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Employee Spotlight: James Machulak

"Being able to form the section of Sol Systems in Asset Management from scratch and build it to what it is now was an experience I really looked forward to when accepting a role on the team."

“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.

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, visit www.solsystems.com.

The Elephant in the Room

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Without a doubt, the industry has gone through some changes in the last few months.

Without a doubt, the solar industry has been rocked these last few months. We’ve shied away from discussing the headlines, but it’s time we address the effects on the marketplace.

  1. Developers are adjusting return expectations. Projects have re-entered the marketplace, and as such, terms must be renegotiated. Developers must readjust their expectations for what their projects are worth. More likely than not, they were being overvalued.
  2. Focus on profitability. For a long time, vertically capable solar developers, especially those that are publicly traded, have been incentivized to focus on their valuation and market cap because that’s what shareholders wanted to see. The more pipeline and growth they could demonstrate, the better. This is already starting to shift (and has been in the last 6 months to a year or so), and investors, project sellers, and even shareholders are realizing the pipeline alone cannot be the sole criterion for judging a company’s value or brand. In other words, solar developers are starting to do focusing on what the solar manufacturers already know: profitability matters.
  3. What’s your contingency plan? No doubt, there will be greater emphasis on the “what if” scenarios. If an entity cannot deliver on Asset Management, can a back-up operator easily be put in its place?
  4. Diversification of counterparty risk. Investors, do you rely on one party for your every portion of your solar investment needs: module procurement, development, EPC, O&M, asset management, etc.? We might see investors diversify their risk, and potentially become more involved on the financial reporting and technical aspects of the solar value chain.

We hate the cliché “the future of solar is bright,” but it’s true. With one million solar installs on the books in the U.S. and another one million projected before the end of the decade, we’re looking forward to riding the solar coaster right on through.

This is an excerpt from the May 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 pr@solsystems.com.

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, visit www.solsystems.com.

Why SREC Forecasts Are Stronger Than You Think

Despite common misconceptions, SREC prices will never reach $0.

Despite common misconceptions, SREC prices will never reach $0.

The value of solar renewable energy credits (SRECs), by nature, is designed to decline over time as the cost of solar declines. SREC markets – markets generally with a solar carve-out in their renewable portfolio standard (RPS) – are governed by the laws of supply, demand, and the alternative compliance payment (ACP). While the ACP acts as a price ceiling, a lesser talked about market driver is the Tier I renewable energy credit (REC) price, which acts in some ways as a “price floor” for SREC values. Many assume that when markets become oversupplied, the value of SRECS will ultimately reach $0. Not a bad assumption, but clearly not a good one either. To understand why, a look at the broader Tier 1 market is key.

REC vs. SREC: What’s the Difference?

Unlike SRECs, RECs are not generated exclusively by solar (as you may have guessed from the name). RECs are typically produced by lower cost renewable energy sources, or those that are built at a tremendous scale (like wind). Solar gets a special carve-out with its own ACP to account for a difference in costs between solar and other technologies, and because solar can be built at smaller scale (e.g. rooftop solar and distributed generation).  In Pennsylvania, for example, wind, geothermal, biomass, and low impact hydro are a snapshot of technologies that qualify for Tier 1 RECs. Non-renewable sources such as “black liquor,” a paper industry favorite, may also count toward RPS compliance in some states.

Why isn’t solar booming in Ohio and Pennsylvania?

When an SREC market becomes oversupplied, SREC prices gravitate toward the Tier 1 price, not $0. Take Pennsylvania and Ohio, two states with extremely oversupplied SREC markets. It’s no coincidence that SREC prices have hit rock bottom in both states, and SRECs are trading for about $13-$14, which is also the Tier 1 price.

Unfortunately, the oversupply in PA and OH cannot be attributed to strong solar builds in-state. Ohio only installed 10MW last year, and PA only installed 15MW of solar; to put that in perspective, tiny Connecticut installed 91MW of solar last year, and Massachusetts installed 286. The oversupply in PA and OH is due to a number of factors, most notably, relatively modest renewable targets, as well as loose compliance rules that allow for energy from out-of-state sources to qualify for SREC. Add in recent interference by the Ohio legislature to freeze the state’s renewable targets, and prices are hitting the Tier 1 price point ahead of schedule.

Regarding the first point, under PA’s version of an RPS, an Alternative Energy Portfolio Standard (AEPS), 18 percent of the electricity supplied by Pennsylvania’s electric distribution companies (EDCs) and electric generation suppliers (EGSs) must come from alternative energy resources by 2021. Only approximately 8% of that must come from Tier 1 sources. In Ohio, only 12.5% of energy must come from renewable energy sources by 2027, though even that modest amount of renewable energy procurement is in jeopardy pending current legislation. To put these numbers in perspective, legislation in Maryland, if enacted, would put the renewables requirement at 25% by 2020, and legislation being considered in Washington, D.C. would increase the renewable portfolio standard to 50%.

On top of PA and OH’s relatively weak renewables targets compared to other states, provisions allowing for out-of-state resources to count toward compliance further dilutes the standards. These provisions also do little to stimulate investment in each state’s own borders. This provision also creates a price interdependency between the two states, which is why pricing is gravitating in both markets toward the Tier 1 price. As such, if legislation moves forward to freeze Ohio’s already meager renewable portfolio standard, the Pennsylvania solar market will also be affected.

What Projects Can Be Built with Tier 1 Pricing?

Solar carve-outs were designed with the expectation that SREC pricing would one day merge with Tier 1 pricing. That is happening now in Pennsylvania and Ohio, and could soon happen in other states if oversupply outweighs renewables targets.

Even with pricing at Tier 1 rates, residential may pencil so long as the integrity of net metering is kept in place. Although some utility-scale solar will move through, the middle portion of the market – commercial and industrial (C&I) and even small utility-scale – will see far fewer opportunity for growth. As if this middle sector of the market didn’t have enough challenges…

This is an excerpt from the May 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 pr@solsystems.com.

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.

Ohio Tries to Freeze Its RPS…Again. Not Cool.

Late last month, Ohio state Senator Bill Seitz (R – Cincinnati) introduced legislation to extend the freeze on the state’s renewable and energy efficiency standards for another three years.

Unfortunately, that’s not all. The bill – SB 320 – also expands the definition of renewable energy sources that may qualify for the Renewable Portfolio Standard, thereby diluting the demand for solar, wind, and other energy sources that would come to mind when one thinks Renewable Portfolio Standard. In addition to gutting the RPS, the bill introduces some bold net metering provisions that would jeopardize the ability of future homeowners and businesses to choose solar.

Put simply, SB 320 is bad news for the Ohio solar industry and the 235 companies that operate in the Buckeye State.

Déjà vu?

In June 2014, Ohio made history by becoming the first state to “freeze” its Renewable Portfolio Standard (RPS). Two years after the passage of SB 310, and the solar industry is still feeling its effects. Solar build rates have declined significantly from a high of 48.3MW in 2012, to a mere 10MW installed for 2015. Ohio has also missed out on economic growth as a result of the freeze, and its solar jobs ranking has dipped from #18 in solar jobs per capita across the country to a #22 ranking in solar jobs per capita for 2015.

