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The Sol SOURCE, February 2017

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

Below, we have included excerpts from the February 2017 edition. To receive future Journals, please subscribe or 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.

Have a solar project in need of financing? Our team can provide a pricing quote for you here.

PPA RATE Feb (1)

Joined

STATE MARKETS

Maryland - It’s official. This month, the Maryland state legislature voted to override Governor Hogan’s veto to HB1106, the Clean Energy Jobs Act. With the override, the state’s renewable energy goal has increased to 25% by 2020 (up from 20% by 2022), and the solar carve-out increased from 2% by 2022 to 2.5% by 2020. While short-term SREC pricing did not increase, the override prevented a further dip in values. Its primary benefit will be a boost to 2019 and 2020 demand, which may result in higher pricing for those SREC vintages. Perhaps SREC prices will rise in coming years, but for now, $20/SREC is the new normal in Maryland, where SREC values have plummeted over the last year given rapid build, most notably of the residential sector. At press time, 493MW of behind-the-meter (<2MW) solar has been installed in Maryland, as compared to 171MW of projects over 2MW in size. More recently, two bills have been introduced to examine the oversupply in the SREC market: one that would expand the solar carve-out to 4% (HB1457) and another that would require a study to examine possible “bigger picture” changes to the RPS (HB1414).

Meanwhile, energy storage is a hot topic at the state legislature this session, where several storage bills will soon be heard in committee.  Proposed legislation could create an energy storage income tax credit (HB0490/SB0758) and an energy storage grant program (HB1395). Introduced legislation would also require the Maryland Clean Energy Center to study possible incentives and regulatory constructs to encourage energy storage (HB0773/SB0715).

Massachusetts - After months of stakeholder engagement, the ever-patient, ever-diligent Massachusetts Department of Energy Resources (DOER) announced the design of Solar Massachusetts Renewable Target (SMART) program, the next iteration of the state’s solar incentive regime. As a refresher, commercial projects in the nation’s #7 solar market have come to a halt [with few exceptions] since the SREC II program closed. With SMART, Massachusetts will transition away from an SREC program and toward a declining block incentive. SMART will also incentivize rooftop solar, canopy structures, and storage – and provide a lower incentive to greenfield development. Land use and siting requirements will be more stringent than in SREC I and SREC II.

Transitioning from one program to the next takes time, and DOER acknowledged this at the January 31 “reveal”. In order to avoid further disruptions in renewable energy investments in the Commonwealth (Massachusetts actually lost solar jobs this last year, according the latest Solar Jobs Census), the DOER will extend SREC II to provide a “bridge” to SMART. In order to qualify for SREC II at a discounted incentive level, projects must reach mechanical completion by the start of the new program, which is now estimated to begin in January 2018 at the earliest. These details are subject to change; comments on the SREC II extension were due February 17.

While SREC II has been extended, the net metering caps have not been lifted; legislation is required to lift the caps (again). The SMART program aims to circumvent this by providing developers with an “on-bill crediting” alternative to net metering. Notably, the Board of Public Utilities – not DOER – must lead this process and so there is a degree of uncertainty here. Details are still to be determined.

The Massachusetts market is experiencing many changes. Sol Systems is following the market transition closely and would be happy to talk them through with you. Feel free to give us a call at (202) 349-2085.

South Carolina - Solar incentive programs for non-residential projects up to 1MW AC in Duke Progress and Duke Carolinas territory have filled, and South Carolina Gas & Electric is soon to follow. While cumbersome fee in lieu of taxes (FILOT) negotiations have hindered economics for commercial and industrial solar projects in the Palmetto state, project economics could improve vastly if property tax abatement legislation is passed this year. The Renewable Energy Property Tax Act (S.44) passed its third and final reading in the Senate in early February and now sits with House Ways & Means. If passed, South Carolina would offer an 80% property tax abatement for non-residential systems, much like its neighbor to the North. Property tax abatement nearly passed last year, but failed after a last minute “poison pill.”

SOLAR CHATTER

  • The numbers are in. The U.S. solar industry added more than 14.6 gigawatts of new capacity in 2016, a 95% increase over 2015! As of November 2016, the industry now employs over 260,000 solar workers across the country, up from 210,000 jobs in 2015. The Solar Foundation estimates that one out of every 50 new jobs added in the United States in 2016 was created by the solar industry, representing 2% percent of all new jobs. Can’t stop, won’t stop.
  • Will the corporate offsite space move away from the RFP business model as more bilateral conversations between corporate purchases and developers pick up steam? We’re watching this trend closely, and foresee potential consolidation in the renewable energy advisory space.
  • With Dallas nearby and sufficient land available, L-Z North in Texas is one of the hottest load zones in Texas for offsite renewables.
  • We’ve got our eyes on the next iteration of the Los Angeles Department of Water and Power (LADWP) solar feed-in tariff program. Tune into the March edition of SOURCE for updates; we’re expecting an official announcement shortly.
  • New Hampshire property owners are increasingly interested in solar, but policy constraints make it challenging for projects to pencil. Customers are only allowed retail net energy metering up to 100kW, and only projects up to 1MW may be interconnected. The New Hampshire Public Utilities Commission is currently exploring new alternative net metering tariffs and whether a cap on solar continues to be necessary.
  • Legislation expanding Rhode Island’s Renewable Energy Growth program (RE Growth) has been filed in the House and Senate. Legislation would expand RE Growth for another 10-years at 40MW each year. Meanwhile, we’re watching closely for 2016’s first enrollment period to open.

ABOUT SOL SYSTEMS

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

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

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

Federal Trends to Watch

Solar energy progress has always been driven at the state level, but we have our sights set on federal trends as well.

Solar energy progress has always been driven at the state level, but we have our sights set on federal trends as well.

From renewable portfolio standards to net metering, solar energy progress has always been driven at the state level. Still, here are a few federal level trends to watch.

1. FERC

Since the departure of Commissioner Norman Bay, the Federal Energy Regulatory Commission (FERC) lacks a quorum to issue major decisions. To address this until a replacement can be confirmed, FERC issued an order to delegate more authority to staff. But, in the interim, could this leave several key solar decisions hanging in the wind?

For example, FERC is investigating transmission charges in the ISO-New England, which are much higher than other regions, and twice as high as PJM. Similarly, will key decisions on PURPA move forward during this limbo period? Notably, we have had our eye on North Carolina, where Duke has reduced contract terms for some larger qualifying facilities (QF) to five years. While a complaint has been filed at the North Carolina Utilities Commission, will this ultimately be in the hands of FERC to decide how long a contract term is required to be “financeable,” and if so, could this set a precedent for other states?

The natural gas industry is less than enthused about the lack of quorum too, as pipeline approvals have slowed significantly.

2. Border tax?

Border taxes – or a border adjustment tax –  has been getting play within Congress and the White House. NPR reports that “a 20 percent tax on all imports would produce an estimated $1.2 trillion over 10 years, enough to offset much of the loss in revenue from the big reduction in tax rates that Republicans want, including dropping from a 35 percent rate to 20 percent for corporations.”

Is the discussion of a possible border tax affecting solar equipment prices? In short, no, uncertainty regarding a tax on imports has not driven up pricing of modules, trackers, inverters, or any other technology. Price declines persist given increased supply and competition from rest of world manufacturers. As we have written about at length, we expect these price declines to continue. However, given the amount of Chinese steel and inverters, modules, and other materials that the U.S. solar industry consumes, a border tax will be cause for concern if passed and signed into law.

3. Interest rates

Investors continue to watch to see if the Fed will raise interest rates. If they do, the cost of capital will rise for infrastructure projects, including solar. U.S. Federal Reserve Chairwoman Janet Yellen mentioned that the Fed could make a decision during upcoming meetings.

Lenders have already responded to the Fed rate increases from late 2016 with an increase in their expected interest rates. We expect this practice to increase in light of expected gradual increases from Fed.

4. Tax reform

As we discussed last month, tax reform will take time, and we are of the opinion that any tax reform is unlikely to impact 2017 or 2018 tax liabilities. Still, the uncertainty regarding tax reform – mainly, how much tax liability will remain in the market after a large rate reduction – rather than tax reform itself, is the real risk. This is impacting tax equity deal structures and has created uncertainty in pricing, as well as discouraged certain new tax equity investors from entering the solar market.

The uncertainty after the election led some potential new solar investors to question whether now was the time to make the leap into solar. In our experience, we have found that the initial post-election shock is over. While uncertainty regarding tax reform looms, many investors’ concerns are easing as they better understand the relevant tax equity structures. And, we have found that developers with sophistication and access to capital are moving forward with business as usual.

Want a refresh on tax reform? Check out the Letter from our CEO from January, and follow SOURCE for our upcoming white paper on this topic.

This is an excerpt from the February 2017 edition of The SOL SOURCE, a monthly electronic newsletter analyzing the latest trends in renewable energy based on our unique position in the solar financing space. To view the full Journal, please subscribe or e-mail pr@solsystems.com.

ABOUT SOL SYSTEMS

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

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

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

A Look at the Customer Perspective: 7 Common Onsite Solar RFP Mistakes

Mistakes in RFPs are common, and we've identified some misconceptions and pitfalls that often lead to them.

Mistakes in RFPs are common, and we’ve identified some misconceptions and pitfalls that often lead to them.

