Sol Systems Logo
Menu

Posts Tagged ‘Solar finance’

Maryland Passes Community Solar Bill

MD state legislature has passed HB 1087.

Will Maryland be the next big market for community solar development?

It’s official: the Maryland state legislature has passed HB 1087, titled “Electricity – Community Solar Energy Generating System Program,” bringing MD one step closer to community solar. If you’re not familiar with community solar, check out our write-up on the Maryland community solar legislation and the challenges faced by these programs.

The bill, which enjoyed bipartisan support passed 46-0 in the Senate and 111-29 in the House. However, there are still a few steps that must be taken before Maryland residents will be able to participate in community solar programs through this law.  First, Maryland’s new governor Larry Hogan has to sign the bill into law. Once the bill becomes law, it is up to the MD Public Service Commission (PSC) to adopt regulations in order to implement the bill. This will be a critical point, as other community solar legislation has been slowed down at this stage. (DC for example has not yet implemented their community solar program despite legislation passed in 2013; Maryland’s bill gives the PSC a generous full year to determine relevant rates, etc.)

HB 1087 establishes a pilot period, extending three years after the beginning of the program, which is denoted by the first submission of a petition from a subscriber organization, or six months after the PSC adopts the required regulations. Establishing a strong and fair set of regulations is imperative to the permanent success of community solar in Maryland, as the PSC will convene a stakeholder working group following the termination of the pilot program to study the feasibility of establishing a permanent program. The listed deadline for the recommendation from this study is July 1, 2019.

Of course, and unlike in other jurisdictions where community solar has been adopted, the fundamental legal requirements to carry out this business model are already in place – see our Remote Solar blog for more information; however, this legislation may reduce some of the financial risk and regulatory barriers to entry associated with creating such projects.

Community solar fulfills all three pillars of sustainability: the environment, economy, and social equity. The third pillar, social equity is often overlooked with typical solar projects. Marylanders will not be excluded from access to solar energy because they rent their living space, or live in an area not physically suited for their own solar array. About 32.4% of Americans do not own their homes, so there is certainly a sizable market of Marylanders who have not yet had access to solar. Additionally, lower-income residents will be more able to access solar, as more low-income residents rent, rather than own their properties. As the solar industry continues to grow, it is important to reduce barriers for those who are actively interested in solar, as they will continue to drive the growth of the industry.

ABOUT SOL SYSTEMS

Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 180MW 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.

Prepaid PPAs: Nice, but “Nichey”

April _ prepaid PPA _ pic

Are prepaid PPAs a unicorn idea, or something that will drive the commercial solar market?

For commercial and small utility-scale solar, the prepaid PPA is a great idea… in theory. By prepaying for expected generation over the contract term, the long term price that the offtaker pays for electricity can be much lower. Assuming the offtaker can find the cash to handle the large prepayment, these deals can increase IRR, lower an offtaker’s levelized cost of energy (LCOE), and also lower the potential cost of a solar energy system. Because of these potential upsides, developers are increasingly turning to us to see if these deals are financeable.

The short answer is yes, prepaid PPAs can be financeable. But, because of the complexity of these transactions associated with invoicing, having to “true-up” generation, bifurcating green attributes, complicating tax payments (carrying a contra asset) etc., we recommend them only in rare situations, namely when:

  1. The host “speaks” kWh. Developers, picture yourselves explaining invoicing, one of the most complex portions of a prepaid PPA, to a typical facility manager at a commercial and industrial (C&I) host site.

    These kilowatt hours over here have already been paid for, these have not. Well, even though you paid upfront for an 8 cent PPA, you actually have a 10 cent PPA. Oh, what’s that? That’s the portion of the electricity that is bifurcated for green attributes. Get it? No?  Do you have a whiteboard?

    It’s not an easy discussion to have, and if the facility manager just doesn’t “get” it, it will make for a long, complicated, and costly negotiation process. For this reason, it’s best to work with a clean energy authority, muni, or another utility-like host that really understands the complexities of their electric bill, and “speaks” kilowatt hours.

  1. Project sizes exceed 5MW. The bigger the project, the better. These deals are costly to set-up, and because of that, it’s better to pursue them only for larger deals that can absorb the transaction costs.

  1. Cheap money at the host. Generally, a for-profit host in anything other than the most mature industry will have a weighted average cost of capital greater than a PPA financier – turning the value of a prepay upside-down.  Prepays find their best value with a public or pseudo-public entity that brings very low borrowing or opportunity costs, but has no way to recognize the relevant tax benefits.

  1. Dealing with the residential sector. Some residential companies have been very successful with prepaid PPAs, but residential is not commercial. If you’re a resi player moving into commercial, scaling your prepaid offering up for commercial is not recommended if it does not follow the above conditions.