Solar investment has fallen drastically since the passage of the first RPS freeze in 2014.

Solar investment has fallen drastically since the passage of the first RPS freeze in 2014.

 

How Does the Freeze Affect SREC Pricing?

After the passage of SB 310, the price of solar renewable energy credits (SRECs) plummeted immediately by over half, from $70/SREC to $30/SREC. Today, SREC pricing is even lower and has traded down to $13/SREC on the spot market. This is troublesome for solar consumers who have already made good faith investments in their solar installations with certain pricing expectations. The value of these good faith investments were compromised with the passage of SB 310, and would again be diminished if the legislature successfully tampers with current law…again.

SB 310’s pricing impact has been felt not only in Ohio, but also adjacent markets that sell their SRECs into the state given an RPS provision that formerly allowed 50% of compliance needs to come from out-of-state sources. The law removed the 50% cap, and bordering states such as Indiana, West Virginia, Michigan, and Pennsylvania quickly flooded the spot market.

Renewable Portfolio Standards = Good

Why else is preserving the RPS good for Ohio? Let us count the ways…

The cost of complying with the renewable portfolio standard has declined sharply. SOURCE: PJM-GATS

The cost of complying with the renewable portfolio standard has declined sharply. SOURCE: PJM-GATS

  • Ohio is home to 235 solar companies and employs 4,800 people across the state, ranking 11th nationally in solar employment. Nearly 3,000 of these workers are solar installers, and another 834 solar jobs are in manufacturing. These jobs are at risk if the freeze is maintained.
  • Four of the five top states in solar jobs per capita have a strong RPS: Massachusetts, Vermont, Hawaii, and California.
  • Combined, renewable energy and energy efficiency saved ratepayers 1.4% in electricity bills between 2008 and 2012.
  • If no legislation passes this year and the RPS is allowed to continue, economic activity could increase by $5.3 billion over the next 10 years.
  • If PUCO’s recent decision to subsidize Ohio’s coal and nuclear fleet is upheld, it could cost ratepayers $6 billion over the next 8 years. Meanwhile, the cost of complying with the RPS is about 0.5% of that figure.

Bottom Line? Don’t Freeze the RPS.

Freezing the RPS would not only be uncool, it would be harmful solar consumers, businesses, and residents in a state that imports $490M in coal from out-of-state each year, according to the Union of Concerned Scientists.

>> Act now! Protect the RPS by completing this action alert.

 

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.

Providing Value: Certainty in Financing

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For developers seeking financing for a sub-500kW project, all-in price is never the only consideration.

For developers seeking financing for a sub-500kW project, all-in price is never the only consideration.

The price of a project does not matter if the financier is unable pay the developer in a timely manner, overpromises on his/her ability to raise tax equity, delays diligence items, reprices the deal, or finds another way to destabilize an otherwise viable project. When selecting financing, developers must ask themselves: How certain am I that I can close with this investor, and if so, will the investor live up to his/her end of the deal? What’s in the fine print?

Sol Systems is offering a new program to ensure our developer partners realize cash flows quickly with very few contingencies.

For projects where developers have LOIs in place (or better—executed PPAs), Sol Systems will pay a developer fee and acquire the projects and any related documents, designs, or permits.  Sol will then work with the developer to handle all remaining development tasks, including host negotiations, and bring the project to commercial operation quickly and efficiently by leveraging internal legal and engineering resources. With this program, we take on project risk so our developer partners can focus on doing what they do best: finding the next opportunity.

Below are items that make a project more valuable and will maximize the developer fee:

  • Executed site lease
  • Executed power purchase agreements
  • Complete due diligence items, such as interconnection applications, geotechnical analyses (if applicable), title reports and incentive applications.

While it may seem counterintuitive, engaging an EPC or running energy models will likely not add value given that Sol Systems prefers to create energy models in-house and identify construction firms from a list of preferred partners.

Taking a developer fee and having Sol finish the project can be particularly useful for sub-500kW projects. As we’ve written about before, projects under 500kW can quickly fall victim to seemingly minor issues or delays given transaction costs related to relatively smaller opportunities (as opposed to a one-off 10MW project, for example, which can more easily absorb these costs). Selling early for a development fee reduces execution risk for the developer, allowing Sol Systems to efficiently move the projects to the finish line.

For larger projects or portfolios of 10MW in size or more, Sol Systems can offer innovative development capital to bring projects to NTP or across the finish line to COD. Development capital is another way Sol Systems works with our developers to reduce their risk, and ensure projects get completed. Read more here about how Sol Systems can deploy development capital to ensure your project gets done.

Contact our team at 888-235-1538 x1 or finance@solsystems.com.

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.

Giving that Matters: April Community Service Day Targets Environmental Stewardship

Sol Systems’ Eva Rodriguez (left) and Jenn Williams (right) building protective cages around the saplings in Heurich Park—Hyattsville, MD.

Sol Systems’ Eva Rodriguez (left) and Jenn Williams (right) building protective cages around the saplings in Heurich Park—Hyattsville, MD.

During one of our bi-annual community service days, Sol Systems worked to restore and protect vegetation in our D.C. and San Francisco communities. The Anacostia Watershed Society (AWS) and Golden Gate National Park Service (NPS) were our service project partners.

AWS is a non-profit working to restore the Anacostia River and its tributaries to be swimmable and fishable by 2025. The Sol D.C. team spent the afternoon performing upkeep on the riparian forest buffer along the NW bank of the river. Our work involved pulling invasive brambles and installing poultry netting cages around the base of saplings, protecting them from animals and managing storm water runoff pollution.

“I didn’t expect to be so inspired to pull weeds, but during the introduction speech, our team leader mentioned how our labor is an investment for future generations,” said Jade Turpin, Marketing Specialist.

NPS works to preserve natural and cultural objects for the enjoyment, education and inspiration of current and future generations. With heavy reliance on the manpower of volunteers, the organization has almost 300,000 volunteers serving to carry out the mission of cultural and environmental sustainability. Our San Francisco team was knee deep in dirt, digging holes and lining wire to create a protective fence along a popular trail at Fort Funston State Park.

Sol Systems’ Cory Vaughan (left) and Erik Bakke (right) build a protective fence along a popular trail at Fort Funston State Park.

Volunteering with organizations such as AWS and NPS is a key aspect of Sol Systems’ company culture. Our Giving that Matters program places high priority on:

1) Partners that advance the three pillars of sustainability  environment, social, and economic.

2) Partners that offer giving opportunities through dollars and deeds.

To learn more about working at Sol Systems, please visit our careers page.

 

ABOUT SOL SYSTEMS

Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 200MW 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 www.solsystems.com.

Development Capital: Giving Local and Regional Developers a Leg up on the Competition

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In requests for proposals and otherwise, national, sometimes publicly traded companies often beat out localized partners due to a much lower cost of capital.

