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What Can Community Supported Agriculture Teach the Solar Industry?

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Like Community Supported Agriculture offers individuals a portion of a crop yield, shared solar models are sprouting up throughout the U.S., offering people opportunities to choose clean energy without owning their own solar energy system or leasing their rooftop.

In 1965, amidst destruction of arable land and the growing use of pesticides in food production, a group of Japanese women invented “tei kei,” a system where consumers supported local farmers on an annual basis in exchange for a share of their crop. In the 1980s and 90s, this idea spread to the United States, where consumers desiring to take control of their food choices enrolled in CSA (Community Supported Agriculture) programs, purchasing a share of a local farmer’s crop each season. Starting in cities in the Northeast where residents didn’t have access to their own gardens, thousands of CSAs have spread across the country. Like Community Supported Agriculture offers individuals a portion of a crop yield, shared solar models are sprouting up throughout the U.S., offering people opportunities to choose clean energy without owning their own solar energy system or leasing their rooftop.

Why Shared Solar Matters

The residential solar market has seen dramatic growth over the past few years due to rapidly declining module costs and innovative financing models like power purchase agreements (PPAs) and leases. Unfortunately, even these forces cannot seed solar development for millions of people who can’t install a system on their homes because they have shaded roofs, weak credit scores, or don’t own their homes. This leaves more than half of Americans without the ability to host a solar array. Businesses have also been taking advantage of the savings and predictable energy costs that come from owning or hosting a solar array, whether on-site or remote. Companies like Wal-Mart, Ikea, Apple, Amazon and Google have all been major players in cultivating the solar boom of the last five years. While it is actually relatively straightforward for them to do so in any deregulated electricity market, many businesses haven’t taken advantage of opportunities to go solar.

Enter shared solar – also known as community solar. Like a CSA for solar energy, people who may not be able to host a solar installation on their roof can buy shares of a solar installation that is installed in a field or on a rooftop in their community. Customers can either pay upfront, or sign a contract to pay for the energy for a fixed period of time. At the end of each billing cycle, people or businesses will see the fruits of their investment as they receive credits on their electricity bill for the amount of solar produced by their share of the installation. In Minnesota and Colorado, these installations are called “solar gardens.”

The Shared Solar Opportunity

While the concept of shared solar has been around for years, recent legislative wins have made it ripe for flowering. Colorado, Minnesota, Massachusetts and California have all passed legislation legalizing the shared solar model and other states are following suit.  Even places like New York, D.C., and Maryland have passed legislation improving the economics and streamlining the administration of these systems, in the absence of industry uptake in a non-legislated model. The National Renewable Energy Laboratory (NREL) estimates that the extra customers that solar gardens bring in could cultivate over 10GW of solar capacity over the next five years representing half of new solar development and billions of dollars in investment opportunity. By removing the barriers to owning or hosting a solar panel on one’s rooftop, these models also potentially open direct participation in clean energy to 100% of electricity customers.

Seeing these opportunities, a number of developers are sowing the seeds for large solar gardens. In Minnesota, the utility Xcel Energy has received bids for nearly 1GW of projects (the state currently only has 22MW of installed capacity). However, Minnesota offers an important case study regarding the regulatory challenges that shared solar faces across the country. Solar gardens in MN are capped at 1MW in size, but many proposed gardens are larger installations co-located on the same site. Xcel has announced it won’t allow co-located gardens and has stalled all Minnesota community solar projects until the Public Utilities Commission reaches a decision. While shared solar models offer the promise to bring solar to millions of new customers, many implementation hurdles still prevent these programs from reaching maturity.

Sowing the Seeds for Shared Solar

Despite the many weeds that still need to be rooted out, the opportunities for shared solar models to accelerate growth are vast. Over three-quarters of Americans believe in further developing our solar resources, and community solar enables people to have direct choice in creating the clean energy future they desire. In the foreseeable future, participating in community solar may be as ubiquitous as purchasing a share in a CSA or shopping at the farmer’s market.

ABOUT SOL SYSTEMS

Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 262MW of distributed generation solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. Sol Systems provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. The company’s tailored financial services range from tax structured investments and project acquisition, to debt financing and SREC portfolio management. For more information, please visit www.solsystems.com.

Why Are There So Few Bankable Inverter Manufacturers?

July 30, 2013- 67 kW (STC rating) photovoltaic array with a PVI 82 kW inverter at the Mesa Verde Visitor and Research Center in Montezuma County, Colorado. The array consists of 286 Schott Poly 235 watt solar modules (13.8% efficiency) wired in 22 series

And another one gone, another one gone…We called it.

This post was co-authored by Senior Director, Investment Analysis Joe Song.