Since SOURCE’s inception, we have discussed request for proposals (RFPs) at length from the developer’s perspective. We provided local developers with advice for competing with national installers who generally have a lower cost of capital and can build with lower margins, and discussed why storage is increasingly a hot topic in RFPs, though it is only viable in a few limited markets. We have also discussed the inherent “race to the bottom” problem with RFPs, and how developers should choose RFP opportunities wisely. 

But, now, with Sol Systems doing development work with specific commercial clients, and we realized we’ve never discussed RFPs from the customer perspective. Until now….

You have gotten to the stage of “yes, we [insert the name of your awesome company here], are going to release an onsite solar RFP.”  It’s likely been a long road for you. And by simply arriving here, you have accomplished a lot.  You’ve herded a lot of cats to obtain all kinds of unexpected internal approvals! So have yourself an adult beverage.  Pat yourself on your back.  And take a deep breath.  Now the real work begins.

Because you’ve put in so much sweat equity thus far, you should be aware of some common misconceptions and pitfalls that can threaten the success of your RFP. In the spirit of sharing some love, our Director of Development Engineering, Mark Cooper, shares seven common mistakes made in issuing RFPs.

1. Certification Requirements

  • You will need to specify if your construction labor must be union or not.  This is one of the largest variable cost drivers in solar construction.
  • Resist the temptation to require solar industry certifications (NABCEP) or local contractor registrations.  A quality solar vendor can be identified by a history of successfully installing similar projects.  Experience is the best qualification. Solar install firms have specific skills and partnerships established for a successful install. Requiring special certifications or something similar will reduce the efficiency of that team. NABCEP is the most well-known, but there are other just as good, so there is no specific reason to requires NABCEP. Focus on experience.  Not just in “winning bids” but in completing projects on-time and on- budget.
  • On the contracting side, some states have published lists of ‘Renewable Energy Professionals’ or similar.  Some RFP require that bidders be on this list.  When you check the list online, many of the companies are bankrupt and others are in the lighting efficiency business.  What started out sounding like a reasonable requirement just limits access to the best PV partners.

2. Equipment Requirements 

  • Require that the installed system meet all local building and electrical codes, and that all equipment be UL listed.  Beyond that, specific requirements will increase cost and possibly prevent the solar firm from designing with the newest and safest equipment.

-Example: Solid aluminum or stainless steel can be replaced at lower cost with zinc or aluminum plated steel.

-Example:  Module technology (thin film vs. polycrystalline vs. monocrystalline) should be at the discretion of the PV firm

-Example:  Inverter technology (micro vs. string vs. central) should be at the discretion of the PV firm

  • Don’t specify particular manufacturers.  Trust your PV supplier to know the best combination of equipment to allow for a safe and efficient install at your particular site. If you don’t feel like your team has the engineering expertise to validate your PV supplier’s choices, consider leveraging an internal engineer within your company or ask them for a recommendation on a third-party engineering firm to help.

3. Thinking Big is Better 

  • Don’t let big names or a stock symbol wow you. Focus on the history of the work. And work that is relevant to your scope and needs.
  • While many companies might have established operations in many states and many projects completed, these features might be a sign of high overhead and low rate of actually building contracted projects.  A smaller firm with a track record of success on the projects they carefully select may be the right choice.
  • Your best chance of success is with a firm that that has reliable financing options and a history of successful installs.

4. “Consultant”: Valuable or Not?

  • Do you need a third party for sheer bandwidth, management, and risk management? The time and added cost might make sense for you.
  • Margins in the solar industry are very thin.  A consultant fee can easily be enough to prevent a project from providing both a benefit to the offtaker and a breakeven situation for the PV firm.
  • The time lost when a consultant runs a complex RFP process often allows local incentives to decline to the point that a project is no longer beneficial.  We have seen this happen many times.
  • If you have a consultant, be a part of the process.  Reach out to a small number of quality PV partners to discuss the project before you issue an RFP. Your best chance for long-term savings is to move forward ASAP with partners who can provide moderate energy savings with a high probability of rapid install. Plus, your consultant will appreciate it as well, as they will have a clear understanding of your expectation of results and what success looks like.

5. Multiple RFP Winners

  • Margins in the solar industry are very thin (have we mentioned that yet?).  Reduced administrative costs and increased economies of scale that come from a single award are often critical in making a portfolio of projects pencil.  So, awarding your entire portfolio to single firm can potentially create added value and savings.
  • That being said, each PV firm is going to have different strengths and weaknesses and perhaps some markets where they are more competitive than others.  Depending on the size and scale of your portfolio, and the responses you receive, it’s okay to share some of the wealth… giving your 10 sites on the East Coast to one company… and 10 sites on the West Coast to another company.
  • If you decided to share the wealth, just remember to scale.  If you don’t have a large national portfolio, it likely doesn’t make sense to share.  If you do have the size to spread the love, don’t award by individual site, award by region.
  • No matter the size of your portfolio, don’t spread your portfolio across more than 2 or 3 winners Even with a massive portfolio, you are still going to lose economies of scale. Which means a higher PPA price for you. And that would not be cool for you.

6. Dictating System Type: Rooftop vs Ground Mount vs Carport

  • We know you’ve done your research.  So, it’s a good opportunity to have your PV firm weigh in on the possibilities.  Beware of putting them in a box—help them (us!) help you!
  • Provide all options and rely on your PV firm to propose the best system for you.

7. Dictating Locations

  • Again, we know you are smart and have done the research.  Just remember we live this work every day.  You may or may not think something will pencil.  But let us show you. Give us all your locations (roof, ground, parking lots) —and let us do the heavy lift on the opportunity. We have in-depth policy knowledge, track opportunities in new and emerging markets, and it is our job to advise you, the customer, on strategy.  It’s your PV partner’s job to make you look good.
  • Developers LOVE data.  Give them as much as possible…locations of utility meters and as much information you have about the load at each of those meters: Yearly is good, monthly is better, 15-minute intervals is best. Seriously, it makes our day to receive 15-minute intervals (#nerdalert).
  • All this data will help a developer maximize project opportunities and custom-fit them to a state’s individual net metering policy.

Well, there you have it.  Best of luck with your solar RFP release, and we hope this knowledge will make you look like a rock star. Feel free to reach out for advice or even just to grab an adult beverage. We won’t charge a consulting fee. And if you are nice, we might even pay for your drink.

This is an excerpt from the February 2017 edition of The SOL SOURCE, a monthly electronic newsletter analyzing the latest trends in renewable energy based on our unique position in the solar financing space. To view the full Journal, please subscribe or e-mail pr@solsystems.com.

ABOUT SOL SYSTEMS

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

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

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

What the Patriots’ Miraculous Super Bowl Victory (however painful) Can Teach Us about Installing Solar in Cities

Following the historic Super Bowl LI this past weekend, which featured the first ever overtime and largest comeback in the game’s history, many of us left our respective Super Bowl parties with a few takeaways:

  • Nothing brings the country together like football (specifically: loving or hating the Patriots)
  • Mr. Clean had the best commercial of the night
  • It’s never a good idea to bet against Tom Brady (even down 25 points)

But are there other takeaways? Trinkets of truth that one could glean from this amazing come-from-behind win? Of course. Oddly enough, the game can teach us a lot about installing solar in cities.

1.     Come Prepared and Stay Prepared

The Patriots’ ultimate success was set in motion long before the game was played, much like the success of a solar project. Preparation is everything, whether you are installing a new game plan for an upcoming opponent or a new rooftop solar array. You have to be ready for when things don’t go as planned. As in the Super Bowl, you never know when you will need two different 2-point conversion plays drawn up. As in solar, you never know when you might have an unforeseen site access restriction or a delay in procuring project critical equipment Great solar installers have great backup plans.

2.     Maintain Coordination and Communication

Coordination and communication are two keys to success for solar installations in cities

Coordination and communication are two keys to success for solar installations in cities

In order to win a Super Bowl or construct a portfolio of municipal solar projects, you need to coordinate a lot of different moving parts. Just as everyone needs to be on the same page from Patriots Owner Robert Kraft and all the way down to the guy who “inflates” the footballs… each of the stakeholders engaged in the solar project needs to understand the project timeline and how it will impact them. This is accomplished with consistent and effective communication between the engineers on the site, “players on the field” and the project managers, “coaches” on the sidelines.

3.     Pay Attention to the Details

Anything less than expert attention to the smallest of details can result in major project flaws for a municipal solar installer. As we saw with Tom Brady’s interception, which was returned by the Falcons for a touchdown, even the slightest mistimed or misdirected action can lead to a major setback. Especially in a city where space is limited, it is truly a game of inches, and one solar carport beam out of place could prevent an ambulance or school bus from safely navigating the parking lot. Catching small issues before they turn into big issues can save a lot of time and money and headache in the future (See Julian Edelman’s catch).

4.     Minimize Disruptions and Distractions

The stakes are higher in the Super Bowl, just as they are higher in a solar project in a city. When you are working on a hospital or police station where there is critical, emergency infrastructure that can’t be shut down, you must find a way to work around these operations. Distractions will inevitably occur as stakeholders manage competing priorities, but solar project managers must work to minimize them—just as the Patriots coaches kept their team focused on the task at hand despite the game’s media frenzy and Lady Gaga’s captivating halftime performance.

At the end of the day you can’t argue with experience and the Patriots were able to deliver in the Super Bowl because they have been there and done that. Sol Systems has also been there and done that when it comes to installing solar in cities (we recently completed an 11 MW portfolio for DC-DGS. Stay tuned for a case study). If you’d like to find out if your city could win with solar, reach out today.