It is not always easy being a local or regional solar developer going head-to-head with a national giant to win business. In requests for proposals and otherwise, national, sometimes publicly traded companies often beat out localized partners due to a much lower cost of capital. In addition, regional developers – sometimes with a team of 10 people or fewer – may not have the balance sheet to fund expensive upfront costs in a deal, such as an interconnection study, geotech, or a PPA deposit.

Still, many potential host customers prefer to “buy local,” giving regional developers the upper hand over the competition. Moreover, the solar landscape is shifting. Trouble with some of the biggest national players provides new opportunity for local and regional developers to increase deal flow. But how do you get that solar project to the finish line?

Enter Sol’s new development capital product. In addition to ultimately financing the solar project, Sol Systems will provide funding for documented third party expenses (e.g. interconnection studies, PPA deposits, and similarly cost intensive development items).

Preferred investment criteria includes portfolios:

  • 10MW in size or more
  • That can reach substantial completion in the next 9-12 months
  • Subject to minimal SREC risk
  • That have or will have offtake
  • With a clear, realistic development path to NTP

As always with Sol Systems, we prefer to partner with developers that will foster long-term relationships rather than one-off transactions.

Give us a call today to get your leg up on the competition, or send an e-mail to William.Graves@solsystems.com. We look forward to hearing from you.

This is an excerpt from the April 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 pr@solsystems.com.

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.

Is Community Solar Too Complicated for Tax Equity Investors?

Community solar – or shared solar – has been getting a whole lotta love lately. At the end of March, The Washington Post published an article entitled “Why this new solar market could be set to explode,” pointing to a report from Rocky Mountain Institute estimating that the untapped market for “community-scale” solar could be somewhere near 30 gigawatts by 2030. If you’re wondering how community-scale solar is defined, Vox does a great job breaking down the different models in a March 24 article.

This graphic from the Department of Energy illustrates different shared solar models.

This graphic from the Department of Energy illustrates different shared solar models.

For our purposes, “community solar” generally refers exclusively to offsite shared solar, where multiple offtakers subscribe to a single large system located elsewhere. As community solar has grown in popularity and the market matures, developers are increasingly asking us if the added complexity of these deals is unattractive to tax equity investors. The answer, of course, depends on the investor, but one thing is certain: all community solar models are not created equally. Here are a few factors to consider when trying to better gauge investor interest in tax credits for a given community solar portfolio:

1)      Number of Subscribers or Offtakers – Shared solar models that require fewer subscribers and allow for non-residential offtakers reduce transactional complexity. Take Minnesota, for example, where a minimum of only five offtakers are required for a given deal, and compare it to Colorado, which requires at least 25 subscribers for every 500kW. In Colorado, this could mean 100 subscribers if a developer builds to the 2MW cap.

The Minnesota model has fewer operational complexities (e.g. billing to 5 customers vs. 100 or more). Moreover, requiring fewer participants will make it easier for a municipality or an entity with investment grade credit to participate. Models that require more participants tend to push developers towards aggregating residential offtakers, which may be less attractive for some tax equity investors (especially those who have not transacted previously in the residential space). Generally investors prefer to look at only a handful of investment-grade municipal or commercial subscribers.

2)      Portfolio and individual project size – Given the complexities of structured finance deals, the bigger the portfolio, the better. Again, take Minnesota. Project sizes are capped at 1MW AC, but some projects are grandfathered in to allow co-location of up to five sites. This allows for project sizes that are up to 5MW AC in size, which can then be paired in a portfolio with other projects. A 20MW portfolio of essentially four distinct 5MW projects will generally have fewer complexities than a 20MW portfolio comprised of twenty distinct 1MW projects, for example.

Apart from the above factors, we prefer structures where participants subscribe to kilowatt hours at a fixed, and not floating, rate (even if the bill credits the offtaker receives from the utility float). Attractiveness of a given portfolio may also depend on the utility territory and if RECs or SRECs may be monetized, adding SREC risk to the portfolio. Bottom line: yes, community solar can be complicated, and certainly, the devil is in the details. Still, with the right structure, community solar can be a very attractive proposition for a tax equity investor.

This is an excerpt from the April 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 pr@solsystems.com.

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.

New Solar Interconnection Standards Adopted in New York and Next Steps

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The New York Public Service Commission issued an official update to its Standard Interconnection Requirements

What?

This past March, the NY Public Service Commission (PSC) issued an official update to its Standard Interconnection Requirements (SIR) regarding New York grid connection for solar and other distributed resources. The updated guidelines allow for more standardized and expedient interconnection of projects to the New York state grid. By putting in place a simpler process for developers to acquire key initial circuit information and requiring fewer projects to obtain full studies, the new requirements ease the burden placed on state utilities to monitor applications submitted to the interconnection queue. The New York Solar Energy Industries Association (NYSEIA) has also committed to hosting a number of briefings and full training sessions on the updated SIR and how member companies should navigate it for optimal benefit going forward.

Who?

Crafted after months of cooperation between leading stakeholders in the solar industry including the NYSEIA, Joint Utilities, New York State Energy Research and Development Authority (NYSERDA), and NY Department of Public Service (DPS), the PSC produced this updated legislation in response to the state’s current Energy Plan goals and new Clean Energy Standard. In addition, the changes include a new NY Interconnection Technical Working Group (NYITWC) and ombudpersons established to resolve remaining issues that the updated guidelines fail to address.

Specifics?

The updated NY Solar Interconnection Standards include the following protocol:

  • Pre-application report whereby developers may request key information on circuits and specific substations of interest without needing to submit a full application to the interconnection queue
    • With a $750 fee and an average timeline of ten business days, this preliminary step can cover the actual interconnection application cost if filed within the required timeline, thereby increasing the efficiency of the interconnection application process as utilities move closer to the future development of hosting capacity maps.
  • State-wide technical screens–some mandatory, some optional–to expedite qualifying projects to execution with no upgrades and no study; elimination of blanket upgrade requirements for projects that don’t require a CESIR study (per the screening process described above)
  • Interconnection contract execution payment for projects with a completed CESIR study reduced from 100% of upgrade costs to just 25% of those costs, accompanied by a detailed per-item cost estimate by the utility
  • Projects up to 5MW now allowed to be processed through the SIR, but keeps the current 2MW net-metering limit in place (making it unlikely that this 5MW upper limit will be used initially)

Items not included but scheduled to be worked on by ITWG in the near future

  • Established best practice standards on technical issues such as substation level reverse power flow, remote monitoring requirements, control and protection issues like direct transfer trip (DTT) requirements and other anti-islanding protection schemes, and voltage flicker and regulation
  • Addition of enforcement incentives for utilities to meet interconnection process timelines and cost estimates
  • Increased queue transparency and formal queue management processes including exploration of site control requirement
  • Improvements to supplemental screen implementation and clearer minimum load screenings
  • Elimination of customer name requirement for interconnection applications and ability to update name/address on circuit section
  • Process for updating initial reviews as well as Coordinated Electric System Interconnection Reviews after minor system configuration changes and interconnection cost sharing options to mitigate higher cost upgrades that would benefit multiple projects

Be on the lookout for more information as the new Solar Interconnection Standards are put into effect in New York over the next few months!

