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SOURCE: The Sol Project Finance Journal, August 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 August 2016 edition. To receive future Journals, please email pr@solsystems.com.

PROJECT FINANCE STATISTICS

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

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

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STATE MARKETS

Georgia – Look out world, 1,600 additional MW of renewable energy are coming to the Peach State. At the end of July, regulators approved Georgia Power’s plan to add 1,600MW of solar, wind, and biomass by 2021. Among the 1,600MW will be approximately 1,050MW of utility-scale, under which wind will be capped at 300MW. This provides tremendous potential opportunity for solar, though this very much depends on rates which have made Georgia developers and EPCs among the most unyielding in the nation.

The plans also include 100MW of distributed generation (DG) projects up to 3MW in size, 50MW of customer-sited DG, 200MW of Georgia Power “self-build” projects, and a new 200MW Commercial and Industrial Program, details of which are still to be determined. The 1,600MW boost may increase Georgia Power’s renewable representation from 5 to 12% of the utility’s overall capacity.

Also approved in the same filing were early site studies and permitting for several hundred megawatts of new nuclear capacity (atop the troubled Vogtle 3 & 4 reactors already underway). Indeed, Georgia’s overall carbon dioxide intensity could be significantly lower in the next 4 – 10 years.

Massachusetts – Uncertainty is rampant in Massachusetts as the Commonwealth transitions away from its reigning solar incentive and net metering programs.

SREC II —> ???

The industry is at the edge of its seat awaiting an initial proposal from the Massachusetts Department of Energy Resources (DOER) on the successor program for SREC II. In the meantime, the ever-tolerant DOER has made changes to its Emergency Regulation to provide a four-month construction deadline extension to May 8, 2017 for solar projects demonstrating that 50% of construction costs have been expended by January 8, 2017. These projects will still qualify for SREC II, but receive a lower SREC factor – which creates a tricky balancing act as DOER must try to minimize moral hazard and spur urgency in development while sparing many projects the guillotine. DOER announced draft guidelines on the 15th, and is accepting comments until the 22nd.

Net Metering —> Market Net Metering

Last month, the Department of Public Utilities released its final framework for the transition to market net metering credits – approximately 60% of retail credit. Systems will qualify under the old regime with full retail credit if:

  • They submit an Application for a Cap Allocation (ACA) before the notification date of September 26 at 2pm
  • ACAs submitted before the notification date are deemed complete by the Administrator of the System of Assurance
  • Cap allocation is obtained by January 8, 2017

And of course, residential systems are untouched.

It is critical to remember that the strongly reduced credit will apply only to net export against monthly meter reads. The window may be closing on the heavy net exporting Virtual Net Metering Credit-reselling systems, but onsite systems serving their own load will be more or less unscathed.

Uncertainty Affects the Market

As SREC II and the current net metering regime come to a close, developers are racing toward these respective deadlines. As a result of this rush, there is a shortage of electricians available for AC work as demand exceeds supply. Subsequently, the price of hiring labor for electrical work has become much more expensive. Other challenges include uncertainty over SREC factors and the new solar incentive program, which makes accurate pricing of projects currently under development – or new opportunities –  nearly impossible.

Finally, be sure to pay attention to the results of the August 23 technical session on minimum monthly reliability charges (MMRCs), which may also affect project economics.

New York – On August 1, the New York State Public Service Commission approved the Clean Energy Standard (CES), which will require 50% of the Empire State’s electricity needs to come from clean energy by 2030. Under the CES, NYSERDA will incentivize Large Scale Renewables (LSR) through centralized renewable energy credit (REC) procurements, very much like they have under the current RPS. The major difference will be the size; the annual obligations for REC purchases under the CES will be approximately twice the size of the annual RPS solicitations that occurred between 2011 and 2015. In Million Metric Tons Carbon Equivalent (MMTCE) converted against the baseline generation mix in NYISO and adjusted for inflation, that’s “a lot.”

However, under the REC procurements, solar will compete with wind, biomass, fuel cells, landfill gas, and other eligible Tier 1 sources for 20-year REC contracts. For reference, 116MW were awarded at a weighted average price of $24.57/REC in the 2015 Procurement. 2017 Procurement dates will be announced on December 1.