ABOUT SOL SYSTEMS

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

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

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

It’s Official: Maryland Aims for 25% Renewables after Overriding Governor’s Veto

If at First You Don’t Succeed… 

The Clean Energy Jobs Act will now become law.

Following the veto override, the Clean Energy Jobs Act will now become law.

In May 2016, renewable energy advocates were surprised to see Governor Hogan veto the Clean Energy Jobs Act (SB 921/ HB 1106), which had passed the legislature with strong bipartisan support.  The Clean Energy Jobs Act would have increased the states renewable portfolio standard and provided a modest increase to the solar carve-out.

However, after the Governor’s veto, hope was not lost. After passing with a veto proof majority, legislators were confident that an override would occur in early 2017. After months of waiting, the state legislature was successful in overriding Governor Hogan’s veto last week, and the Clean Energy Jobs Act will now become law. The Maryland Senate overrode the Governor’s veto in a 32-13 vote, and the veto override passed with a 88-15 vote in the House of Delegates.

What Does This Mean for Renewables?

With the Clean Energy Jobs Act approved as law, Maryland’s renewable portfolio standard will now be raised to 25% by 2020. This means that by 2020, 25% of the state’s electricity needs will be met from clean energy sources like solar and wind. This is a bump from the previous standard of 20% by 2022. The solar carve-out will also increase slightly from 2% by 2022 to 2.5% by 2020.

Such a modest increase in the solar carve-out may provide some initial relief to Maryland’s solar renewable energy credit (SREC) market, which plummeted in 2016 for a number of reasons, mainly higher than expected residential build, and to a lesser extent, the perception of the PJM interconnection queue. Before the passage of the override, Maryland SRECs were trading at $18, only slightly higher than Pennsylvania and Ohio, two markets that have experienced lackluster solar growth over the last several years. For reference, prices in Maryland were at $100/SREC only one year ago.

Conclusion

According to the Chesapeake Climate Action Network, the Act will incentivize 1.3GW of new clean energy in Maryland and could reduce greenhouse gas emissions by more than 2.7 million metric tons per year. And, while the override will not bring SREC values to early 2016 levels, this victory is an important first step in providing some relief to the market which is home to over 5,400 in-state solar jobs.

More importantly, it is yet another win for strong, local renewable portfolio standards. With this new act, Maryland joins other renewable policy success stories from 2016. Notably, we saw Ohio put an end to its RPS freeze, New York and Rhode Island aim for high renewable targets of 50% and 38.5% respectively, and Illinois sign into law a bill to make their RPS more effective. D.C., Oregon, and Michigan also increased their RPS standards in 2016. As other leadership states look to increase their renewable standards to 40% or even 50%, will Maryland lead or follow? Only time will tell.

ABOUT SOL SYSTEMS

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

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

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

The Sol SOURCE, January 2017

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

Below, we have included excerpts from the January 2017 edition. To receive future Journals, please subscribe or 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.

Have a solar project in need of financing? Our team can provide a pricing quote for you here.

PPA RATE JanV2

Joined Charts

STATE MARKETS

Ohio – On December 27, Ohio Governor John Kasich affirmed his support for renewable energy jobs and vetoed House Bill (HB) 554. The legislation that would have eviscerated the state’s renewable portfolio standard (RPS) by making the standard voluntary for two years. A voluntary standard would have removed the “teeth” from the RPS, sending a signal that Ohio was not open to renewable energy business. In a statement on the veto, Governor Kasich stated that HB 554 would have created “self-inflicted” damage to the state’s economic competitiveness. As a result of the veto, the RPS, which was on pause in 2015 & 2016, resumed on January 1.

While rhetoric from RPS opponents has cited high costs of the program, publicly available data from the Public Utilities Commission of Ohio (PUCO) shows that the RPS costs ratepayers an average of 29 cents per month, a small price to pay for over 4,800 in-state jobs.

Governor Kasich was the third Midwestern Republican governor to support local renewable energy investment this past December. Illinois Governor Rauner signed a massive RPS bill in early December, and Michigan Governor Rick Snyder signed a modest increase to the state’s RPS shortly thereafter.

Maryland – All eyes are on Annapolis as the local solar industry awaits a veto override as early as next week. In May, Governor Hogan vetoed House Bill (HB) 1106, legislation that would have increased the state’s renewable portfolio standard (RPS) to 25% and slightly increased the state’s solar carve-out. While the solar carve-out increase is modest, it will be an important first step in providing relief to the local solar renewable energy credit (SREC) market, which has plummeted in value over the last year given larger than expected residential builds, and to a lesser extent, the perception of a large PJM interconnection queue. Maryland SRECs are currently trading at $18, only slightly higher than Pennsylvania and Ohio, two markets that have experienced lackluster solar growth over the last several years.

Meanwhile, after much delay, the 300MW+ community solar program will soon open for business. Stay tuned!

Virginia – The Solar Energy Industries Association (SEIA) estimates that solar in Virginia grew by 72% over the last year. At Sol Systems, we predict even further growth in 2017, with the biggest gains coming from the utility-scale sector. Aside from Dominion’s 400MW by 2020 goal and some very high profile corporate offsite purchases, there is hope for success at the state house thanks to an intensive working group of solar industry and utility stakeholders. Notable legislation from the stakeholder group includes a utility-administered community solar program and a streamlined permitting process for utility-scale projects, as well as incentives for utilities to allow on-site power purchase agreements for large-scale projects. PPA legality has been limited to a string of other bills has been introduced outside of the industry-utility coalition, and Ivy Main from the Sierra Club does an excellent write-up. With a large number of data centers existing in the state, which consume massive energy loads, the potential for major growth exists.

SOLAR CHATTER

  • In the aftermath of last year’s IRS 50(d) ruling, we expect investors to coalesce around preferred tax equity structures and pricing, all while the prospect of corporate tax reform looms. Developers will most likely be pushed to bear this risk.
  • While New Jersey’s “pull forward” legislation remains very much in play, some are optimistic about the chances of a longer term renewable portfolio standard (RPS) bill under a new administration; gubernatorial elections will take place this November. Notably, an aggressive 80% RPS bill has already passed the Senate. Meanwhile, New Jersey SREC prices have increased to $260 in anticipation of the BGS auction.
  • Changes are on the horizon in New York. The Public Service Commission is expected to issue an order on the Value of Distributed Energy Resources (VDER) in the coming weeks. VDER is an ongoing proceeding to calculate the value of distributed generation to the grid and will ultimately replace net metering in the Empire State. Comments on the state’s 50% Clean Energy Standard – which will encourage large scale renewables – were due on January 10. While the 2017 procurement is expected to be much smaller than the industry had hoped, with the closure of Indian Point nuclear plant in 2021, large scale renewables could help to fill its gap.
  • The solar industry is eagerly awaiting an updated proposal from the Massachusetts Department of Energy Resources (DOER) on the new solar incentive program, as well as word as to whether SREC II will be extended as a bridge to the new program. DOER will update stakeholders during a January 31 meeting. The Commonwealth is also in early stages in setting targets for energy storage and passed electric vehicle legislation at the end of last year.
  • Changes to D.C.’s community solar regulations will grant residential community solar subscribers full retail credit. To be an eligible facility, projects must be located within the District of Columbia. While sites may be challenging to find, D.C. has the strongest SREC market in the U.S.
  • The California Public Utilities Commission recently announced its revised proposed decision, creating guidelines for assessing time of use (TOU) rate shifts in pending investor owned utilities’ rate cases. Specific TOU periods and rate design will be determined separately in each IOU rate case. There is still hope among solar advocates that peak period shifts will be less severe than initial IOU proposals indicated. For commercial customers, systems will be eligible for 10 years of grandfathering under previous TOU period structures as long as initial interconnection applications are in by January 31, 2017 and final building permits are submitted by July 31, 2017 (December 31, 2017 for schools). Uncertainty persists around additional grandfathering for systems interconnected after July. On the storage side, the debut of the updated Self Generation Incentive Program (SGIP) continues to lag, with rumors of late signaling that Tier 1 of the incentive may not be made available until April.

ABOUT SOL SYSTEMS

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

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

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

Letter from CEO Yuri Horwitz

Friends, Clients, Customers, Partners,

Each year we take a collective breath as a company to take stock of where we are and what’s happening around us. This year is no exception. Below, we share our thoughts on the current state of the solar market and Sol Systems. Take a look if you’d like, and feel free to follow up with us with any questions you may have.

The solar industry is thriving, but it remains a volatile place where new entrants and old ones struggle as they build, collapse, succeed, and fail – sometimes in that order. This past year was a turning point for the industry. The federal investment tax credit (ITC) was extended in full through 2019, and in part through 2023; a huge number of corporations have dedicated themselves to go 100% renewable energy and are procuring solar energy aggressively; and there are now over one million solar systems in the United States. At the same time, the single largest renewable energy developer filed for Chapter 11 bankruptcy protection; the two largest US manufacturers have lost over 50% of their value in the last 12 months; and the single largest residential developer and financier is struggling with financial difficulties. Still, the outlook is good, but realizing it is complex. Here’s our take.