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.

Rhode Island’s RE Growth Program: Sailing Steady in the Ocean State

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Choppy Seas in Massachusetts? Check out Rhode Island for Smoother Sailing

For anyone looking to test the solar energy waters in Rhode Island, mark your calendars for April 18th at 9 a.m. National Grid has gotten approval from the Rhode Island Public Utilities Commission for its 2016 Renewable Energy (RE) Growth program. The first Open Enrollment for solar energy projects greater than 25kW will open on the 18th, and developers with solar projects will have two weeks, until April 29th at 5 p.m., to apply to the program. This will be the first of three Open Enrollment periods in the state for this year, with the second being tentatively set for some time in July.

Looking at Past RE Growth Journeys

National Grid’s RE Growth program is not new. It started in 2011 and later expanded in 2015 to include a total goal of 160MW of renewable energy by 2019. Eligible renewable sources include wind, hydro, and anaerobic digesters.

Under the program, National Grid offers 20-year tariffs to solar projects for their solar energy generation. Developers with projects competitively bid into the program at a price below the ceiling and if selected, that bid price is offered to the different winning projects.  In 2015, the ceiling prices for solar projects larger than 25kW were 16.70¢ per kWh for projects sized 1-5MW and 20.95¢ per kWh for projects sized 251-999kW. Medium-scale projects (26-250kW) did not have to bid in, and were able to enroll at a standard price of 24.40¢ per kWh. The RE Growth program also has a separate carve-out annually for small-scale solar projects under 25kW. Similar to the medium-scale solar projects, these do not have to be bid for, but rather have standard pricing, which varies from 29.80¢ per kWh to 41.35¢ per kWh, depending on size of the system and whether it is host or third-party owned. The 3MW that were set aside for these small-scale solar projects under the 2015 enrollment have not all been met, and as of March 1, 2016, 1,452kW were still up for grabs.

This under-enrollment is not the first in the program’s history. The initial goal of 40MW of renewable energy by 2014 was 1.4MW shy at 38.6MW. In 2014, both small (<25kW) and large-scale (1-5MW) solar were unable to meet their targets of 500kW and 8.5MW, respectively. Meanwhile, wind exceeded its allocation of 1.5MW, but was alongside good company, as medium-scale solar (26-250kW) also exceeded its 1.5MW allocation.

Rhode Island Solar Energy’s Turning Tides

While overall solar energy enrollment fell slightly short in 2014, 2015 saw a surge in the greater than 25kW solar category, with over 13MW enrolled in the medium (26-250kW) to large-scale solar (1-5MW) capacity projects.

Before 2015, according to SEIA, Rhode Island only had about 15MW of solar energy installed in the state. In other words, that number was almost double in 2015 just from the projects in the RE Growth program. Overall, according to a recent action plan entitled “Grow Green Jobs RI,” the RE Growth program has helped support almost 40MW of renewable energy capacity since its start in 2011, and solar is starting to lead the renewable energy pack as the largest component of the program’s projects. If it continues swimming toward the 2019 160MW goal, solar capacity in the Ocean State could increase almost ten-fold in just 5 years.

Let us not forget that this growth of solar energy is also coupled with a growth in jobs. According to the “Grow Green Jobs RI” action plan, the clean energy sector in Rhode Island accounts for 9,832 jobs across the state and has six times the job growth rate than the overall rate in the state, and the solar energy sector specifically is seeing a 20 percent increase in job growth nationwide, according to the National Solar Jobs Census.  Furthermore, according to the plan, the RE Growth program alone is expected to create 250 in-state jobs and increase state tax revenue by $1 million a year.

Choppy Seas in Massachusetts? Check out Rhode Island for Smoother Sailing

Market uncertainty in neighboring Massachusetts could steer developers to look at the Ocean State for new opportunities. At least, we hope so. The Rhode Island solar market – while smaller in installed capacity than nearby markets such as Massachusetts, Connecticut, New York, and New Jersey – is still attractive and offers above-market rates.

If you are a solar developer looking to dive into the Ocean State, contact our project finance team at finance@solsystems.com 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. Check out our experience page to see our portfolio.

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.

A Tale of Two Carolinas

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North Carolina is the country’s #2 solar market, but the 35% state tax credit is no more.

It was the best of times, it was the worst of times. North Carolina is the country’s #2 solar market, but the 35% state tax credit is no more.

Without the state tax credit, the Tar Heel state starts to look a lot more like its neighbor to the South. And that’s not a bad thing. North Carolina and South Carolina are both in the same genre of solar market. Land lease and labor costs are low, and interconnection costs are low or reasonable for sites near transmission lines or substations. Both share the gift of relatively high production versus their counterparts north of Mason-Dixon line. They’re similar in terms of geography and the types of projects that can be built (ground mounts with low upfront and ongoing costs). Unlike high saturation states such as Hawaii and California, grid penetration is not an issue. The two states even share utility companies in common, and projects in the 5-10MW AC range benefit from long-term fixed contracts at similar rates. Larger projects require directly negotiated bilateral contracts for slightly lower rates, which are becoming more common in both states.

We’d also cite property taxes as a differentiator between the two. Unlike South Carolina, North Carolina benefits from an 80% property tax abatement for non-residential solar projects. This means that in South Carolina, developers must negotiate a payment in lieu of taxes (PILOT) agreement with each solar installation, or head to their local town council and explain that the solar energy system will not be attending public school or driving on the roads, and as such, should be exempt from the bulk of property taxes.

We’re mixing our Dickens here, but all we have to say about property taxes and the expense uncertainty they create, is “Bah! Humbug!”

This is an excerpt from our March 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 pr@solsystems.com

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.

SOURCE: The Sol Project Finance Journal, March 2016

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SOURCE is a monthly solar project finance journal that our team distributes to our network of clients and solar stakeholders. Our newsletter contains solar statistics from current real-life solar projects, trends, and observations gained through monthly interviews with our solar project finance team, and it incorporates news from a variety of industry resources.

Below, we have included excerpts from the March 2016 edition.  To receive future Journals, please email pr@solsystems.com.

PROJECT FINANCE STATISTICS

The following statistics represent some high-quality solar projects and portfolios that we are actively reviewing for investment.

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STATE MARKETS

Maryland - Since the start of 2016, SREC prices in Maryland have taken a nose dive. They started the year at around $160/SREC and are now approaching the sub-$100 level. Currently, legislative action is pending to increase the Maryland renewable portfolio standard to 25% of electricity by 2025.  HB 1106, known as the Maryland Clean Energy Jobs Bill, also calls for a modest increase in the solar carve-out provision with the RPS, pushing it from 2% by 2020 to 2.5% by 2020. While the Clean Energy Jobs bill will not have a dramatic upward push on SREC prices, the bill’s successful passage could possibly bring SREC prices back to where they were, closer to $120 for 2017, and to $85 for 2018. Hearings on the bill were held in committee on March 3 and 8.