SOLAR CHATTER

  • Net energy metering (NEM) 2.0 is upon us in California. In June, San Diego Gas & Electric became the first to hit its NEM 1.0 cap, and Pacific Gas & Electric is expected to follow as early as October. Despite the slight hit to project economics, the new regime will also increase the size of projects eligible for net metering; previously, projects were limited to 1MW.  PG&E made interconnection applications for systems greater than 1MW available earlier this week.
  • Property taxes remain a barrier to solar project development, and also create quite the headache in diligence. Each time an investor enters a new territory, new property tax rules must be understood. The remedy? Developers may show their sophistication and transactional experience by thoroughly understanding the local tax regime, knowing their local assessor, and documenting the expected expense for their partners to underwrite.
  • Know anyone in Florida? Voters will be able to cast their vote in support of Amendment 4, a measure which will encourage solar in the Sunshine State, during the August 30th primary. Take a moment and tell five friends. Then, in November, watch out for the confusing, utility-backed “solar” amendment, Amendment 1, during the general election.
  • Our utility-scale origination team is seeing more activity in southern markets such as Florida, Alabama, Mississippi, Texas, and South Carolina. Developers are looking to these states because of their above average irradiance and relatively low cost to procure land.
  • Despite the Supreme Court “stay” on the Clean Power Plan (CPP) earlier this year, California submitted a draft of its CPP compliance plan at the beginning of August. As Mary Nichols, Chair of the California Air Resources Board tweeted: “We’re down with #CPP (yeah, you know me!)”
  • 2016 is looking to be a banner year for utility-scale solar in Virginia. Dominion is making progress toward its goal to reach 400MW of solar by 2020, much of which has been comprised of large “self build” solar farms for corporate offtakers. GTM Research estimates that Virginia will reach achieve 166MW in 2016.

ABOUT SOL SYSTEMS

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

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

50(d): What Does It Mean for the Tax Credit Market?

Recent guidance from the IRS will provide certainty to the tax credit market.

Recent guidance from the IRS will provide certainty to the tax credit market.

Last month, we wrote in SOURCE that after years of anticipation, a 50(d) income ruling would soon be released. Sure enough, the Internal Revenue Service (IRS) issued temporary regulations in the Federal Register on July 22. In its issuance, the IRS clarifies its recognition of the income associated with the tax credit for lease pass-through transactions and whether that income should be included in a partner’s outside basis calculations. It has broad implications for many market participants.

To take a step back, let’s look at the lease pass-through structure and understand how it has different capital accounting treatment for the investment tax credit (ITC) compared to the partnership flip.

Under the partnership flip structure, the regulations direct tax equity investors to deduct half of the value of the 30 percent investment tax credit (ITC) when calculating their outside basis in year 1. Solar tax equity investors utilize outside basis for the purposes of realizing the depreciation associated with the investment, and calculating a gain or loss upon exit from the partnership that owns the project after the recapture period. Reducing an investor’s outside basis therefore means reducing the investor’s ability to absorb losses and/or take a capital loss upon exit – both of which are benefits for tax equity investors.

In a lease pass-through structure, the ITC is instead passed through to the Master Tenant where it is then allocated to the partners. Section 50(d) requires the partner to include one-half the ITC ratably into income across the depreciable life of the asset (in this case, five years). The inclusion of one-half the ITC value into income results in greater taxable income for the partner.

But here’s the key. Under normal accounting treatment, any taxable income received increases the capital account. An increase to the capital account, you guessed it, allows a partner to absorb greater losses, offset taxable income, and enjoy a larger loss on exit (depending on the particular deal). In other words, for a tax-laden investor, 50(d) income is a good thing. The industry broadly followed this interpretation, making the lease pass-through structure quite popular despite its particular complexities.

Then, almost two years ago, the IRS sensed peace in the kingdom and announced it would issue clarity on this subject. In December, news broke that guidance was pending, creating uncertainty in the tax credit market, mainly in the form of price bifurcation as investors and syndicators priced these transactions differently depending on views on how IRS would ultimately interpret the rule, variations on who would wear the risk, and bets on when the guidance would in fact be released.