The Transformation of the Energy Industry Means Competition

The energy industry is undergoing a fundamental transformation unseen since the mid-1930s when the United States provided millions with electricity throughout the Midwest through the Rural Electrification Act of 1938. Natural gas, solar and wind energy, and storage (basically in that order) are driving production, delivery and demand disruption, plus energy efficiency and more active customers are also contributing. Solar is quickly becoming one of the most competitive sources of electricity for corporate, industrial, and municipal users. But the solar industry is not alone.

Huge U.S. natural gas discoveries in the last half decade, new technologies around hydraulic fracking and horizontal drilling, and new pipelines have brought all-in prices for natural gas down dramatically. Henry Hub pricing has fallen dramatically in the last decade and now stands where it did in 2008.  But, today, most of the gas purchased in the United States is actually produced in the United States, and much of that gas is being used to produce electricity. In fact, for the first time in our history, natural gas produced more electricity than any other source in 2016. Natural gas pricing is set to be fairly stable in the next 3 years, and we expect that with coal plant closures it will continue to drive electricity pricing around the country.

CEOletterGraph

Natural gas will cannibalize coal and nuclear power, and will compete directly with solar (especially large solar projects serving corporate customers and utilities). Solar will also compete with wind projects having increased hub heights, longer and more efficient blades, and cheaper turbines, not to mention a production tax credit (PTC) that provides almost sixty percent (60%) of the CapEx of wind projects. Coal, nuclear, and large-scale hydroelectric will fade as regulations, a stable electricity market, storage, and power plant fleet age catch up to existing assets.

So how can solar compete in this environment? We believe that solar succeeds in this highly competitive reason for 5 reasons:

  1. Solar costs are falling faster than any other technology – 20-40% each and every year for the last 10 years.
  2. Solar empowers stakeholders to engage in their energy procurement, financially support that technology, and vote for it. Each and every rooftop system helps solar build a political constituency that supports solar incentive programs and solar policy.
  3. Shorter development timelines than any other technology mean projects can scale up quickly to meet demand in specific regions. The electricity market is a volatile and dynamic market, and this flexibility favors solar when corporations are procuring solar, when utilities need to replace or develop electricity supply quickly, and when communities are concerned about carbon emissions. Solar projects can also be sized appropriately to a customer’s load, and solar can exist in suburban environments.
  4. Limited environmental issues compared with natural gas, hydro or even wind projects mean more community support. While wind maps point to restricted and specific areas, solar projects can produce electricity competitively in virtually every state in the country.
  5. Solar produces when energy is needed for the most part, which means it doesn’t disrupt energy markets like wind has done in Texas.

Deep Dive: Costs Will Continue to Decline

In 2010, I vividly remember sitting at my desk and hearing that modules were being sold at a then jaw-dropping $2/watt. That number was as unbelievably cheap at the time, and seems outlandishly expensive now. Projects at that time were being built for $4-5/watt. We expect to see module pricing at or around 40-45 cents/watt for conventional polysilicon modules, and drop below 40 cents in 2017. That’s a 20% reduction in just the last couple of months. Some are predicting solar modules in the 20-30 cent range by 2018.

Balance of system costs (such as racking, inverters, and installation) are all coming down in price. Single-axis trackers have become so cheap that they’ve become the industry standard for large systems in most markets. Chinese inverter manufacturers (inverters condition and transition a solar project’s DC electricity to AC) are reducing costs by 50%, producing inverters at 4-8 cents/watt. Additionally, new 1500 Volt dc applications used in Europe are now being integrated into U.S. projects, reducing cabling costs, installation time, and even system level energy losses. Simultaneously, the industry is just getting better at building solar, resulting in reduced labor costs per watt and overhead as well.

This downward pricing has put pressure on high efficiency modules produced by U.S. companies like SunPower and First Solar. Subsequently, their stocks have declined 49% and 72% respectively in the last 12 months. That makes solar look ugly from a public equities perspective, which is how most people consume information about solar. But, that’s a myopic view.

In fact, these price declines mean that solar projects can deliver energy at an increasingly competitive price. Our team estimates that for each 10 cent/kW decline in all-in pricing for utility solar projects, our industry can reduce power pricing by about .5 cents/kWh. That doesn’t sound like much. But, it means that if we can bring solar project pricing down by 30 cents in the next three years, we’ll bring power pricing down by 1.5 cents. That’s huge for a project selling power at 4-5 cents. Take a moment and consider what this industry can do in the next 10 years, or 20 years.

Simple steel in the ground and silicon in the sun, with minimal moving parts, mean a very attractive long-term energy asset with minimal production risk. Lower risk assets are lower risk investments, which is why large insurance companies like John Hancock and Prudential are doubling down on solar. Lower risk investments mean a broader pool of capital and a lower cost of capital, which means that solar owners can finance their systems long-term more readily, and offer energy customers lower energy pricing.

In short, solar will rapidly compete directly with wind and natural gas – which is one reason that corporates are procuring solar power directly.

Corporations Will Increasingly Control Energy Markets – and Buy Solar

Corporations are procuring energy directly from projects, either through physical delivery, or through “virtual” delivery via a contract for differences (CFD). In the last 18 months, General Motors signed a PPA for 34MW; Google, for 43MW; Amazon, for 150MW; Apple, for 130MW; Kaiser Permanente for 153MW, and Dow Chemical for 200MW. Over 500MW of solar have been built to serve corporate and municipal customers directly in the last two years.

Our advice for corporates entering into this market is that they must do their homework. Customers should consider the correlation between nodal or zonal pricing at their load node, and nodal pricing at the solar project; long-term congestion risk as other future power projects can depress nodal pricing; and development risks (double check development timelines, risks, and the bona fides of your developer partner). Corporates should also be aware of some of the accounting implications, namely derivative accounting, that are critical in Contract for Difference (CFD) transactions. Perhaps most importantly, we suggest that corporates think of offsite contracts as a hedge against volatility, and a tool for sustainability, rather than a tool to lock in savings. Energy prices go up and down, and sustainability officers would do well not to promise too much to their CFOs.

We believe we will see an explosion of corporate interest in offsite renewables, and specifically offsite solar. Most energy load is urban in nature, and rooftop solar cannot effectively offset enough of this load (we’re currently developing one of the most complex urban installs in history, and it is a challenge).  Generally speaking, solar projects can be located closer to load (which reduces basis risk) and developed more quickly around a customer and their interest. Additionally, a distributed solar fleet that serves customers can be broken out and located throughout a RTO or ISO, which further reduces basis risk.

This is why we’re investing heavily in these assets with development partners, and also working closely with a number of corporate, educational, and municipal partners to help them achieve their sustainability goals.

Solar Scales

Solar employs hundreds of thousands of people in every state in this country including finance, construction, manufacturing, development, and asset management professionals. Solar has gone global, it has gone big, and it has gone corporate. There are certainly downsides to this growth, but we believe it is the natural maturation of an industry and one that we can all be proud of.

The result is that Southern Company, Sempra Energy, Dominion, Excel, Exelon, ConEdison, MidAmerican, and every single large energy company in this country is either developing solar assets or has invested in companies that develop solar assets. Goldman Sachs, JP Morgan, Bank of America, Wells Fargo, US Bank, PNC, M&T and virtually every large U.S. bank in the country has invested in solar projects. Google, Amazon, Microsoft, GM, Apple and hundreds of companies now purchase solar energy. We welcome them.

Development companies that would like to compete in the industry must find a niche, should ideally choose geographic focal points, and must focus to succeed. The notion that a developer has to be vertically integrated is slowly subsiding. New companies and old ones are providing high-quality service for solar developers to scale – namely highly efficient pure-play EPCs, niche engineering service, localized real estate experts, and sophisticated software that can displace inefficient manual efforts. We believe the runway for efficiencies is long, and we’ve yet to see the full maturation of the industry.

Companies that focus on specific niches such as community solar, like Clean Energy Collective and SunShare, or specific geographic markets, like Bluewave Capital or Borrego, will succeed. Too many have tried to be too many things for too many customers or stakeholders. It’s a challenge that some of the largest solar companies have worked through, or in some cases, failed to work through.

So What Are We Concerned About? Tax Reform.

The federal investment tax credit (ITC) drives the entire solar industry and was extended recently through the active work of both Republicans and Democrats. The ITC provides a 30% tax credit for companies and individuals investing solar project through 2019, at which point it steps down each year to 10% in 2023. Pending tax reform raises two challenges. Banks, insurance companies and utilities are faced with significant uncertainty with respect to their actual tax rate (the corporate tax rate is currently 35%), and are concerned that the Administration tries to kill the ITC.

Our view is that an Administration focused on creating jobs and growing the economy will not take an axe to the ITC at such a critical stage in the industry’s development given the industry’s more than 200,000 jobs. We are more concerned that uncertainty around tax rates is slowing the entry of new investors. Companies account for (and value) infrastructure investments based depreciation schedules, capitalization policies, tax incentives, their tax rate, and their actual tax liabilities. With ambiguity around tax reform, and without a clear understanding of their tax obligations, banks, insurance companies, and utilities cannot effectively manage their investments. The one silver lining for solar is that the problem is even more acute for other tax incentives like the historic tax incentive, and potentially the federal production tax credit.

We think this risk is actually relatively benign, but the optics are the challenge. Our institutional clients have gotten comfortable with the fact that any tax reform is unlikely to impact 2017 tax liabilities, or even 2018 liabilities. Tax reform generally takes place over a number of years. Further, the Administration will not take aim at the ITC given its natural step-down and the industry’s jobs. Even if the ITC were reduced, such a change would be prospective, and would not impact current investments since the ITC is accounted for in the year the project is delivered.  If you are considering making ITC investments, we encourage you to talk to our Fund & Asset Management Team.