Rhode Island – Massachusetts drama got you down? Check out neighboring Rhode Island, where the RE Growth Program will reopen on April 18th. Developers with solar projects over 25kW will have until April 29th to submit into the program. After April, there will be two additional Open Enrollments in 2016; the next one is tentatively scheduled for July 2016. More info at ngrid.com/REGrowth. Given high electricity prices, pricing will be attractive. Rhode Island is also an attractive market for 10MW+ wholesale projects, especially if NEPOOL renewable energy credits (RECs) are monetized with a strong strip

Oregon – Oregon has passed new legislation requiring 50% renewables by 2040. The legislation also calls for investor owned utilities to eliminate coal use by 2035, and creates a community solar program. To encourage solar development in the state, accompanying legislation will encourage solar between 2MW and 10MW with a very modest $.005/kWh incentive for five years. On top of that, avoided cost rates for qualifying facilities are much lower than other markets where PURPA has driven solar development. Despite the RPS and high solar resource in parts of the state, this market still looks too tight to pencil for much of the solar industry…for now. Biomass and thermal trash burning will also count toward RPS compliance.

SOLAR CHATTER

  • Rumor has it that Spanish wind turbine manufacturer, Gamesa, is looking at moving into the U.S. solar inverter business.
  • Governor Kasich has given some lip service to the Ohio Renewable Portfolio Standard on the campaign trail. He says he’s “not playing around.” As a reminder, an RPS freeze is OH affects solar in PA, IN, and even Virginia. Here’s a refresher explaining why.
  • It’s happening. Deal sizes are getting bigger and bigger since December 31, 2016 is no longer a “Date-That-Must-Not-Be-Named.”
  • With highly publicized turmoil among major companies, developers are increasingly valuing transaction execution capabilities over price in the project bidding process.
  • The New Jersey Senate Environment and Energy Committee voted unanimously to refer an 80% RPS bill for a vote by the full Senate. Wowza, that’s a whole lotta solar and wind.
  • Companies that were “sold out” of product for 2016 delivery in anticipation of the investment tax credit (ITC) rush are now saying they will have product available this year. Surprise, surprise.
  • We’re seeing an uptick of projects in Florida. This could pick up substantially if property tax abatement moves forward. This issue will be taken up on a ballot initiative in August
  • Solar resource in the U.S. was on average 5-10% lower in 2015 than the long-term mean. Less sunlight means lower returns from projects last year. Don’t despair –  2015 was just one low sunshine year.

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, visit www.solsystems.com.

The Solar Development Landscape is Shifting. Are You Ready?

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Self-consumption, wholesale projects, and development outside of renewable portfolio standards are a few ways that solar development is changing.

In January, we wrote about how state-level battles over net metering and rate design will push the industry closer to self-consumption. Moreover, challenges to PURPA are encouraging some utility-scale solar developers to finance their deals through wholesale power contracts. Meanwhile, GTM Research estimates that more than half of all utility-scale solar – more than 6GW – will come on-line outside of state renewable portfolio standards (RPS).

In other words, the solar development landscape is shifting. Are you ready?

1. Self-consumption

The trend toward self-consumption can be illustrated by two of the nation’s solar leaders: New Jersey and California. New Jersey has rebooted its energy storage incentive. Though the deadline for open enrollment has passed, a competitive solicitation will take place later this year. In California, the Self-Generation Incentive Program (SGIP) will be increasingly important as the value of electrons exported to the grid is lowered slightly in light of changes to rate design.

Then of course, we saw Hawaii slash their net metering, making it financially feasible to go off-grid with help from storage. Con Edison in New York is also offering a storage incentive that is closely aligned with “resiliency” more than it is for ancillary grid services.

2. Wholesale projects

We are already seeing much activity with wholesale projects. Typically, these projects range from 5-10MW+ in size with relatively low wholesale agreements. Many of the projects that we’ve seen are in the PJM Region or the Northeast and can benefit from strong Tier I renewable energy credit (REC) long-term strip pricing, as well as relatively stable spot market electricity pricing.

Still, given higher land and build costs, projects in the Northeast can be tough to sell wholesale. Moreover, wholesale projects can still be challenging to finance, as without contracted revenue, you can’t put debt on these projects.

Two solutions we’ve discussed internally is bidding these projects into a local incentive program, and then selling the tail (after system size in these programs is maxed out) into the wholesale market. Additionally, these projects can be paired with a synthetic or remote PPA. In certain situations, these PPAs can be shorter in contract length than a traditional behind-the-meter project (10-20 years).

Expect us to write a lot more about this topic in the future.

3. Renewable portfolio standards (RPS)

While utility-scale solar growth may take place outside of renewable portfolio standards, proposals for more aggressive RPS standards are popping up around the country (see: Hawaii, Maryland, D.C., California, Vermont, Oregon, and New Jersey).

However, it’s important to remember than an RPS on its own cannot encourage solar growth. An RPS can force the hand of the utilities to create programs that will help it meet these standards, but without an accompanying program, an RPS can be more of a sentiment rather than the sole driver of market growth.

Maryland, D.C., New Jersey, and Massachusetts have had successful renewable portfolio standards because they are accompanied by a solar carve-out, which created the SREC markets. California is the nation’s #1 solar market year-over-year not just because of their 50% RPS, but because of high electricity prices, favorable rate design, a strong legacy incentive program that jumpstarted their local industry, among several other factors. States like Oregon, which recently passed a 50% RPS, will not immediately jump to North Carolina status with an incentive program at $.005/kWh. Moreover, the 50% RPS does not need to be met with solar.

Navigate the changing development landscape with a trusted financing partner. Contact us at finance@solsystems.com or 888-235-1538 x2 to discuss your financing needs with our team.

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.

Will the Clean Energy Jobs Bill Stabilize the Maryland Solar Market?

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If market conditions stabilize in Maryland, solar employment will increase another 8.5% by the end of 2016

According to the latest Solar Jobs Census, Maryland ranks #12 in solar jobs nationally, with nearly 4,300 solar workers cross the state. 40,485 homes were powered by solar as of The Solar Foundation’s latest report.

The growth of the Maryland solar market is largely due to the state’s renewable portfolio standard (RPS), which has created a strong, stable market for solar renewable energy credits (SRECs). Unlike other SREC markets – such as Pennsylvania and New Jersey – which have been volatile, boom, and bust, Maryland has benefitted from consistent growth year-over-year and a stable market for SRECs. Moreover, high incentive levels in other “flashier” East Coast solar markets (e.g. Massachusetts, where we are offering $280/SREC for 5-year contracts in SREC I, $200 in SREC II) have historically led to relatively less representation by commercial and utility-scale solar developers in the state, again leading to a relatively stable supply-demand balance.

Maryland RPS = GOOD

The Maryland RPS has lived up to its promises. More than 1,000 solar jobs were added in Maryland last year alone. If market conditions stabilize (more on that below), solar employment will increase another 8.5% by the end of 2016, according to The Solar Foundation.