In sum, prepaid PPAs can work for commercial and small-utility scale solar, but because of added complexities of negotiating these deals, we see them as more of a niche idea than something that will become mainstream for commercial any time soon. Still, when they work, they can be a creative way to get projects to pencil.

This is an excerpt from our Solar 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 180MW 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.

Illinois Solar Gets Closer to Game Time

20140823_xl_solaranlage-zw-ruedersdorf-fredersdorf8534

The Illinois Commerce Commission released a draft Proposed Order earlier this month on the Illinois Power Agency’s (IPA) Supplemental Procurement Plan, solidifying noteworthy changes for the Illinois solar market.

The Illinois solar market is marching ahead to an eventful 2015.  Recent action on the Supplemental Procurement Plan means solar energy system owners should look for the Illinois SREC market to come to fruition very soon.

Earlier this month, the Illinois Commerce Commission released a draft Proposed Order on the Illinois Power Agency’s (IPA) Supplemental Procurement Plan. In the draft Proposed Order, the Commission reviews objections and comments submitted to them regarding the IPA’s plan and makes rulings on each issue. Many of the rulings solidified changes we examined in past articles on the Illinois solar market[s1] . The following conclusions are particularly noteworthy for current or prospective solar system owners in Illinois:

Read More

Sol Systems Offers New SREC Contract. Meet Sol Combo

1024px-Jigsaw_puzzle_01_by_Scouten

Sol Systems offers four SREC monetization options: Sol Upfront, Sol Brokerage, Sol Annuity, and now, Sol Combo.

Solar Renewable Energy Credits (SRECs) are a confusing, yet critical, piece of solar finance for solar energy system owners and installers alike. To solve for this, Sol Systems offers four SREC monetization options: Sol Upfront, Sol Brokerage, Sol Annuity, and now, Sol Combo.

For many customers, deciding how to handle the solar renewable energy credits (SRECs) generated by their exciting new rooftop power plant can be tricky. Are they the kind of person who will lock in a price for the long term, saving themselves time and energy and adding greater certainty to their financial planning? If so, Sol Annuity is the best option.

Another type of customer is one who likes to play the volatile spot market and take some risks for the chance of scoring a higher short-term return. If so, Sol Brokerage is the best option.

Read More

A Look Back at 2014: What Does a Shortage of Bankable Projects Mean for C&I Solar?

Solar project development is cyclical: more capital chases projects, oversupply of capital brings down yields, capital exits the space, more projects chase the money; rinse, lather, and repeat.

There is a shortage of bankable projects in C&I solar.

There is a shortage of bankable projects in C&I solar.

As we reflect on 2014, we will remember it as a year when an abundance of sponsor equity was met with a shortage of bankable project opportunities. Here’s why, along with our predictions for commercial and industrial (C&I) solar in 2015.

1. Transaction Costs Reinforce C&I Growing Pains

The culprit for C&I’s flat growth is once again the large transaction costs associated with relatively smaller project sizes (as opposed to multi-megawatt residential portfolios and utility-scale projects).  Since any number of issues can kill a project opportunity, we recommend working with a financing partner early on to help tackle issues with interconnection, host credit, property taxes – you name it.

 2. Diminished Incentive Regimes

With incentive programs drying up in several major markets (Gainesville, Indiana Power & Light, LIPA, NIPSCO, etc.), many developers are struggling to create bankable project opportunities.  Why not bank on the markets that work without incentives, and with just a moderate PPA (i.e. California, Arizona, and Hawaii)? Also, follow the opportunity: there are several underrated solar markets that aren’t seeing nearly the development activity that they should be (New Jersey, Maryland, and <650kW in Massachusetts).

3. Hungry, Hungry YieldCos

Yieldcos have eaten much of the larger, “middle of the fairway” bankable project pipeline, contributing to the shortage of financeable project opportunities that are left for investors. However, it is important to remember that generally it is only the most clear cut, “perfect” projects are being placed into YieldCos — generally, multi-megawatt ground mount projects with an investment-grade offtaker, likely a utility or publicly-rated corporate entity.

Because Yieldcos are not as flexible on size or credit, we anticipate them having issues “feeding the beast” in 2015 and beyond. Stay tuned; only time will tell.

Think Diligently in an Undersupplied Project Marketplace

You can count on tables to turn over the years.  Along with the ebb and flow of a maturing solar market itself, buying and selling power will fluctuate, making long-term relationships crucial to profitability.

In 2014, we still saw solar developers reject our initial bids because a bid from another investor was “too good to be true.” Turns out they mostly were, and the same deals resurfaced for our team later in the year.