In its ruling, the IRS states that:

  • Investors are not entitled to an increase in their capital accounts under 50(d)
  • 50(d) income is a partner item not a partnership item, and each partner in the lessee partnership is the taxpayer
  • 50(d) income does increase a partner’s outside basis

Now that the industry has more clarity on IRS intent, it is our expectation that the tax credit market will find a new equilibrium for transactions moving forward. Moreover, additional certainty may attract new investors to the solar ITC space, as historic and other tax credit markets also adapt to these changes.

If this all sounds wonky, it is. Don’t worry; we are here to help. To learn more, contact from our tax structured team at finance@solsystems.com with the subject line “Tax Equity”. We have placed tax equity into over 200MW of solar assets across the country, and can explain what the temporary regulations mean for investors.

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

ABOUT SOL SYSTEMS

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

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

The Storage Story: What’s in Store?

Energy storage can be used for a variety of applications, including utility infrastructiure, grid stabilization, peak load shifting and peak demand offsetting. Photo credit: NREL

Energy storage can be used for a variety of applications, including utility infrastructiure, grid stabilization, peak load shifting and peak demand offsetting. Photo credit: NREL

Storage has been no stranger to the energy conversation over the last several years. According to the White House, the United States doubled the installed capacity of energy storage to 500MW in 2015 alone. As the U.S. solar market continues to grow, the industry is beginning to envision a future where solar projects are built with storage units to help offset peak demand (just ask Elon Musk). Where do we stand currently? Is storage growing in the U.S., or is it just a buzz word?

The Current State: Looking at the State Level

Energy storage incentive programs have emerged in some of the top solar markets. California’s Pacific Gas & Electric (PG&E) has had the Self-Generation Incentive Program (SGIP) in place since 2001. Recently, the California Public Utilities Commission approved reforms that will require 75 percent of the program’s $83 million annual budget be used for energy storage. Previously, much of the budget had been consumed by fuel cells.

On the East Coast, New Jersey, whose program we have previously addressed, incentivizes $300/kWh of electricity produced by qualifying projects which caps at $300,000 or 30 percent of the total cost (whichever is lower).

In addition to these incentives, some states have introduced mandates to encourage storage development. California, true to its history of ambitious renewable energy goals, led the way with a 1.3GW procurement mandate by 2020 for its three largest utilities. Oregon followed suit shortly after with a storage mandate of its own. Looking back East, comprehensive energy legislation passed in Massachusetts at the end of July orders the Department of Energy Resources (DOER) to develop a 2020 energy storage mandate.

On the Horizon: National Incentives

Storage’s momentum has continued at the federal level. Early last month, Senator Martin Heinrich of New Mexico introduced an investment tax credit (ITC) for energy storage modeled off the solar ITC. While a good idea in theory, the solar industry is already facing an undersupply of tax equity, and the number of investors willing and able to monetize the solar investment tax credit is already limited, which drives up return requirements for these investors.

In addition to federal legislation, the White House recently took actions that they estimate will accelerate storage procurement or deployment to at least 1.3GW in the next five years.

Outlook for Developers

Energy storage can be used for a variety of applications, including utility infrastructure, grid stabilization, peak load shifting and peak demand offsetting.

As the storage market grows, we have seen increased demand for storage + solar solutions in requests for proposals (RFPs), and we are participating in these RFPs with partners as we look to meet consumers’ demand for this “hot” technology.

While mass adoption of solar + storage is at the very least one year away, growing interest in the topic makes it critical for solar developers to expand their knowledge on this topic. It is important to know when to add storage to a project, but it may be just as vital to know when to disqualify it. For now, energy storage feasibility is still highly incentive-driven (and thus, location-driven). Even in states with energy storage incentives, however, adding energy storage to a solar project sometimes fails to increase customer savings. Part of the challenge is that energy storage and solar offset different parts of customers’ energy bills. Because of this, optimal tariffs for solar and energy storage savings are rarely the same.  Nevertheless, if customers in states with incentives have large, “spiky” loads and high demand charges, or are on tariffs with time of day based rates, it is worth evaluating the addition of an energy storage system to a solar project.

Stay tuned. As more energy storage incentives become available and the cost of energy storage systems continues to decline, it will become increasingly important for solar experts to be energy storage experts.