In addition to employment and solar deployment numbers that have come out of the Maryland RPS, it’s becoming increasingly easier and more affordable for utilities and energy suppliers to meet solar requirements set forth by the RPS. That’s because SREC prices, which utilities and energy suppliers must procure year-over-year to comply with the RPS, have steadily been declining.

The declining value of solar renewable energy credits makes it easier for utilities and energy suppliers to meet Maryland’s renewable energy goals.

The declining value of solar renewable energy credits makes it easier for utilities and energy suppliers to meet Maryland’s renewable energy goals.

The Maryland Solar Market is at Risk

Unfortunately, however, this stable growth is at risk. Since the start of 2016, SREC prices in Maryland have taken a nose dive from $160/SREC and are now approaching the sub-$100. Price declines will continue, as previously unattainable utility-scale projects – which had a December 31, 2016 deadline before the extension of the solar investment tax credit (ITC) – will now move forward, disrupting the SREC market’s supply and demand balance. Moreover, the cost of solar has plummeted dramatically since the original passage of the RPS in 2004, and costs have continued to decline since its subsequent amendments. In fact, since 2010, the cost of a solar electric system has gone down by 70% according to the Sunshot Initiative. As costs of solar have come down, these goals need to be reevaluated to better reflect the growing demand for solar in the state.

Introducing the Maryland Clean Energy Jobs Bill

Currently, legislative action is pending to increase the Maryland RPS. HB 1106, also known as the Maryland Clean Energy Jobs Bill, calls for a modest increase in the solar carve-out provision with the RPS, pushing it from 2% by 2020 to 2.5% by 2020, and pushing the overall renewables requirement to 25% of electricity by 2025. This will essentially require more than 500MWdc of solar. This is an attainable RPS goal that the solar industry is expected to meet with ease. This slight increase in near-term demand for solar is offset by reduced Solar Alternative Compliance Payments (SACPs), which essentially act as a price ceiling for the SREC market. Moreover, this increase is modest in comparison to other states such as Oregon and California which recently passed 50% RPS bills. Maryland’s neighbor, D.C., also proposed a 50% RPS last week.

Moreover, the Clean Energy Jobs Act of 2016 will support pre-apprenticeship, apprenticeship, and other workforce programs to establish career pathways within the renewable energy industry. (As a company that’s been hiring constantly over the last several years, we’d appreciate being able to find more local talent with ease.)

Will the Clean Energy Jobs Bill Affect SREC Prices?

While the Clean Energy Jobs bill will not have a dramatic upward push on SREC prices, the bill’s successful passage could possibly bring SREC prices back to where they were, closer to $120 for 2017, and to $85 for 2018. HB 1106 was heard in the Maryland House Economic Matters Committee on 3/3. Its corresponding bill in the Senate will be heard in committee today, Tuesday, March 8. Tell your state legislators that you want to see more solar in Maryland by doing by clicking on MDV-SEIA’s Action Alert, or by calling your state legislator.

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.

So, You’re Developing a Sub-500kW Solar Project…

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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.

New Jersey’s Energy Storage Incentive

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The Renewable Electric Storage Incentive appeared successful but because of some misunderstandings, 9 of the 13 approved projects have pulled out.

Last year, New Jersey, in an attempt to improve the resiliency of their electricity infrastructure as well as for load shifting and frequency regulation, sought to incentivize behind the meter energy storage. The initial program, The Renewable Electric Storage Incentive, was aimed primarily at solar + storage installments and allotted $3 million to 13 separate projects throughout the state.

The program appeared successful, but because of some misunderstandings with PJM about the ability to combine PJM grid incentives with the New Jersey energy storage incentive, 9 of the 13 approved projects have pulled out. The good news with this, however, is that the unused funds will be recycled back into the program for future use.

Upcoming March 1st 2016 Application Deadline

Starting on March 1st, New Jersey will offer its second machination of its energy storage incentive and begin accepting applications. Round 2 has doubled the size of the program to $6 million and will distribute the funds in two separate allocations.  The first $3 million will be offered in an open enrollment format, and the 2nd will come later in 2016 in a competitive solicitation dictated by research currently being conducted by the Rutgers Laboratory for Energy Smart Systems (LESS).

To be eligible, projects must be connected to a class 1 renewable resource and have a minimum capacity of 50kW, which can be aggregated over multiple sites. The incentive is set at $300 per kWh of energy capacity, with a per-project ceiling of $300,000 or 30% of the total project cost. A single owner or developer can qualify for multiple projects up to a per-entity incentive cap of $500,000. For full list of requirements or to apply click here.

What Does This Mean for Solar Developers?

Driven by the combination of incentives like the New Jersey rebate program and improving system economics, the distributed storage market is growing and creating real opportunities for developers.

The upcoming open enrollment for New Jersey presents a particularly attractive opportunity. Todd Olinsky-Paul of the Clean Energy group writes:

An open enrollment rebate is much more reliable, and bankable, than a competitive solicitation, which may or may not result in a grant; this also happens to be the first dedicated energy storage rebate program in the country, which means the results should be of great interest to energy agencies in other states.

To address this growing opportunity, Sol Systems is developing a solution to offer storage that can be paired with solar installations. For more information, contact Ben Margolis at ben.margolis@solsystemscompany.com.

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.

Massachusetts’ SREC II Program: A New Hope?

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As of February 18th, 67MW still remains under the program cap for projects under 25kW

For anyone interested in the solar energy industry, lately Massachusetts is synonymous with hitting solar energy caps. We have discussed the Commonwealth’s net metering caps at length, and have reported as the cap for the Solar Carve-Out II Program (SREC II) has neared.  With another update from the Massachusetts Department of Energy Resources (DOER) last week, here’s the latest on the SREC II program.

Still Space for Systems under 25kW

First and foremost, some good news. According to an email update from the Massachusetts Department of Energy Resources (DOER) on Thursday, February 18th, 67MW still remains under the program cap for projects under 25kW. So, if you are planning to install a project under 25kW, there is indeed still space for your project, and DOER has posted clarification for procedures and required documentation needed for projects to obtain an Assurance of Qualification. Keep in mind, the remaining 67MW* of available capacity under the program cap may run out quickly; we recommend applying as soon as you’re able.

Remember: if you partner with Sol Systems, we will complete the SREC certification process on behalf of your customers. Contact info@solsystems.com so we can help.

What about Systems over 25kW? Hasn’t the Cap Already Been Hit?

The second part of DOER’s announcement dealt with projects over 25kW. As we have already reported, the cap was met nearly two weeks ago, but not all of the applications submitted may be real contenders. The most recent update by DOER also hints to this possibility.

As it stands, the initial review of applications larger than 25kW is still ongoing. However, an initial review of a significant number of applications has been completed. All incomplete applications have been returned with a description of what needs to be done to fix the issues discovered in the initial review. These developers have until Thursday, February 25th, to resubmit applications for their projects, and if the applications still are not complete then, they will be rejected. For anyone on the waiting list who has been nervously biting their nails and sitting on the edge of their seatwaiting to see if they will have a chance to be considered, Thursday marks the first chance for moving off or up the list. After Thursday, the DOER will review all resubmitted applications and then provide an update regarding the SREC II Program’s Cap.  Stay tuned to our blog for updates.