And, How About Sol?

Amid this change, building a solar company is no easy feat. We’ve invested in people and an energy infrastructure that is dynamic in order to adjust to a fast-changing industry. Sol Systems efforts are best viewed through our three relatively independent operating units.

Our oldest business unit trades, aggregates, and finances environmental commodities on behalf of the company and thousands of customers. This company aims to vastly expand our solar renewable energy credit (SREC) financing program in 2017, and continue to expand into other environmental commodities, to assist our developer and customer partners.  We expect to grow our customer base by 25MW in 2017.

We established what is now Sol Asset & Fund Management in 2012. That business unit manages hundreds of millions of dollars of solar assets on behalf of our institutional clients, and will increasingly be managing private funds that actually own solar assets on behalf of some of these clients. We currently asset manage over 300MW of solar assets. We expect to manage 440MW by the end of 2017 for this business line.

Finally, in 2015-16 we began working with select clients to develop solar assets for them. We refer to that team as Sol Development. We grew this team to one of the largest groups in the industry specifically focused on providing corporate customers with onsite and offsite solar procurement solutions. We expect to develop between 50-100MW of solar projects on behalf of these customers in 2017.

In Sum….

We’re proud of the evolution of our businesses, optimistic about the future of Sol (and our industry), and indebted to a team that has made this incredibly exciting journey a reality. And mostly, we’re indebted to many of you for being our partners, our clients, and our friends. Thank you. Our joint commitment and hard work drive the positive change in this world we endeavor to craft.

Yuri

A Glimpse into the Future: Technology Predictions for 2017

How will emerging technologies affect the 2017 solar landscape?

How will emerging technologies affect the 2017 solar landscape?

In last month’s SOL SOURCE, we looked back at top trends in solar during 2016. To start the New Year, here are three solar technology trends to watch.

1. Equipment prices continue to fall

In 2016, the industry saw module prices fall from the mid-60s (cents/Watt) to the low 40s. At Sol Systems, we see this trend continuing. Greentech Media Research predicts another 5-6 cent drop this year. It seems that their 2013 prediction of 36-cents-per-watt modules in 2017 is quickly becoming true. With modules prices positioned to drop below 40 cents in 2017, along with an oversupply carrying over from last year, more financial pressure is being put on Tier 1 suppliers.

Price declines are not limited to modules. Tracker prices are also expected to see price declines of around 5-10 percent in the coming year. As yield grows in importance for financial thresholds in the utility-scale market, trackers should continue to increase their market share in that sector.

2. Software will push down the levelised cost of energy (LCOE)

New software launches or significant updates to existing software (i.e. PV system design programs), continue to simplify many processes for developers & EPCs. Programs like HelioScope can create an array blueprint, as well as expected energy output in a matter of minutes. Asset management software, such as 3Megawatt, Lens and Ra Power are continuing to gain popularity and are allowing asset owners one streamlined tool to reduce operation costs and increase integrity of data. We see companies continuing to adopt these and other software tools this year. As hard costs decline and engineering comprises a larger part of all-in EPC costs, especially on small projects, software can help to control soft costs.

3. Bifacial modules: How will they fare?

Bifacial modules, which yield power from both sides using refracted light from the back side, were deployed occasionally in 2016. Yingli and Sunpreme both have models looking to compete in the market. Bifacial modules, which can produce up to 30 percent more yield than traditional modules, still comprise a tiny fraction of the market share, but we predict that adoption may rise. In the continued effort to optimize space-constrained opportunities, such as commercial and industrial (C&I) projects limited by roof space, an increase in capacity or yield will enable improved economics that could grow mid-market project opportunities.

Can’t get enough of solar technology trends? Check out our conversation with Sol Systems’ Joe Song from September 2016.

This is an excerpt from the January 2017 edition of The SOL SOURCE, a monthly electronic newsletter analyzing the latest trends in renewable energy based on our unique position in the solar financing space. To view the full Journal, please subscribe or e-mail pr@solsystems.com.

ABOUT SOL SYSTEMS

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

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

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

Sol Systems Takes a Bite out of Food Waste During Bi-annual Community Service Day

The team worked swiftly and diligently to sort items of food into their respective bins.

The Sol Systems team worked diligently over a 3-hour period to collect, sort and box food items for the CAFB.

Did you know that 40% of food in America is discarded rather than consumed by the 43 million Americans that are hungry? The consumer packaged goods (CPG) industry is in a powerful position to help reduce this waste. The CPG plays a huge role in the American economy as the largest single source for manufacturing jobs  and supports over 30,000 communities across the nation. As the industry works to refine efficiencies in the supply chain, reduction of food waste will drive greater sustainability.

Sol Systems’ core philosophy, also called the Heart of Sol, aligns with the three pillars of sustainability:

  • Environmental Protection: The world’s health is our health.
  • Social Equity: Society’s well-being is our well-being.
  • Economic Prosperity: Thriving businesses support thriving communities.

At Sol, minimizing waste is a company tenant, which is why we selected the Capital Area Food Bank (CAFB) as our community service partner for a biannual company-wide day of service. Our group of 70 driven professionals with ranging expertise in finance, energy, engineering, legal, construction management, and business development, set out on a three-hour shift to sort, pack, label, and organize boxes of fresh produce, canned goods and dry good items in the food bank’s distribution warehouse. With exceptional teamwork, we completed all of the tasks with 30 minutes to spare. Our total impact almost filled the room with:

  • 1,560 units of fresh produce
  • 3,200 units of canned goods
  • 1,200 units of dry goods
DSC_0337

As a whole, the Sol Systems team helped sort and package over 5,960 units of food.

Each year, CAFB helps 540,000 people get access to good, healthy food – that’s 12% of the families in the Washington D.C. region. Similar to CAFB, food banks around the nation serve as partners with food and beverage manufactures in the CPG industry to implement food waste diversion programs and improve sustainability in the supply chain.

Sol is proud to deliver energy – whether it’s through volunteer hours or solar development and financing to like-minded companies. Collectively, we can make a real impact for a more sustainable world.

ABOUT SOL SYSTEMS

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

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

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

The SOL SOURCE, December 2016

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

Below, we have included excerpts from the December 2016 edition. To receive future Journals, please subscribe or 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.

Have a solar project in need of financing? Our team can provide a pricing quote for you here.

PPA RATE Dec

Joined Charts

STATE MARKETS

Illinois – On December 8, Governor Bruce Rauner signed the Future Energy Jobs Bill, sweeping energy legislation that will support all sectors of the solar energy market: distributed generation, community solar, brownfields, and utility-scale solar. The legislation also creates a stable funding stream to pay for multi-year renewable energy credit (REC) contracts to help Illinois meet its 25% by 2025 renewable portfolio standard (RPS). The funding certainty is a key provision, as the instability in the state budget had previously stunted the growth of the solar market. The funding will now be held in the Renewable Energy Resources Fund (RERF).

Solar was a big winner in this legislation, as was nuclear. As part of the legislation, struggling nuclear plants will be subsidized using zero emission credits (ZECs), similar to the mechanism used in New York’s 50% Clean Energy Standard. Are we seeing a new trend in state-level energy policy?

New Jersey – S-2276, legislation to “pull forward” the renewable portfolio standard (RPS) to 4.1% by 2021 is on hold until after the New Year. If passed by the General Assembly and ultimately signed by Governor Chris Christie early next year, near-term demand for solar would be increased. Given the oversupply of solar renewable energy credits (SRECs) in the market, however, longer-term follow-on legislation would be needed in the coming years to provide true market stability. New Jersey’s gubernatorial election will take place in 2017.

Already, the price difference between vintage 2017 and vintage 2021 is clear evidence that traders see little long-term value in the NJ SREC market under the existing RPS target. Vintage 2017 recently traded for $235 while 2021 is fetching a mere $80 by comparison.

Given its SREC trading business, Sol Systems is still actively financing rooftop and carport projects in New Jersey, and also sees the Garden State as an ideal market for merchant assets. We are specifically interested in late stage Sub-Section Q, S & T projects.

Ohio – While states across the country are considering legislation to increase their respective renewable portfolio standards, the Ohio state legislature narrowly passed another “freeze” to the state’s modest 12.5% RPS earlier this month. Theatrics ensued in Columbus over the last several weeks of hearings, including one state senator claiming that “kale mandates” were sure to come next if the RPS was allowed to resume (he clearly had not seen this Sunrun commercial).

The Senate passed the freeze bill 18-13, and the House vote was 56-41, with many Republican legislators voting against the freeze. This bi-partisan support for renewable energy is critical, as freeze proponents were unable to gather enough votes for a possible veto override. Businesses interested in signing a letter asking for Governor Kasich to veto another freeze to the RPS can email policy@solsystems.com. If a veto occurs, the RPS, which was put on pause in 2015 and 2016, will resume on January 1.

