, and we’ve been moving modules to other markets and trying to fill the gap,” Bailey said at the conference.  Sol Systems' Andrew Gilligan was featured in AOL Energy! Check out the article below.

The Problem With Policy

SunPower’s experience in Italy also highlights the importance of policy risk in the solar industry, as firms are still working towards lower costs that would allow them to compete without government incentives.

Intensified cost competition has not driven every player out of the market. Integrated firms like SunPower and Q-Cells control solar power developments from manufacturing to project implementation, and are less sensitive to manufacturing margins.
The Money Still Flows

And SunPower and Q-Cells have both managed to attract capital, despite uncertain economic conditions.

Q-Cells is employing innovative means of raising project funds, such as going through a traditional project finance route but “wrapping” it in an insurance policy, according to director of new market development Nick Chaset. A wrap provides a guarantee against potential losses.

“We’ll provide a parental guarantee as a publicly traded company or we’ll go through a third party like [insurance company] Zurich,” Chaset said.

SunPower is continuing to fund projects using power purchase agreements, as well as lease financing, according to Bailey. The company’s creditworthiness benefits from French oil major Total‘s decision, announced in April, to buy 60% of the solar firm’s shares and provide $1 billion in credit support over five years.

“We have one of the strongest balance sheets in the world behind us”, Bailey said.

And the companies’ solid track records give them a leg up over less established firms.

“Big investment banks, financial institutions aren’t interested in taking risks on a new developer,” said Gilligan.

Two Certainties: Natural Gas And Taxes

But the US solar industry may face additional challenges in the coming years. One of the primary drivers behind a recent boom in solar projects is the option for solar developers to receive a 30% investment tax credit in the form of a cash grant, according to Gilligan. He does not expect the cash grant option to be renewed next year, which would force solar project developers to seek tax equity financing, which may not be as readily available.

And if the price of US natural gas fails to rise, it could act as a barrier to development of all renewable fuel generation sources.

“As long as this natural gas price stays around $4…it’s so cheap that it’s not going to be a good financial decision to build big wind and solar farms,” Gilligan said.

But Riedy argues that there are US solar manufacturers with the potential to survive the culling process by advancing solar technologies and achieving the necessary cost reductions.
“There’s a lot of guys that have really good stories to tell in the solar space and they’re up, they’ve got their projects going, they’re manufacturing panels, the panels are starting to compete with the Chinese,” Riedy said.
Ultimately, any firm that can keep its costs down and provide a reliable product may outlast its competitors.
“Cost is always the key driver,” said Booz Allen Hamilton energy associate David Brown.