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

ABOUT SOL SYSTEMS

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

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

Investing in Community: Schools (Nonprofits) and Solar Energy

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Sol Systems has closed on 48MW of capacity with tax-exempt offtakers, including KIPP DC: Connect Academy in Washington, DC.

Just like any residential or commercial customer, nonprofits must consider many factors before financing a solar project. Unlike homeowners and businesspeople, however, 501(c)3 organizations are tax-exempt and thus cannot directly benefit from the Investment Tax Credit (ITC) like their for-profit counterparts can. The ITC incentivizes taxpayers such that 30 percent of the dollar amount invested into eligible solar projects can be claimed as a tax credit. Nonprofits, without this same opportunity, remain relatively underrepresented in the renewable energy space as a result.

Even so, schools, places of worship, and other nonprofits can still source and benefit from on-site solar arrays. Through panels on the roofs of elementary schools or carports at community centers’ parking lots, solar installations can reduce and stabilize long-term electricity prices, and provide educational value–children are exposed to of the science and environmental sustainability benefits of solar starting at a young age. However, are the projects viable from an economic and practical perspective? Unable to afford the high upfront costs, how can a school finance the desired project? Parents and school administrators will ask these, among other, practical questions. For schools and nonprofits in general, Sol Systems offers the option of third-party ownership in the form of a power-purchase agreement (PPA).

At the point of signing a PPA, many issues must be addressed: understanding the school’s pre-solar energy usage and related costs, providing power purchase rates that are lower than the grid’s cost of electricity, and determining any necessary changes (e.g. roof reinforcement, temporarily cleared parking lot) before installation can begin. These steps are needed to guarantee minimum production, accurate metering, and the selection of a competitive and reliable vendor from a request for proposal (RFP) process.

Once chosen, Sol Systems can work to deliver the school a reliable project that will provide the nonprofit with clean energy for the next 20 to 25 years. The school has two options at the end of the PPA term: 1) uninstall the project or 2) purchase the project from the owner. If the school has the necessary capital, the latter option may be attractive if the realized energy savings justify the purchase.

Sol Systems has successfully closed numerous projects using this model for academic institutions ranging from elementary schools to universities. In total, Sol Systems has closed on nearly 48MW of projects with tax-exempt offtakers. This includes not only schools and academies, but also churches and government entities. While ITC and other tax benefits (e.g. MACRS) seem to exclude nonprofits considering solar projects, Sol Systems’ track record with tax-exempt entities strongly proves otherwise.

Once their school engages in a solar PPA, students (eager for recess) won’t be the only ones excited by sunny days–the overall school community will also be looking forward to the continued environmental and economic benefits of its solar installations.

ABOUT SOL SYSTEMS

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

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

FERC Ruling Opens Solar Market Potential to Co-ops and Munis

FERC

FERC obligated DMEA to “purchase from QFs offering available energy and capacity”

Access to solar energy has significantly increased as the cost of solar installation has dropped 70 percent within the past decade (2006-2016). Cost declines, when paired with supportive energy policies, have enabled the growth of solar in new markets. One such policy, the Public Utility Regulatory Policies Act of 1978 (PURPA), has been critical for driving solar development by requiring utilities to purchase electricity from qualifying facilities (QF), which include solar and other renewable generating facilities.

A 2015 Federal Energy Regulatory Commission (FERC) ruling—citing PURPA as the ultimate authority that overrides contractual obligations between two electric cooperatives—gives more purchasing control to rural electric co-ops and municipal utilities nationwide. Further upholding its ruling, FERC rejected a June 2016 declaratory order request made by the appellant co-op. Both decisions contribute to the increasing solar capacity owned and purchased by co-ops, which plan to add over 375MW  between 2016 and 2018.

The favorable change for renewable energy stakeholders stems from petitioner Delta-Montrose Electric Authority (DMEA), a member-owned and not-for-profit rural electric co-op distributing electricity to approximately 28,000 members in Southwest Colorado. Having entered a forty-year wholesale electric service contract in 2001, DMEA was required to purchase at least 95 percent of its energy needs from a Colorado-based generation and transmission (G&T) co-op known as Tri-State. However, DMEA was eventually offered the opportunity to interconnect with and purchase power from a local hydroelectric project. Taking this offer would exceed the contractual five percent cap, so DMEA petitioned for relief from its power purchasing constraints with Tri-State.