SOLAR CHATTER

  • Can’t stop, won’t stop. On Tuesday, GTM Research and SEIA released their latest Solar Market Insight report. 4,143MW were installed in Q3 2016, the biggest quarter ever for the U.S. solar industry. In other words, a megawatt of solar is installed every 32 minutes. Fourth quarter 2016 is poised to be even bigger.
  • How could corporate tax reform affect solar under the new administration? While a decrease in the available tax burden would reduce ITC-driven investments in solar from corporations, conventional wisdom states that overarching reform would take years, and potentially would not take effect until the already built-in stepdown of the tax credit. But in an administration where nothing seems conventional, industry groups are encouraging solar supporters not to become complacent.
  • South Carolina is open for solar business in 2017. While a wrinkle in the state’s property tax regime stalled some projects in 2016, falling costs and the additional time to negotiate fee in lieu of taxes (FILOT) agreements means the spigot is back open for next year.
  • Fourth quarter is always the time of the year when developers and EPCs rush to complete year-end deadlines. For solar installers and developers in Massachusetts, this is especially true, as developers race to meet January 8th SREC II deadlines before reduced incentive levels kick in. While the residential solar market will continue under reduced rates, the commercial market is at a standstill. Will emergency regulations create a bridge from SREC II to the new incentive regime? As program design for the SREC II successor program is ongoing, uncertainty regarding the new incentive structure and pricing has halted the ability to lock down new commercial customers.
  • Hope springs eternal for developers using niche non-Tier I equipment in an attempt to decrease hard costs. Our advice to these developers? Stick to proven Tier 1, UL-listed manufacturers with demonstrable performance data, at least five years of production experience, and more than a gigawatt of capacity. Module costs are at an all-time low, so there’s no need to sacrifice quality for cost or get locked into purchase orders too early. Sol Systems works closely with project partners to optimize design and equipment selection.

ABOUT SOL SYSTEMS

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

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

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

Risky Business: Assessing Risk for Offsite Renewables

Last month, we touched on basis risk as an advantage for solar compared to other energy technologies Although basis risk needs to be addressed, and is a natural starting point, we find other potential risks are often overlooked by host customers and developers.

Basis risk is oft-mentioned in offsite renewables, but other risks exist and should not be ignored.

Basis risk is oft-mentioned in offsite renewables, but other risks exist and should not be ignored.

If basis risk is new to your vernacular, it might be helpful to know that it’s a term borrowed from the hedging world where a hedge contract and commodity price don’t move in sync. It’s used in the energy space to refer to the long-term energy price differences between generation and demand, and within the renewable energy space to refer to nodal risk and congestion issues.  Fundamentally, it means that over time, the price that the customer is paying for energy does not move together with the price that the offsite project is receiving from the grid. As those prices move away from each other, the hedge becomes “dirtier” or unconnected from the underlying price exposure (utility prices in this case).

Corporations are procuring energy from offsite solar on the scale of 800MW in 2016, and basis risk is the first and most obvious risk identified. However, there are other risks that customers need to address before entering these transactions, and developers should be highlighting these up front in order to work with customers to mitigate them as effectively as possible.

1.  Merchant Risk 

Merchant risk is the inherent risk that a customer is taking on when entering into one of these contracts. It is the floating side of a fixed-for-floating swap. By entering into this contract, the customer is exposed to the merchant energy market. It is the obligation of developers and financiers to ensure projects are at or near the current merchant costs so as to minimize the potential downside risk faced by customers. While merchant risk is inherent in the transaction, setting up the fixed-for-floating swap is an effective long-term hedge for other merchant exposure. It is important to sell the hedge aspect of merchant risk when concerns of long-term price exposure enter the conversation.

2.  Negative Pricing Event Risk 

Energy assets may encounter negative pricing in the market, and this market may impact a corporation’s contract for differences (CFD). A negative price signal in the electricity markets occurs when there is sufficient generation (supply) on the electrical grid, and the independent grid operators “signal” to energy producers to reduce their output by charging them for producing energy (instead of paying them). It is usually represented as negative locational marginal price, and is designed to disincentive additional energy production. When supply is high and demand is low, spot prices generally fall. This is even more common in markets with a significant amount of renewable energy and other production sources that can’t be shut down and restarted in a quick and cost-efficient manner to balance supply to the grid.

This is less often the case with solar than with wind, which is incentivized to produce even with negative energy pricing. Wind farms also tend to be concentrated in specific regions (ie. West Texas), that will run a negative price in response. It is important to highlight non-settlement terms like this that solar can offer as a benefit over wind assets.

3.  Delivery or Execution Risk:

Like any project, onsite or offsite, a customer is often banking on the developer completing their project. Yet, the developer faces delivery risks every step of the way.  To mitigate these risks, we recommend utilizing an assurance or surety as a guarantor to protect the customer against losses resulting from failure to fulfill project execution.

Experienced developers know and preempt many of the potential risks before they arise. In any case, it is important to be up front with customers about the risks and communicate clearly about how they can and will be resolved during the development process.

To learn more about offsite renewables, download our offsite overview. If you have any additional questions you can contact me at ben@solsystems.com.

This is an excerpt from the December 2016 edition of The SOL SOURCE, a monthly electronic newsletter analyzing the latest trends in renewable energy based on our unique position in the solar financing space. To view the full Journal, please subscribe or e-mail pr@solsystems.com.

ABOUT SOL SYSTEMS

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

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

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

The Heart and Sol Inside and Outside of the Workplace: Sol Team Members Take Action to Solarize D.C. Through Philanthropy

Sol Systems' Anna Noucas participates in a volunteer rooftop PV build

Sol Systems’ Anna Noucas participates in a volunteer rooftop PV build in Northeast Washington, DC.

As a solar energy company, Sol Systems truly walks the talk in advancing our clean energy future. Historically, the firm has provided both financial and human capital to support sustainability initiatives. We call this our Heart and Sol.

To do our part to ensure a more sustainable future, we launched our Giving That Matters philanthropic initiative rooted in the pillars of sustainability:

  • Environmental Protection: The world’s health is our health.
  • Social Equity: Society’s well-being is our well-being.
  • Economic Prosperity: Thriving businesses support thriving communities.

Since inception, we’ve delivered over 500MW of clean power in more than 25 states across the nation. To date, our projects have offset 421,666 metric tons of carbon emissions which is equivalent to over a million road trips from coast to coast.

Sol’s sustainability initiatives, beyond financing and developing onsite and offsite solar, include: donating compost, procuring eco-friendly breakroom and office supplies, and purchasing 3213kWh of wind RECs at the headquarters office. Additionally, we’ve organized 5K fundraisers nationwide to both draw awareness to the benefits of solar energy and fundraise on behalf of industry nonprofits including: Solar Energy Industries Association (SEIA), the Solar Foundation, and the Clean Energy Leadership Institute.

Sol’s philosophy focuses on the holistic concept of sustainability, which transcends in our team’s personal giving and volunteer outreach endeavors. Various team members donate money and time outside of work to fulfilling the economic, social, and environmental issues that face the communities we live and work in.

Most recently, Leslie Barkemeyer, associate general counsel at Sol Systems, used her bridal shower as a way to the give back to the D.C. community and the solar industry. Rather than a traditional bridal brunch, the future Mrs. Hodge called on her family, friends, and colleagues to help her fundraise to sponsor a rooftop PV solar installation for a low-income family in Washington, DC. Through a program with GRID Alternatives, Leslie, her four bridesmaids, and four women from Sol traded in their heels for hard hats to install the racking system, inverter, and module for a 3.6kW system with 12 panels at a private residence in northeast DC.

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Leslie’s team for the 3.6kW PV installation with GRID Alternatives.

With over 20 million low-income, owner-occupied, single-family homes in the United States, the GRID Alternatives staff is dedicated to making solar affordable for families with the most financial need, and exemplified their commitment to the cause by allowing our group to move forward with the build despite the inclement weather policy.

“We are so fortunate. We don’t need any houseware. So why not pay it forward.” said Leslie. “It was fascinating working on the construction side. We did a small residential project, so the type of work is not entirely analogous to the work that goes into the commercial and utility scale solar projects we focus on at Sol Systems. Still, it was very cool to learn how to ground, install inverters and drill modules into racking. The build was complex and certainly required a team.”

To date, Leslie and her bridal shower guests have reach 66% of their fundraising goal. If you’re interested in supporting their efforts to provide solar for all residents in Washington, D.C. donate here.

ABOUT SOL SYSTEMS

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

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

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

Celebrating Maryland Solar with Baltimore Mayor-Elect Catherine Pugh

Celebrating Solar Blog

Baltimore Mayor-elect Catherine Pugh speaks at Christ Church Harbor Apartments.

Earlier this month, Sol Systems hosted an event to celebrate solar energy at the Christ Church Harbor Apartments, home to a 196kW rooftop system financed by Sol Systems with our partners RER Energy Group and WGL. Christ Church is a low-to-moderate income senior living facility located on the Baltimore Harbor. Baltimore Mayor-Elect Catherine Pugh, a longtime solar champion, was the keynote speaker. Mayor-Elect Pugh spoke on the benefits of solar energy for the community, the state, and thanked the residents for their support throughout the installation process.

“[Christ Church’s] 196kW solar array has produced enough solar to offset carbon dioxide emissions from over 12,000 gallons of gas or 120,000 pounds of coal,” said George Ashton, President of Sol Systems and Chair of the Maryland Clean Energy Center, who spoke at the event. “These numbers are telling, but they don’t tell the other story; the story of an energy independent Baltimore creating its own clean, green, solar energy from its own rooftops.”