What Does It All Mean?

In early February, we predicted this “Churn #1” of incomplete applications that were rushed through, but would soon be eliminated. While the exact numbers of this churn will come in after this Thursday, we expect the number of rejected applications to bring the program from drastically “oversubscribed” to nearly “fully subscribed.”

After that first churn, there is potential for a second churn to come in the form of unfinished projects currently holding an Assurance of Qualification under the “pending” category. This means that although they have received an Assurance of Qualification, they may not yet be operating and generating SRECs, so they have not received a State of Qualification. These projects are under a 9-month deadline to reach mechanical completion, and there is a chance not all of them will make it.

In sum, there is still a glimmer of hope for installers and developers:

  • Sitting on the >25kW waiting list with a complete application
  • Installing solar projects under 25kW or less… What are you waiting for? There are still 67MW that are yours for the taking.

Sol Systems will continue to follow SREC II developments on our blog. Stay tuned for our next write-up, which we’ll put out shortly after DOER’s next announcement.

*Note: Since the publication of this article, 15MW remain for solar projects under 25kW

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.

Virginia’s Solar Legislation: Will It Live to See Another Day?

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Virginia ranks 32nd in the country with only 18MW of solar energy installed

For a brief period at the beginning of 2016, Virginia’s legislature looked like it might have been gearing up to strap down and improve the solar market in the state. Such legislation is necessary, as Virginia ranks 32nd in the country with only 18MW of solar energy installed according to the Solar Energy Industries Association (SEIA).

Furthermore, as we have previously discussed, Virginia came in with a “C” in the solar net metering class of 2015. Its neighbor, Maryland, on the other hand, came in with an “A” and is 12th in the nation with 321MW of solar energy, 4,300 people employed in the sector, and a 95% increase in solar investment over 2014. Virginia has less than half of the solar jobs in Maryland, coming in with under 2,000 solar workers.

It is about time that Virginia stepped up, and legislation this session offered a glint of hope that it just might. However, despite a valiant effort by MDV-SEIA, a collection of pro-solar legislation was tabled in Richmond last week after a heavy showing from opposition.

So, which bills are amongst the dearly departed? Here are a few highlights.

This Session’s Obituaries: Will They Live to See another Day?

HB 1050 and SB142 – this team of bills sought to establish a 30 percent state tax credit for solar thermal systems (though not their solar PV companion).

HB 1285 – would have authorized community energy programs, which allow multiple customers to subscribe to clean energy from an offsite location. It is an idea that is catching on across the country to provide more equitable access to clean energy, and this bill was solar advocates’ push to have community solar programs enter the Virginia market.

HB 1286 – like 1285, was a darling child of solar advocates across the state. It was an all-encompassing piece of legislation providing for the allowance of third party financing through power purchase agreements, lifting the one percent cap on net metering, and authorizing community and “agricultural” net metering programs. Over half of U.S. states and the District of Columbia allow for third party financing, but not Virginia, which has made solar’s cost prohibitive for its citizens.

HB 480 – sought to establish a tax credit equal to 35 percent of installed renewable energy and define the aggregate amount of credit allowed to each person for placing into service renewable energy during the taxable year.

Virginia’s neighbor to the South, North Carolina, had a 35 percent tax credit until recently, which according to data from the N.C. Department of Revenue generated the state $717 million in spending and capital investment in 2014, with only $126 million claimed. North Carolina also ranks 4th in the country for solar capacity with 6,000 solar jobs. You snooze, you lose, Virginia.

SB 761 – looked to establish a mandatory Renewable Portfolio Standard (RPS) in Virginia, which would have required 25 percent of generated power to come from renewable energy by 2025. The current RPS in Virginia is voluntary, and as such, symbolic in nature. Hence one of the many reasons for little solar growth in the state.

SB 779 – was a bill that survived past the others. It was poised to be a weaker version of HB 1286, which still would have been major progress for the state. However, this bill was also tabled…for now.

The Last Bill Standing

HB 1305- is the only solar bill still standing in Virginia’s legislature. It provides a tax exemption worth 100 percent of the solar energy systems value for projects 5MW and under, and for projects from 6MW-20MW that file for interconnection before December 31, 2018. It also drops the tax exemption to 80 percent for projects above 20MW starting January 1, 2017.

The Living Dead: Summing it Up

Clearly, some of these bills were stronger than others in regards to promoting clean energy, but all of the above were kept from moving forward in this legislative session. So, the question is

Will There be a Resurrection?

Fingers crossed, yes. As the discussions stand these bills have been “carried over,” and will be discussed again at special subcommittee this upcoming summer.

So, if you are a Virginia customer do not lose hope, but do not just sit tight. Reach out, speak out, and ask for solar because maybe the umpteenth time Virginia discusses solar energy might just be the charm! As for the solar industry, with such a large laundry list of requests, it is time to rally around the priority bill that has the biggest likelihood of passing and allowing the local renewable energy economy to flourish.

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.

State Solar Jobs Census: Takeaways from Major Markets

The US solar industry grew 20% as a whole in 2015, now employing over 200,000 employees

The US solar industry grew 20% as a whole in 2015, now employing over 200,000 employees

Earlier this month, The Solar Foundation (TSF) released its annual State Solar Jobs Census, a state-by-state breakdown of its national report on the solar industry. The 177 page Solar Jobs Compendium summarizes data through Q3 2015 for each state, including growth projections for 2016. We’ll look at the major takeaways by region.

New England

  1. The Bay State is Still Booming…For Now – Massachusetts enters 2016 as the nation’s 2nd ranked solar market for jobs. Combined with having the 6th largest amount of solar capacity, these are impressive numbers for the nation’s 6th smallest state by area. For years, Massachusetts has been a leader in the solar industry, and its job market is projected to grow another 9 percent in 2016. As SREC II comes to a close and net metering leaves the state in a standstill, will solar employment continue?
  2. Connecticut’s Solid Showing – Connecticut is a very distant 2nd place to Massachusetts in New England, but boasts more installed solar capacity than the remaining four states in its division combined. The latter is due in part to the relatively small solar markets of Maine, New Hampshire and Rhode Island, but is also a testament to the state’s successful residential market. According to the report, over 60 percent of new capacity installed in Connecticut last year was in residential, creating a solid job market for installers. As for the commercial and industrial (C&I) market, we love us some ZRECs.
  3. Legislative Barriers – The report notes that Maine, New Hampshire and Rhode Island all have an installed solar capacity of under 20MW. TSF partly attributes this to regulations involving the states’ net metering policies (look away, Nevada). 