FERC obligated DMEA to “purchase from QFs offering available energy and capacity,” a ruling that ultimately upheld PURPA to supersede any conflicting contractual obligations. Namely, this 2015 order allows DMEA to purchase local hydropower as desired and continue to support similar-scale renewable energy generating projects. Tri-State, wanting to recover lost revenues from member co-ops that have since diversified their energy purchases, then filed its own petition a year later. Nevertheless, in June 2016, FERC rejected the declaratory order request that “would effectively undo Delta-Montrose’s statutory obligation to purchase from QFs and correspondingly limit QFs from selling power to Delta-Montrose at negotiated rates.”

The FERC orders open parallel opportunities to the 835 other rural electric distribution co-ops as well as municipal utilities across the United States. Like DMEA, many such co-ops and utilities face similar contractual constraints on their percentage of self-generated power. This fact helps explains why, for example, two rural electric co-ops in New Mexico recently issued a request for proposal (RFP) for a large-scale solar PPA much larger than their original five-percent limits would allow.

U.S. co-ops currently own and purchase about 16.7GW of renewable capacity (including contracts for federal hydropower), and this number will continue to rise in part by solar photovoltaic projects’ expanded presence. As many distribution co-ops and municipal utilities exercise their independence to purchase more renewable energy, Sol Systems continues to provide financing for local solar developers.

The mass integration of solar into existing energy systems is not achieved overnight; financing, development, increased grid flexibility, and additional means to ensure the energy source’s reliability will be necessary. Still, the future of solar among rural electric co-ops and municipal utilities is certainly brighter.

ABOUT SOL SYSTEMS

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

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

Grounded, Growing: Sol Systems Over the Years

The Sol Systems Team has seen plenty of growth over its 8 year history.

The Sol Systems Team has seen plenty of growth over its 8 year history.

Then & Now

Sol Systems is deeply rooted in effective teamwork. Co-founders George Ashton (President) and Yuri Horwitz (CEO) started as track teammates in 2001 at their alma mater, William and Mary. After school, their career paths parted ways—George becoming a finance professional and Yuri a clean energy lawyer. Ultimately, George and Yuri re-joined forces in 2008 to form Sol Systems, consisting of 58 full-time employees and 8 interns across three (Washington DC, Philadelphia, San Francisco) office locations as of July 2016.

Each year for the past four years, Sol Systems has been recognized by Inc. Magazine as one of the fastest-growing companies in America and even more so in DC. The company’s significant growth parallels that of the overall industry. But what is it that specifically accounts for Sol Systems’ success? Despite many fitting answers, the essence is captured by two key concepts: forward-thinking and upholding a triple bottom line.

Forward-Thinking

To facilitate the financing of over 450MW of solar energy to date, Sol Systems has looked beyond the horizon (both literally and figuratively). The company has evaded the complacency of any one business model and has instead consistently pivoted to build off the company’s strengths and keep on the cutting edge of the solar industry. For example, Sol Systems’ initial business line focused on aggregating solar renewable energy credits (SRECs), and the company has since added two additional business lines: structured finance and project acquisition (with another line set to launch in autumn 2016).

Andrew Gilligan, now heading investor acquisitions, began as an undergraduate intern on Sol Systems’ SREC Customer Service team before graduating and working full-time in 2011. A veteran team member, Andrew reflected on the company’s growth. “We’re taking on challenges,’ said Gilligan, “but only the ones we’re equipped to handle.” Such an anticipatory spirit is inherent to the company, and Andrew’s statement resonates with the thoughts of colleague Bridget Callahan. Like Andrew, Bridget joined Sol Systems when SRECs were its main source of revenue generation, and she currently manages the four-member SREC Customer Service team.

“SRECs are a unique state incentive structure that has been critical to adding solar in markets such as MA, NJ, MD, and DC. Sol Systems recognized the importance of SRECs early on,” said Callahan, “and we continue to help system owners and developers maximize SREC revenue today.”