This is why we advise solar developers to conduct diligence on their solar investors, just as they vet your company and project opportunities. Together, we can scale the C&I market.

This is an excerpt from our Solar 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@solsystemscompany.com.

About Sol Systems

Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 171MW distributed generation solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. It has over $550 million in assets under management as of September 2014.  Sol Systems provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. The company’s tailored financial services range from tax structured investments and project acquisition, to debt financing and SREC portfolio management. For more information, please visit www.solsystemscompany.com.

Financing Partnerships Drive North Carolina’s Solar Boom

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

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

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

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

Read More

If C&I Solar Projects Were Thanksgiving Dinner

Thanksgiving_Dinner_Alc2

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

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

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

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

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

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

About Sol Systems

Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 171MW distributed generation solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. It has over $550 million in assets under management as of October 2014.  Sol Systems provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. The company’s tailored financial services range from tax structured investments and project acquisition, to debt financing and SREC portfolio management. For more information, please visit www.solsystemscompany.com.

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

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

Read More

Extra Credit for Getting C&I Credit Right

C&I solar credit

Commercial and industrial (C&I) credit is incredibly complex – and can often be a deal breaker in middle market deals. Here’s how to get it right.

Unlike residential, which has standardized credit scores, or utility-scale, which generally has utility off-takers, commercial and industrial (C&I) credit is incredibly complex – and can often be a deal breaker in middle market deals (which we generally categorize as 200kW – 5MW).

Why is credit such a deal breaker in C&I as opposed to other market sectors? To start, very few facilities are owner-occupied, and it is hard to guarantee that the same tenant will buy the electricity for the length of a 20 or even 15-year PPA. Think of your own booming solar business. As your company expands, you will need more office space. Can you guarantee to a solar developer (and thus, the end buyer: an investor) that you will be there to buy the electricity when your lease is up in five years? If you leave the building, can you ensure another reliable, rent-paying tenant will take your place, or that the owner of the building will be able to quickly find someone who will use electricity and take your place? No? Hence the issue…

C&I solar deals often die when the developer realizes all too late that the host has poor credit. How could that happen? For one, it is inherently uncomfortable for a developer to ask a host to turn over their audited financials, and developers sometimes have a hard time choosing how and when to fit “the talk” into the courting discussion. As a result, C&I developers often rely on the host’s word, rather than financial statements, to ensure creditworthiness (or worse, some subjective indicator – suit or haircut quality, a spic and span facility, etc.). Then, when it gets time to sell the project to an investor and further credit analysis reveals an issue, they realize the project cannot move forward. All of that development time (and money) wasted.

Read More

Just Say No: When to Walk Away from a Solar Deal

Sometimes the key to success is knowing when to walk away from a bad deal.

Sometimes the key to success is knowing when to walk away from a bad deal.

Solar developers and investors alike often ask us the same question: what is the secret to making middle market solar projects work? Often, the key is knowing when to walk away before the transaction costs become too much to bear.

In other words, a project can seldom overcome serious obstacles facing two or more critical financeability metrics, such as:

  • Project Size – A one-off 1MW+ project is almost always more attractive than a one-off 200kW project. Bundle that 200kW into a 1MW+ portfolio with different off-takers, and it is still less attractive to an investor than the one-off 1MW+ project with a single off-taker.
  • State Market – Certain solar markets are more attractive than others to investors. Flip through the “markets” section of past Project Finance Journals, and you will see what those markets are
    and what incentives they offer, though some should be obvious (DC, CA, & MA are generally more attractive than IN, PA, OH).
  • Host / Off-taker Credit – Municipalities, universities, schools, and hospitals (MUSH) hosts with investment grade credit are the most attractive, and unrated credit is the least attractive. Perhaps counterintuitively, unrated credit with three years of audited financials falls somewhere in the middle, very much depending on a real read of the customer’s situation.
  • Project Development Status – Projects with an executed PPA, site control, interconnection, approval, and completed permitting are most attractive to investors. Earlier stage projects will have a hard time securing financing until they have reached these milestones.

Though there are exceptions to every rule, the further your project is from these desired characteristics, the least likely they are to receive financing. And, the further that projects are from this spectrum, the more costly the complexities are.

At this stage in the evolution of our industry, if you haven’t seen your proposed financing model “in the wild,” it’s not because no one else has thought of it; it’s because it is unlikely to work. The reality is if your creative project development idea sounds too creative to be true, it probably is; complexities don’t add, they multiply. Or, as one of us here is fond of saying, “every minute of explanation on top of the base deal is another basis point on the returns.” In a market sector where transaction costs weigh down relatively smaller project opportunities, it is better to walk away before you burn too much time on a deal that won’t make it. Your time is much better spent on a cleaner project.