It has been a challenging year for the Maryland solar industry. Solar renewable energy credit (SREC) pricing – an important driver for solar growth and economic development in the state –  dove as the market experienced oversupply. In May, Governor Hogan vetoed legislation that would have expanded the state’s foundational solar energy policy, the renewable portfolio standard. This could impact the viability of the state’s pilot program for community solar.

“Community solar is a way that renters, people with shaded roofs, and low income Maryland residents can take advantage of the benefits of solar without installing it on their roofs,” said Ashton, “which is critical to a place like Baltimore.”

Many are hopeful that a veto override will take place in early 2017. Mayor-Elect Pugh spoke on this during her keynote address, ensuring the group that the override would move forward.

Sol Systems is grateful for the residents and team at Christ Church for their leadership on sustainability in the city of Baltimore, and for hosting us last week at their facility.

ABOUT SOL SYSTEMS

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

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

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

It’s Official: D.C.’s 50% RPS Becomes Law

You may have heard talk over the past couple of months about a renewable portfolio standard (RPS) expansion happening in the District of Columbia.  Well, it’s no longer just talk. Back in July, Mayor Bowser signed the initial bill, and it then went to Congress for review. Now, effective as of October 8, B21-0650, the Renewable Portfolio Standard Expansion Amendment Act of 2016, is officially law.

What are D.C.’s New Renewable Targets?

While the SACP has increased substantially under this law, the devil is in the details.

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Figure 1: SACP schedules under new and old legislation

Under the act, D.C. must procure 50% of its electricity from renewable energy by 2032, and the solar requirement is now 5%. At these new levels, D.C. is now on par with other state clean energy leaders like California, New York, and Oregon in regards to RPS goals. Not only does the law increase the renewable requirements, but it also extends the alternative compliance payments for utilities that don’t meet these standards; this acts as a price ceiling in the marketplace. Under Section 6(c)(3), the current $500 penalty for every megawatt hour (MWh) of solar not met is extended to 2023 (reference Figure 1), and for the proceeding 9 years, until 2032, the alternative compliance payments for utilities stay in the couples of hundreds for utilities that don’t meet their requirements.

SREC Pricing: The Devil is in the Details

With an ACP that high, one may expect SREC values to hover around $500 for the foreseeable future.  Think again; the devil is in the details. As the legislations stands, existing load contracts from five years or less before this new law will still be subject to the old solar ACP schedule (reference Figure 1), which decreases to an ACP of $350 starting next year.  What this load amount will be is still uncertain; it could be large, or it could be small. The point here is that some of the market will be under different compliance obligations than others, and a $500 SREC price is not a safe assumption for SREC pricing in the short term. It might be a future outcome, but those who expected pricing to remain at current levels may be disappointed.

Conclusion

While D.C.’s new standards may not result in continued $500 SRECs, at least right away, the new law will help grow solar and other renewables in the District through 2032 and beyond, and the clean energy job market with them. In a statement by Mayor Bowser, her office estimated that the new bill will create 100 new green jobs within just the first year, and that number will increase year over year.

On top of that, the new law will have larger societal and environmental benefits. It will help the District meet its Sustainable DC Plan which aims to reduce carbon emissions by 50%. In addition, the new law creates a “Solar for All Program,” to be run by the District Department of Energy and Environment (DOEE).  This program hopes to reduce the energy burden for 100,000 low-income households by 2032, and will bring access to renewables to communities that may not have otherwise had the opportunity.

Overall, the Renewable Portfolio Standard Expansion Amendment Act is paving D.C.’s renewable future for everyone in the district, and establishing the District as a national leader in forward-thinking energy policy.

ABOUT SOL SYSTEMS

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

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

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

SOURCE: The Sol Project Finance Journal, October 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 Octoberr 2016 edition. To receive future Journals, please subscribe or 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.

Have a solar project in need of financing? Our team can provide a pricing quote for you here.

PPA RATE OCT


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STATE MARKETS

Massachusetts – The commercial solar market is at a standstill for all but a small number of projects that will be eligible for a May 2017 SREC II extension. Potential host customers continue to issue requests for proposals (RFPs), but without firm program guidelines in place for a successor program, submitting accurate, honest pricing for these RFPs remains impossible. While the industry awaits the new program – which is set to go into effect in summer 2017 – new commercial development has come to a halt, and will stay that way if no extension to SREC II is granted. Meanwhile, the Massachusetts Department of Energy Resources (DOER) has convened weekly stakeholder meetings to work through many remaining questions about their straw proposals. Expect for the new program to be very rooftop heavy; strict land restrictions have been proposed that will limit most greenfield development.

We’ve always considered the Northeast market to be fundamentally different. It is deregulated, electricity is expensive, the utilities are not nearly as powerful as they are in the Midwest or South, and land is relatively more challenging to secure and purchase (because of restrictions and costs). As a result, we expect the Northeast to increasingly move toward commercial and residential distributed generation and away from utility-scale projects.

Virginia – After installing only 10MW in 2015, Virginia is on its way to install over 1GW of solar capacity over the next five years. In fact, SEIA estimates that the installed solar capacity in Virginia has grown by 72% over the last year. Solar legislation has had limited success at the state house year after year. So, what gives? The reasons for this dramatic uptick are multi-fold: Dominion has pledged 400MW of solar by 2020, for one, and corporates continue to enter into creative financing arrangements in the Commonwealth. With renewable pledges from the McAuliffe administration and pending changes to Dominion Power’s Renewable Generation Tariff, expect this growth to continue. However, given PPA legality issues – except for a very limited pilot program – most solar development in Virginia will remain utility-scale. The state’s market profile is in stark contrast to Massachusetts for all of the reasons mentioned above. In other news, MDV-SEIA and the Solar Research Institute published the results from its community solar listening sessions and request for information (RFI) earlier this month. Will we see community solar legislation in Virginia in 2017?

Texas – The Lone Star state’s unique regulatory environment – as well as its ample transmission infrastructure – offer options for traditional PPA projects, utility offtake, and hedged corporate offtake contracts. Land and labor costs are affordable, solar irradiation is high, and permitting is favorable. However, given high penetration and the possibility of congestion at certain hubs, a project’s suitability for solar is no longer enough. A truly optimal project must be certain of the long-term transmission and distribution outlook, the local tax regime, and interconnection costs to be compete. Still, expect to see a lot of capacity with slim margins coming out of the Lone Star state. According to SEIA, Texas is expected to install more than 4.6GW of solar electric capacity over the next five years, second only to California during that time span.

SOLAR CHATTER

  • 2016 saw two major shifts in the tax equity market: the ITC extension, and the IRS ruling regarding 50(d) income. The ITC extension means more projects are fighting for scarcer tax appetite, which is also exacerbated by the extension of bonus depreciation. The 50(d) ruling provided much-needed clarity for investors and developers utilizing the lease pass-through structure, though the verdict does limit the amount of depreciation an investor can absorb compared to previous tax interpretation. Developers may also find terms tightening up in the coming months as a result of these changes. As the market continue to mature, we expect (and hope) to see a more apples-to-apples understanding of tax equity pricing across the market in 2017.
  • Pricing is quickly heading under $1/Watt for utility-scale projects. Despite strong economics for onsite behind the meter projects, a number of commercial customers are increasingly expressing their preference to scale with offsite solar. Much of this can be attributed to aggressive corporate and institution goals targets to procure a certain percentage of renewables by a certain date.
  • Our team is starting to see more sub-investment grade credit opportunities. We predict for more of these projects to emerge as many lower hanging fruit, investment grade counterparties have been picked over.
  • Applications for the latest enrollment of Rhode Island’s RE Growth program are due on October 21. Rhode Island – and its very pro-solar Governor Raimondo – proved its commitment to solar energy after passing a package of renewable energy bills earlier this summer.
  • Legislation to “pull forward” New Jersey’s solar carve-out to 4.1% by 2021 passed committee earlier this month. If it passes through the General Assembly, will Governor Christie sign it? More importantly, is this bill enough to mitigate future oversupply? On a related note, May, 31 2017 is the deadline for Grid Tied Subsection Q projects to be delivered.
  • The buzz around storage is starting to reach host customers, who are more frequently asking RFP respondents to include both a solar only option, and an option with a storage adder. While the buzz exists, when will storage be a viable solution across all markets? Storage is being discussed more in New York, and given the Massachusetts Department of Energy Resources’ recent straw proposal, MA is piquing the interest of storage developers. In places like California and Hawaii, storage is becoming a critical component to customer facing solutions and even utility-scale projects.
  • It’s that time again. As the industry rushes to meet Q4 closing deadlines, developers and financiers are also starting to line up early stage 2017 pipeline. We see a far expanded solar market in 2017, both in terms of size and geographic diversity. We expect big news out of the South in the coming years.
  • Maryland projects are harder and harder to pencil as SREC prices continue to fall, and no other incentive regime exists for non-residential projects. The industry has its eyes on a veto override in January, which could provide short-term price support. Unfortunately, the expected boost may still not get solar projects to the level of economic viability that developers and customers require.
  • Time of use (TOU) rates are very much top of mind in California, where rate cases are pending for the investor owned utilities (IOUs) that would push peak periods later in the day. San Diego Gas & Electric – also the first IOU to hit its net energy metering (NEM) 1.0 cap –is the farthest along. Meanwhile, California is already beginning to discuss NEM 3.0, and advocates are getting up to speed on solar + storage analytics, which will be important to future NEM frameworks in the state.

ABOUT SOL SYSTEMS

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

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

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

What Comes After North Carolina?