The company is, of course, only as dynamic as the people constituting it. Noting trends among new hires, Bridget and Andrew similarly commented that everyone is very open, positive, and team-oriented–all factors contributing to the company’s agility as a small private firm. Andrew added that the team recruits those who are not only smart and adept at problem-solving but also passionate about deploying solar energy. In doing so, Sol Systems is an industry leader that continues to realize and raise the threshold of its potential.

Triple Bottom Line

Even with perpetual movement forward, the company remains focused on delivering its triple bottom line (i.e. People, Planet, Profit). Beyond profit, Andrew and Bridget emphasized how the company creates value for people and the environment. They also cited less obvious ways Sol Systems benefits its stakeholders besides helping build the clean energy sector. Bridget remarked that “Sol Systems has definitely shown that it wants to invest in the people. A key example is having an HR department focused on professional development for employees.” The adage that meaningful change starts from within is no exception to Sol Systems’ workplace—the company encourages a strong internal community that, in turn, extends to developers, investors, and other partners.

Describing the company’s commitment to environmental sustainability, Andrew shared that, “[Sol Systems team members] obviously finance solar projects, but we try to get people excited about it. We also do volunteer projects that help preserve the outdoors as best we can.” The company’s physical office space is an additional reflection of Sol System’s care for the environment; here, one can find composting and single-stream recycling as well as wind RECs purchased to help offset the office’s load.

In sum, Sol Systems’ promotion of social and environmental welfare is simultaneous to its economic success.

Future Direction

The company continues to welcome new hires, celebrate long-time employees, and foster community. So, what’s next for Sol Systems? The company’s scope of work is ever-broadening, but Sol Systems is certain to uphold its core values. After all, the organization is not only a business, but also a supportive team–not so different from the one that brought Yuri and George together before they founded Sol Systems.

ABOUT SOL SYSTEMS

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

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

Module Shortage? That’s So 2015.

After a year of module shortage whispers, the market now faces an oversupply. 

After a year of module shortage whispers, the market now faces an oversupply.

Oh, how quickly things can change in one year on the solar coaster. After reporting extensively on module shortage rumors throughout 2015, a funny thing has happened: we are now facing a module oversupply. Why?

  1. Decreased demand from major rest-of-world markets is creating a glut in supply. GTM Research expects a reduction of 3% – 4.5% in global demand from China alone. Europe’s solar market continues to lack growth, and the Euro is not where it once was.
  2. Our industry’s gift from the holiday season, the solar investment tax credit extension, has nullified the urgency to complete projects in 2016. With December 31, 2016 no longer the deadline for ITC eligibility, many projects originally slated to be placed in service by the end of this year have been pushed into 2017 and 2018.
  3. A certain company (you can guess) that manufactured modules – and bought modules for their own solar projects – is no longer manufacturing modules or developing projects. As a result, there remains an excess of preexisting inventory that needs to be placed into third party projects.
  4. High efficiency module monocrystalline manufacturers have turned their focus to the North American solar market, offering pricing that is highly competitive when compared to conventional polycrystalline product. This has created downward price pressure on the polycrystalline manufacturers as they are forced to reduce their prices to remain competitive.

Sol Systems has seen module prices in the low-to-mid 50 cent range for Q3 and Q4 installations, much cheaper than anticipated for 2016. Based on our analysis in the market, we expect that low prices are here to stay. Bring on the cost declines, which will enable further market opportunity and bring us closer to grid parity. For projects that we co-develop with partners, Sol Systems can often secure lower-cost modules. Give us a call.

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

ABOUT SOL SYSTEMS

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

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

Procurement DE-claration, 2016: SRECDelaware Announces 2016 Procurement Results

The Delaware solar renewable energy credit (SREC) program, SRECDelaware, recently announced the results of its 2016 Procurement. This year, procurement was marked by a higher than anticipated volume of SRECs produced by new systems between 25kW and 2MW in capacity. In response, Delaware’s state utility, Delmarva, decided to buy the resulting 2446 excess SRECs. The overall outcome of Delaware’s procurement oversubscription was a slight price drop from last year for SRECs in the oversubscribed tiers.

What is the Procurement Program?