The above is an excerpt from our Solar 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@solsystemscompany.com.

About Sol Systems

Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 171MW distributed generation solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. It has over $550 million in assets under management as of September 2014.  Sol Systems provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. The company’s tailored financial services range from tax structured investments and project acquisition, to debt financing and SREC portfolio management. For more information, please visit www.solsystemscompany.com

The Road to Interconnection May Be Rocky

The road to interconnection can be rocky, but it doesn't have to be.

The road to interconnection can be rocky, but it doesn’t have to be.

Uncertainty in interconnection timelines is nothing new, but it nonetheless remains an issue in a number of solar markets. When looking to complete projects within an investor’s target commercial operation date (COD), often the biggest unknown is how long it will take the utility to enable a successful interconnection, which may include utility provide equipment, testing and commissioning, and issuance of approval notices.   In the worst case, you might be waiting for someone to handcraft a transformer for you, or take care of some vegetation management.

Timelines and processes vary utility by utility. But ultimately, this uncertainty hurts the EPC who will face damages if the project is not done on time. This issue is especially relevant now as end-of-year deadlines approach.

In addition to timeline sensitivities, another issue lies in interconnection costs. If you go through the entire development process and then realize that interconnection costs make the deal challenging to finance, the deal may not fully materialize without additional solutions.

Read More

Sol Systems Speaks at Minnesota Solar Conference

Members of the Sol Systems Project Finance Team will be in attendance at the MnSEIA hosted conference.

Members of the Sol Systems Project Finance Team were in attendance at the MnSEIA hosted conference.

Several members of the Sol Systems project finance team attended the Midwest Gateway to Solar conference, hosted by the Minnesota chapter of SEIA, on November 4th and 5th. On Tuesday, Sol Director of Project Finance, Ben Margolis spoke among other subject matter experts on Developing Solar Finance for Minnesota.

The Sol Systems team is actively reviewing solar project investments in the Minnesota solar market. As we discussed in our October Solar Project Finance Journal, we especially see possibility in the state’s community solar program. We are also interested in 400kW+ portfolios of <40kW projects that have been awarded Made in Minnesota grants and will be keeping an eye on the Value of Solar Tariff, which we expect to be active in 2015.

To learn more about financing for Minnesota solar projects, please contact our team at finance@solsystemscompany.com.

Read More

Go Ahead, Wake the Sleeping Giant: Why C&I Solar is Poised for Growth

While residential solar installers battle for market share and YieldCos gobble up utility scale projects, the commercial and industrial (C&I) solar space has been relatively quiet. Broadly defined as behind-the-meter projects between 50kW and 5MW, the middle market remains untapped due to market fragmentation and complexity associated with relatively smaller deal sizes. In fact, the number of middle market solar projects interconnected in Q1, 2014 was down 12% from the same quarter in 2013, according to Greentech Media (GTM) and SEIA’s Solar Market Insight Report. Additionally, Q1, 2014 marked the first quarter that residential solar MW installed exceeded those installed in the C&I niche since 2002.

Read More

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

Chicago

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

Prepared in collaboration with Sol Systems Intern Mark Noll

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

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

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

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

Read More

Ohio Opposition to Renewables & Solar Energy Mounts

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

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

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

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

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

Read More

Massachusetts Updates 2016 Managed Growth Allocation, Developers Still on Edge

Massachusetts solar developers breathed a sigh of relief after last week’s announcement.

Some developers of 650kW+ solar projects may get their projects built after all.

Some developers of 650kW+ solar projects may get their projects built after all.

After the initial August 26th announcement that the 2016 Managed Growth Capacity Block would be 0MW, the Massachusetts Department of Energy Resources (DOER) opened a public comment period.  As expected, solar stakeholders expressed their concern over the 2016 allocation, citing that the DOER had projected overly ambitious growth in Market Sectors A-C. In response to these comments, DOER adjusted the 2016 Managed Growth Capacity Block allocation from 0MW to 20MW .

What is Managed Growth in Massachusetts?

The Massachusetts SREC-II Program, initiated in April, creates differentiated financial incentives for each market sector (“SREC Factor”) to level the playing field. This program makes smaller solar projects more competitive compared to larger ones by ideally giving financial preference to residential and rooftop projects (a higher SREC Factor close to 1.0) and providing less support for larger projects (ground mount, landfill or brownfield projects less than 650kW.) Previously, this program allocated 26MW and 81MW for the Managed Growth sector in 2014 and 2015 respectively.  As the legislation mandates, the reconsideration and final decision of the 2016 Managed Growth Capacity Block came from the following formula:

Read More

Get in Line and Get Creative: How to Deal with Module Price Changes

The following is an excerpt from our Solar 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@solsystemscompany.com.