North Carolina is a solar giant. As development slows, which state will step up to take its place?

North Carolina is a solar giant. As development slows, which state will step up to take its place?

It is no secret that North Carolina has experienced a solar boom in recent years, skyrocketing to the #3 spot nationally in terms of installed capacity. This boom was jumpstarted by a 35% state tax credit and an attractive qualifying facility (QF) rate and contract term. As a result, the Solar Foundation counted nearly 6,000 workers in the Tar Heel state at the end of 2015.

Since the expiration of the state tax credit, the market is not drying up, but it has certainly slowed down. Add long approval timelines for interconnection and Duke’s new “circuit stiffness reviews,” (trademark that one, guys) and this runaway market is certainly slowing. Where will developers in the region run to next?

We have written before about South Carolina, which has experienced rapid solar growth – both on the utility-scale and residential side – in 2016. If the market could only fix its property tax challenges, it could rival its northern counterpart. Georgia, on the other hand, has now matured, with promises of more solar on the way. As these states increase in penetration – and competition – developers are starting to race to markets further down South – such as Louisiana, Mississippi, and Alabama – in search of low cost land and labor, and the possibility of long-term bilateral contracts with utilities and cooperatives.

To be clear, the North Carolina market won’t be coming to a halt any time soon – or so long as the fundamentals of PURPA are upheld, a critical issue for our industry and one worth fighting for. As the state faces continued penetration, which state will become the next North Carolina? The race is on.

This is an excerpt from the October 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, please subscribe or e-mail pr@solsystems.com.

ABOUT SOL SYSTEMS

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

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

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

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

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

Burr, it’s Cold in Here…

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

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

Ohio, is Another Freeze Really Necessary?

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

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

A Thaw is the “Common Sense Plan”

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

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

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

Conclusion

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

ABOUT SOL SYSTEMS

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

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

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

New Jersey RPS “Pull Forward” Bill Pushes Forward

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Solar installations in NJ are increasing dramatically, which threatens to push supply and demand into disequilibrium once again.

On Thursday, October 6th, the New Jersey Assembly Telecommunications and Utilities Committee passed and merged bills S-2276 and A-3918 in a 5-2 vote that will “pull forward” the solar carve-out from 3.47 percent to 4.1 percent by 2021.

For several years, New Jersey was the poster child for SREC market volatility. In 2012, SRECs tanked from a high of ~$700 per SREC in 2009 to just $70 per SREC. The market finally reached stability when Governor Christie signed legislation – the S1925/A2966 bill – into law in 2012. The bill accelerated the Renewable Portfolio Standard (RPS) by four years, bringing supply and demand back into equilibrium.

Since the bill’s passage in 2012, SREC pricing has recovered to recent highs of $260. However, last year’s solar investment tax credit (ITC) extension – among other factors – are causing the rate of solar installations to increase dramatically, which threatens to push supply and demand into disequilibrium once again. The pull forward bill was designed to better align solar installation rates with the years that the solar industry has to take advantage of the ITC, and to prevent investment from going to other states as SREC prices continue to fall.

Next up, the bill will be listed for a vote in the General Assembly. Will it move forward? Stay tuned to our blog for more information.

Interested in solar in New Jersey? Contact our team at finance@solsystems.com to discuss financing, SRECs, or on-site and off-site solar energy solutions or fill out our project intake form.

ABOUT SOL SYSTEMS

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

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

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

Employee Spotlight: Senayt Rahwa

Senayt Rahwa

Associate Counsel Senayt Rahwa

The unique and dedicated team of people who work at Sol Systems have been a key part of our success over the past eight years. With a growing staff of over 60 full-time employees, in offices at Washington, D.C., Philadelphia, and San Francisco, the driven, talented group of industry professionals have created resourceful financing mechanisms for the solar industry and thousands of individual projects. Every month, we give you an inside look at some of the incredible work our team members have been doing. This time, we are featuring Associate Counsel Senayt Rahwa, to hear about her experiences and opportunities at Sol Systems.

1. Why did you choose to pursue a career centered around solar energy?

During law school I took several climate change and environmental law classes which were just more interesting to me than the other courses I was taking at the time. My particular focus was environmental law from a social justice perspective – the intersection between community development and renewables became an area I really enjoyed and I felt compelled to pursue after graduation.

2. What work were you doing before coming to Sol Systems?

After law school, I worked at a law firm here in D.C. in the tax credit finance and syndication group for several years. My practice there was really a hybrid of real estate, debt financing and tax equity work with both New Markets Tax Credit and Solar Investment Tax Credit projects. I was able to work on a variety of projects including representing institutional investors financing large commercial solar projects to construction of new charter schools in low income communities.

3. What made you want to start a career at Sol Systems?

I met Yuri and Leslie at an Energy Bar Association event and was really drawn both to the company’s mission as well as Sol Systems dynamic and unique company culture. Hearing of the history of the company and what it has grown to become was motivating and made me want to get involved with this team.

4. Since starting at Sol Systems, how have you found in-house counsel differs from your earlier work experience at a larger firm?

At a large firm, you are working with multiple clients all of whom have differing business models and objectives, so getting to know those clients really well is more challenging. Working in-house has been different because my only client is Sol Systems and I’m deeply embedded in the company’s mission, purpose, goals, and work. The nature of the work is also such that I am charged with providing legal guidance with commercial insights rather than only identifying risks and deferring to the client’s tolerance for such risks.

5. Since joining Sol Systems, what has been your favorite part about working here?

Sol Systems is very dynamic – each day here is different and poses new, interesting challenges and watching how our team comes together to face those is cool. I appreciate how decisions are made intentionally, people are very collaborative, and there are is comradery amongst the team that encourages everyone to support one another.

6. What are the key facets of renewable and solar deals are you providing legal aid and counsel for?

There are a ton of projects out there, but we help evaluate if those projects are actually financeable for the investors who are putting money into a deal. We work to bring the investor perspective to bear on the development side that is focusing on the on-the-ground realities of the project.

7. Outside of Sol Systems, what do you do with your free time?

I like hiking and kayaking – and just being outdoors in general. I love spending time with family and friends both here in the DMV and back in Colorado. And at the moment, I am enjoying getting ready for a new addition to our family due in December!

Want to be a part of the Sol Systems team too? To learn more about available solar energy careers with Sol Systems, please visit our careers page.

ABOUT SOL SYSTEMS

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

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

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

Overheard at Solar Power International: Musings on Solar Technology Trends

SPI, held this year in Las Vegas, is one of the industry's largest solar conferences.

What was the latest gossip coming out of Solar Power International this year? We’ve got you covered. Photo Credit: The Solar Foundation

Last week marked yet another Solar Power International. We sat down with Joe Song, Senior Director at Sol Systems, to discuss some of the Sol engineering team’s biggest takeaways from this year’s show.

Module price declines continue, and they are here to stay. This year at SPI, rumblings of further declines were heard throughout the conference. As we have written about in past issues of SOURCE, this is due to a number of issues, such as the solar investment tax credit (ITC) extension and decreased demand from international markets.

In 2016, we’ve experienced an approximately 20 percent price decline since the beginning of the year for conventional polycrystalline technology, which may force high efficiency module manufacturers to react accordingly to stay competitive. We would not be surprised to see some modules prices dip below the $0.40/Watt range by the end of 2017, and we anticipate that these price declines will be permanent.

The U.S. Department of Energy’s $1/Watt by 2020 goal is becoming very real, and has a real chance to exceed those goals in some markets.

The inverter space is changing rapidly. The introduction of extremely price efficient Chinese inverters ($0.04/W – $0.08/W), combined with new competition in the utility-scale space is giving incumbent inverter companies a run for their money. 1500V certifications should enable 2017 utility projects to more widely deploy higher voltage installations, with the goal to shave a few pennies from Balance of System (BOS) costs.

The small utility-scale space is of increasing interest to EPCs and equipment manufacturers alike. This sector is perceived as the next “it” market sector, and Sol Systems built out a utility-scale origination team in Q12016 to focus more on this sector (generally speaking, <25MW, though this team is currently reviewing projects 7MW – 40MW in size). These projects are efficient with shorter development timelines than large utility-scale, can be more targeted to grid-specific “need” areas, avoid transmission interconnection, and may still achieve price economies similar to large utility-scale projects. Many community solar program size limits fall within this range.

Creative, brilliant, and necessary technologies were on display in the exhibit hall this year. We observed some broad leaps in the tracker space, a continuation of the module/racking integrated product approach, light-weight carport products, bi-facial and laminate crystalline silicon modules, and high voltage inverters. We continue to see opportunity to optimize core components, reduce balance of system costs, and find ways to enable disruption. The exhibit hall was littered with great ideas that are being supported by industry partners such as Powerhouse and DOE SunShot. We’re excited about the opportunity to witness continued innovation

Carports and single axis trackers are growth areas in the Balance of System and racking space, where we see these types of projects increasing in market share. Trackers are especially increasing in popularity as the pricing and design have improved to enable smaller projects, with higher tolerances for interesting site conditions. Carports continue to be one of the main levers in the C&I space and should experience efficiencies as products find ways to reduce steel and incorporate installer-friendly design. Competition within the racking space will continue to be fierce, as arguably more gains may be achieved with racking when compared to other core components.

Have questions on technology trends? Shoot us a note at finance@solsystems.com, and we’re happy to connect you with our engineering team.

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

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

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