Delaware has a unique structure of SREC procurement that allows customers to bid competitively on SREC purchase contracts with the Delmarva. These contracts were meant to address price volatility in the DE SREC market. Accordingly, solar energy systems in DE are categorized into one of five tiers based on system size and installation date. Customers in each tier bid on contracts with Delmarva to sell their SRECs at a fixed price. The customer with the lowest priced bid in each tier wins the contract. Additionally, Delmarva can buy up to 6,000 more SRECs from customers after all the tiers have been sold.

See below for a chart detailing the tiers for DE SREC Procurement:

Graphthree

*N-1, E-1, and E-2 compete for the same pool of 4,400 SRECs

How is this year’s procurement different from years past? At the most basic level Delmarva buys more SRECs and tier cutoffs have evolved. Delmarva can now purchase up to 6,000 additional SRECs after establishing its 20-year contracts with bid winners. In the past, Delmarva was limited to a purchase of 3,000 additional SRECs. Furthermore, the DE SREC program has changed the nameplate capacity cutoff for systems in E-1 to 25kW, rather than 30kW. Additionally, this year’s contracts last for 20 years. Customers sell their SRECs to Delmarva at the bid price for the first 10 years and then for $35 per SREC for the last 10 years of the contract.

As discussed earlier, Delmarva was allowed to purchase up to 6,000 additional SRECs after establishing contracts. However, Delmarva actually purchased nearly 2,500 SRECs more than that limit by purchasing all SRECs priced below $95 from the oversubscribed tiers of N-2 and N-3. SRECDelaware cites that the undersubscribed tiers N-1, E-1, and E-2 were filled with low-priced excess N-3 bids, since tiers N-3 and N-2 had more SRECs than Delmarva originally intended to purchase. In years past, none of the tiers have been undersubscribed.

Bid Pricing Results

SRECDelaware’s 2016 Procurement resulted in a bid price increase for tiers N-1, E-1, and E-2, but a decrease for the oversubscribed tiers, N-2 and N-3. Below are the results of this year’s procurement, as well as the changes in average bid price over time.

Graph1

Graphtwo

ABOUT SOL SYSTEMS

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

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

Meet the New Faces of the SREC Customer Service Team

Sol Systems is pleased to introduce two new members of the Solar Renewable Energy Credit (SREC) Customer Service Team: Lauren Miller and Avery Sellers.

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Avery Sellers and Lauren Miller help manage over 7,000 customer accounts

Along with Bridget Callahan, Kate Brandus, and Jessica Cowan, Lauren and Avery are responsible for managing over 7,000 customer accounts, with tasks ranging from registration with regulatory entities to assisting with the distributing of SREC payments.

As a SREC Customer Operations Associate, Lauren works directly with customers by registering their solar energy systems and monitoring generation reports for SREC minting with the generation tracking entities PJM-GATS and NEPOOL. Avery, an SREC Operations Associate, verifies meter readings and assists the IT team in improving the customer dashboard.

Lauren and Avery both started at Sol Systems as interns in the SREC Operations and Marketing teams, respectively. Previously, Lauren worked at the White House Council on Environmental Quality in the Office of Federal Sustainability. Avery has worked at Smart Electric Power Alliance, formerly the Solar Electric Power Association.

Lauren graduated from Georgetown University with a B.S. in Science, Technology, and International Affairs, specializing in energy policy. Her passion for clean energy grew out of a commitment to sustainability that started at a young age. Lauren grew up loving hiking, and her family always emphasized the importance of environmental conservation.

Avery holds a B.A. in Political Science from George Washington University. Renewable energy has always been close to his heart, especially since his father also worked in the renewable energy sector. Avery wants do work that is globally impactful and finds the energy sector as the perfect place to make a positive change.

When they’re not at the office, Lauren and Avery both enjoy music. Lauren enjoys nature by hiking and kayaking, but is also an avid dancer, specializing in jazz and hip hop. Avery almost went to film school and now focuses on photography over filmmaking. He also enjoys spending time outdoors, whether it be kayaking, snowboarding, or cycling.

Please help us in welcoming Lauren and Avery to the team.

Working at Sol Systems

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

ABOUT SOL SYSTEMS

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

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

So, You Want to Go Merchant…

Cost declines are driving the growth of merchant solar. Where are the best opportunities?

Cost declines are driving the growth of merchant solar. Where are the best opportunities?