Mid and South Atlantic

  1. Success in the Carolinas – With successful Q4 projections for both states, the Carolinas finished strong in their respective situations. North Carolina, a powerful solar state that we know well, doubled its capacity in 2015 to claim hold to 2nd place in installed capacity behind California. With 90% of its capacity in utility-scale projects and less room for residential installations, its job market ranks 9th. South Carolina, an emerging solar market, looked to double its total installed capacity in Q4 alone. With a projected job growth of 20 percent in 2016, South Carolina will be a small market to keep an eye on.
  2. Maryland Makes Strides – Maryland added an impressive 1,200 jobs to its solar market in 2015, ranking 12th overall in US job markets. Through Q3, the state added almost 60 percent of its new capacity through residential installations, and plans to add up to 143MW of capacity on schools in 2016. With the April passage of a community solar bill, 2016 could be an interesting year for the state, but TSF projects more tempered growth in 2016 compared to its predecessor. Meanwhile, keep an eye on the SREC market, which is starting to decline given large utility-scale projects that will stunt the state’s supply/demand balance.
  3. Installation Without Representation! – Here in the District, the 1,000 solar jobs through Q3 2015 rank 6th in the nation per capita. A solid SREC market and high energy prices have driven D.C.’s steady residential market that awaits the outcome of the proposed merger of utilities Pepco and Exelon.

The West

  1. California Reigns Supreme – No surprise here. California is the nation’s leading solar market, and it’s not even close. The size of the state brings it in at 5th in jobs per capita, but it leads virtually everywhere else. The state added over 2,000 megawatts in the first 3 quarters and over 21,000 jobs (don’t worry, we won’t take all the credit). In 2016, TSF projects 14,000 new jobs in the Golden State, a 20 percent increase. Don’t expect a new solar champion next year.
  2. Nevada’s Cliff Dive – The Census report on Nevada’s solar industry is more of a glimpse into the past. Nevada ranked as the 3rd overall jobs market for solar through Q3 2015, but that was before the December net metering ruling by the Nevada PUC. After the PUC’s bait and switch, the state has seen multiple companies move out and hundreds of jobs slashed in the industry, sure to hurt the Census numbers for this year. What was once a state projected for 20 percent growth and 1,600 new jobs in 2016 is now scrambling to pick up the pieces of a once thriving market.

With the extension of the solar Investment Tax Credit (ITC), much of the 2016 growth projections could end up much different than they were at the end of Q3 2015 when the census data was gathered. Interested in joining the growing industry? Sol Systems is hiring! To learn more about solar energy careers with Sol Systems, please visit our careers page.

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.

SOURCE: The Sol Project Finance Journal, February 2016

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SOURCE is a monthly solar project finance journal that our team distributes to our network of clients and solar stakeholders. Our newsletter contains solar statistics from current real-life solar projects, trends, and observations gained through monthly interviews with our solar project finance team, and it incorporates news from a variety of industry resources.

Below, we have included excerpts from the February 2016 edition.  To receive future Journals, please email pr@solsystems.com.

PROJECT FINANCE STATISTICS

The following statistics represent some high-quality solar projects and portfolios that we are actively reviewing for investment.

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PPA-RATE-Feb

STATE MARKETS

California - At the end of January, the California Public Utilities Commission voted to uphold retail rates and defined parameters for net energy metering (NEM) 2.0, which will go into effect when each utility territory meets its respective cap. San Diego Gas & Electric will likely be the first. Major updates since the Proposed Decision include the Commission’s exclusion of transmission charges from non-bypassable charges (NBCs), effectively lowering NBCs to ~2-3 cents/kWh. A detailed analysis of NEM 2.0 can be found in Utility Dive. We expect PPA rates to be lower for California projects under the new regime. Looking forward, CALSEIA’s got their eyes on time-of-use rates.

Meanwhile, the Self-Generation Incentive Program (SGIP) will open to applicants on February 23. SGIP is meant to encourage self-consumption by incentivizing behind-the-meter applications, such as energy storage.

NEM 2.0 combined with incentives for storage will further push the California market toward self-consumption.

Maryland – SREC prices in Maryland have recently dipped from $160/SREC to $120/SREC. Price declines will likely continue, as the extension of the solar investment tax credit (ITC) has made it possible to build utility-scale projects in the state, which will affect the supply demand balance. One such project is Great Bay, a 75MW project expected to hit the market in the next 12 months. In addition to the added supply of solar capacity in the state, the solar requirement within the Renewable Portfolio Standard (RPS) is stagnant at 2% beginning in 2020 as the SREC market effectively begins to merge with the Tier 1 REC market. Depending on what percentage of PJM pipeline you view as likely to go online, and what the effect on residential uptake will be as REC prices decline, this combination could result in ample supply until 2020 and oversupply thereafter. Given the utility-scale projects expected to come online over the next several years, these trends are likely to continue even with the pending RPS changes.

​Meanwhile, legislation mandating utilities to provide permission to operate within 20 days is sailing through Annapolis.

Massachusetts – Well, that was fast. On February 5, the Massachusetts Department of Energy Resources (DOER) announced that the SREC II program for projects over 25kW has filled up (25kW still has under 100MW left). Sound familiar? If so, that’s because the first iteration of the SREC program – cleverly named SREC I – reached its cap fewer than 2 years ago. While 450MW of projects over 25kW have applied for SREC II in the last month, based on our analysis, expect some major churn.

We expect that many of the projects in the queue are unbaked or missing an interconnection agreement, meaning they will be deprioritized in the queue. Developers with projects close to start of construction and/or with an interconnection agreement still have some hope for receiving a coveted SREC II certification (Read our thorough analysis for more details on the Massachusetts SREC II crunch). Unlike the transition from SREC I to SREC II in 2014, neither an emergency regulation nor an “SREC III” are currently being considered.

On top of this, Massachusetts still has that whole net metering thing to worry about; 107,296MW remain on the waiting list in National Grid territory. Long-term, sustainable solar policy, anyone?

SOLAR CHATTER

  • After a valiant effort by the Maryland-D.C.-Virginia Solar Energy Industries Association (MDV-SEIA), a collection of pro-solar legislation was tabled in Richmond after a heavy showing from opposition at the last minute. Legislation – including a bill to authorize third party financing – is expected to be reconsidered in a summer subcommittee.
  • No soup for you! And by soup, we mean PPAs. In early February, the Kansas Department of Revenue (DOR) confirmed that only a utility can sell power to a customer.
  • According to the latest Solar Jobs Census, the solar industry now employs 208,859 workers. 75,598 of those jobs are in California, and Washington, D.C. ranks sixth nationally in solar jobs per capita. P.S. We’re hiring!
  • Grow your business with the RE Growth Program. Rhode Island Renewable Energy Growth Program should be coming back in 2016; look for the first enrollment of 2016 to be announced in late spring. Don’t cross this “bonus” market off your list. Though the program is relatively small compared to adjacent markets, pricing is high.
  • One bad apple spoils the whole darn bunch! Despite the bad reputation that YieldCos have garnered over the past several months, several YieldCos are still fundamentally strong. If only Wall Street could tell the difference…
  • After some challenges early on (whatever you do, don’t mention co-location), Minnesota’s community solar gardens are nearly home free. Projects are already on the market and will be built and/or come online soon.

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.