Solar tariffs are impacting module procurement and selection.

Solar tariffs are impacting module procurement and selection.

The solar tariff dispute is leading to longer procurement times and altering module selection. Now, as developers build out their initial design specs with a specific module in mind, we are finding that as a project approaches NTP, the modules may become unavailable or too costly. In other words, both developers and investors are finding themselves compromising on module selection, or at least dealing with a scarcity of choices once it comes time to actually procure equipment for a given project.

Some developers we work with have kept their eyes out for module deals throughout the transaction process, and even after financial close, with the hope that another supplier can bring comparable modules into the U.S. market at a more affordable price. As a result, it is becoming increasingly common for developers to swap modules. Overall, investors are comfortable with this last minute module swap as long as the modules are solidly Tier 1 – or the investor has already provided a list of approved vendors. In one case, we made the decision to switch modules on a project rather than wait through a several-month delivery timeline, even though the swap required some redesign in order to accommodate the change. We do not encourage these module “swaps,” but we recognize that sometimes they may be necessary. 

Read More

Interested in Developing a 650 kW+ Solar Project in Massachusetts? Think Again (Or Be Very Patient)

The countdown is now over, and the DOER has released their initial analysis and expectation for the Managed Growth Capacity Block for 2016.

The Massachusetts DOER has released their expectation for the SREC-II program’s 2016 Managed Growth Capacity Block.

Yesterday’s announcement from the Massachusetts Department of Energy Resources (DOER) may have taken some Massachusetts solar developers by surprise.

Immediately following the announcement of the allocations for the 2014 and 2015 Managed Growth capacity, commercial and utility scale solar developers across New England began counting down the days to when the 2016 capacity amount would be revealed. Developers had long awaiting the final figures for the DOER’s 2016 allocation, hoping they could fit their 650 kW+ solar projects into the Massachusetts solar program.

The countdown is now over, and the DOER has released their initial analysis and expectation for the Managed Growth Capacity Block for 2016.  The final result is… 0 MW.

Read More

South Carolina Solar is Rising

South Carolina solar

The South Carolina solar market may grow to 300 MW. Sol Systems is actively seeking to invest in commercial solar projects in the Palmetto State.

After two years of negotiations, the South Carolina House of Representatives voted unanimously on new legislation to promote solar inthe Palmetto State. As a result of the South Carolina Distributed Energy Resource Act (S.B. 1189), Sol Systems expects the South Carolina solar market to expand from a mere 8 MW to 300 MW or more by 2021. Here’s how.

South Carolina’s New Solar Program

Under S.B. 1189, larger utilities (those who serve 100,000+ customers – effectively SCE&G and Duke Power) must obtain 2% of their average 5-year peak power demand from solar energy sources. Of this 2%, 1% must be comprised of 1-10 MW solar projects; the other 1% must be comprised of solar projects under 1 MW, 25% of which must be 20 kW or smaller. Here’s the breakdown of that 2%.

Read More

Massachusetts SREC-I Auction Throws a Curveball to the Markets: Here’s how this will impact SREC-II projects.

Massachusetts proposes new solar policy...again. The new proposal is a compromise to address net metering and the SREC market.

The Massachusetts SREC Clearinghouse did not clear. Here’s what comes next.

Round II of the Massachusetts SREC-I clearinghouse auction failed to clear yesterday, July 30. A third round will be held on Friday, August 1st, 2014. As we described earlier in an explanation of the Massachusetts SREC-I auction, This annual auction, which is based on the volume demanded, allows SREC sellers the opportunity to auction their SRECs at the end of each summer for a fixed price of $300/SREC, minus an auction fee (most customers will net $285)

Implications of the Massachusetts SREC-I Clearinghouse Round II

An Auction failing to clear Round II automatically increases the Renewable Portfolio Standard (RPS) obligation by 142,504 to 1,054,933 SRECs for compliance year (CY) 2015. An increase in demand generally pushes prices higher, which is what Sol Systems’ SREC trading team saw yesterday. Massachusetts SRECs with a 2015 vintage stamp increased $35 per SREC to $320 from $285. Since a partial clearance of the Auction is allowed in Round III, compliance entities and SREC investors are likely to bank some SRECs in expectance of this increase in CY 2015 RPS obligation. All unsold auction SRECs will be returned to the owners (with extended life of three years) in proportion to the clearance volume in Round III and will have to be sold on the spot market.

Read More