In some markets, solar is now at a price point where installation costs are competitive with locational marginal pricing (LMP). As solar costs continue to fall, the potential for merchant solar is on the rise. With overall system pricing decreasing by 5-10% in Q1 2016 alone (depending on geography), the merchant solar market is ripe with opportunity.

Who? The solar industry’s rapid cost declines are catching the eyes of sophisticated corporate buyers, educational institutions, and other entities who are increasingly looking to off-site renewables to hedge against volatile electricity pricing and provide cost savings. The wind industry has been structuring these transactions for years, but paired with cost declines, solar has added appeal because projects can be sized in accordance with an electricity buyer’s load at much smaller scale, and more rapidly deployed.

Why? Developing merchant solar projects can be far more straightforward from a developer’s perspective than a typical PPA deal. One of the appeals of merchant solar is that it can be far more streamlined than selling a PPA to a host customer. After leasing land from a landowner, a developer can move through the various stages of development and then exit by selling the development rights before one would have otherwise entered PPA negotiations. For Sol Systems, merchant projects are most attractive when site control is in place, interconnection is underway, and geotechnical concerns have been addressed.

Where? The opportunity for merchant solar is most prevalent in open energy markets, such as PJM and ERCOT. In the PJM region, Maryland and New Jersey are especially ripe with opportunity given the added boost from solar renewable energy credits (SRECs). California is also an attractive market for similarly structured transactions because of Direct Access (DA), which allows customers to purchase electricity from competitive suppliers. However, DA is unavailable to new customers.

So, you want to go merchant? Now is the time. Contact ben.margolis@solsystems.com for tips on breaking into this new market, or if you have projects in need of off-take.

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

ABOUT SOL SYSTEMS

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

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

Employee Spotlight: James Machulak

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ABOUT SOL SYSTEMS

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

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

The Elephant in the Room

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

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

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

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

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

ABOUT SOL SYSTEMS

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

Why SREC Forecasts Are Stronger Than You Think

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

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

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

REC vs. SREC: What’s the Difference?

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

Why isn’t solar booming in Ohio and Pennsylvania?

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

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

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

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

What Projects Can Be Built with Tier 1 Pricing?

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

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

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

ABOUT SOL SYSTEMS

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

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

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

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

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

Déjà vu?

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

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

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

 

How Does the Freeze Affect SREC Pricing?

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

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

Renewable Portfolio Standards = Good

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

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

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

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

Bottom Line? Don’t Freeze the RPS.

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

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

 

ABOUT SOL SYSTEMS

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

Providing Value: Certainty in Financing

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

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

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

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

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

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

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

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

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

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

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

ABOUT SOL SYSTEMS

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

Giving that Matters: April Community Service Day Targets Environmental Stewardship

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

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

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

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

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

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

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

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

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

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

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

 

ABOUT SOL SYSTEMS

Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 200MW solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. Sol Systems provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. The company’s tailored financial services range from tax structured investments and project acquisition, to debt financing and SREC portfolio management. Inc. Magazine named Sol Systems on its annual Inc. 500 list of the nation’s fastest-growing private companies for a second consecutive year, ranking it No. 6 in the nation’s top solar companies in 2014. For more information, please visit www.solsystems.com.

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

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

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

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

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

Preferred investment criteria includes portfolios:

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

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

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

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

ABOUT SOL SYSTEMS

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

Is Community Solar Too Complicated for Tax Equity Investors?

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

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

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

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

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

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

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

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

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

ABOUT SOL SYSTEMS

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

New Solar Interconnection Standards Adopted in New York and Next Steps

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

What?

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

Who?

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

Specifics?

The updated NY Solar Interconnection Standards include the following protocol:

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

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

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

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

ABOUT SOL SYSTEMS

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

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

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

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

Looking at Past RE Growth Journeys

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

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

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

Rhode Island Solar Energy’s Turning Tides

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

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

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

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

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

If you are a solar developer looking to dive into the Ocean State, contact our project finance team at finance@solsystems.com or (888) 235-1538 ext. 2 to see how Sol Systems can help secure financing for Rhode Island solar projects. Sol Systems has previously facilitated financing for solar projects in Rhode Island with feed-in tariff contracts. Check out our experience page to see our portfolio.

ABOUT SOL SYSTEMS

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