And another one gone, another one gone…We called it. It’s a new ball game for the inverter business. Advanced Energy (AE), the #3 inverter manufacturer in the U.S., recently announced its intention to “wind down” its inverter business. With Satcon’s bankruptcy and SMA announcing its own struggles earlier this year, it is evident that inverter manufacturers are experiencing the pricing compression that module manufacturers have batted against for the past decade.

When considering equipment preferences for our own investments, we count nearly two dozen Tier-1 module manufacturers, as opposed to five or so inverter companies (and we find this to be market with other financiers). Why is it that there are far fewer bankable inverter manufacturers than bankable modules?

For one, engineering and manufacturing modules is a much simpler and more standardized process that is nearly commoditized, with a lower hurdle rate and learning curve as opposed to tech-heavy inverters. All inverters are not created equally; these are highly complicated, highly sophisticated machines that are arguably more important than the modules to which they connect.

As opposed to modules, inverters do have moving parts, and they are exposed to a harsher degree of operating conditions, with parts that are more prone to failure but also depended on to perform at a high degree of availability. In addition, inverter manufacturers often have much more intensive service programs, being called upon much more frequently than any other core technology provider, presenting resource demands that are challenging to fulfill sustainably. In comparison to module manufacturers, where only a few have unique technologies, the majority compete mostly on marketing and pricing, with little differentiation in the actual product itself.

Module manufacturers were the first to feel the extreme downward pricing pressure from foreign competition. Then, as most low hanging cost reductions were exhausted, inverters became the next target of price compression for the last few years. Foreign companies like Chint and Sungrow are contributing to the same trends in the inverter market, causing a tremendous downward effect on pricing and creating highly competitive conditions in the U.S. While it is a positive news for the industry that all-in project costs have become more competitive, we may continue to see high quality manufacturers no longer able to sustain profitable business lines.

In the near term, we do not expect consolidation of the inverter business to have a dramatic impact on project development, inverter pricing, or delivery schedules. We project that for the most part, the remaining manufacturers have the ability to scale. This may, however, give investors pause as they reconsider bankable inverters and how to evaluate this properly in light of these change-ups. It is highly likely that recent newcomers will ultimately prove worthy of participating in non-recourse financed projects; the amount of time it takes for the market to gain this comfort in these newcomers will be a key consideration.

The biggest question that remains in light of AE’s news is about servicing the operating inverters still under warrantee, and to what degree the warranties will be honored. Since AE is not closing up shop – just “winding down” its manufacturing – we remain optimistic that AE will service the parts or certify a third party to handle for them.

This is an excerpt from our 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 solar energy finance and investment firm. The company has facilitated financing for 262MW of distributed generation solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. Sol Systems provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. The company’s tailored financial services range from tax structured investments and project acquisition, to debt financing and SREC portfolio management. For more information, please visit www.solsystems.com.

Is DC’s Sustainable Energy Utility Sustainable?

Groups such as GRID Alternatives have been critical to pushing forward low-income solar in the District.

Groups such as GRID Alternatives have been critical to pushing forward low-income solar in the District.

The District of Columbia City Council is a tried and true champion of renewable energy development. Over the past decade, it has extended and expanded the District’s Renewable Portfolio Standard and solar carve-out, cultivating the strongest SREC market in the country. In 2008, the Council created the DC Sustainable Energy Utility (DCSEU) and the Sustainable Energy Trust Fund (SETF). The Council charges the DCSEU with increasing the District’s renewable energy generating capacity, especially among low-income households. But the DCSEU may face an uncertain future, due in large part to actions that may strip the utility of its main source of reliable funding.

Through the end of 2014, the DCSEU had installed 28 percent of the District’s renewable energy generation capacity. To accomplish this, it installed solar arrays on 105 low-income homes at no cost to the homeowner, relying heavily on the funding it received from the Sustainable Energy Trust Fund. But in passing the “Fiscal Year 2016 Budget Support Act of 2015” on for Mayoral approval last month, funds will be diverted from the SETF to the DC General Fund for the fifth time in seven years. The result will be the removal of over $5 million of ratepayer fees from solar development, potentially stifling local installers and costing low-income residents valuable income.

Where does the DCSEU get its funding?

Natural gas and electric utilities provide most of the SETF’s funding, but the law implies that utilities should recoup their contributions by imposing a small surcharge on ratepayers’ utility bills. That has been working since the law’s passage in 2008. But if this revenue is shifted from the SETF and instead to the District’s General Fund, ratepayers effectively pay extra taxes on their electricity and gas – taxes that are unlikely to be put toward renewable energy development.

What’s the good news?

DC’s Fiscal Year 2015 Budget re-upped the newer Renewable Energy Development Fund (REDF), which enables the DCSEU to continue pursuing its solar development goals in the District. The law mandates that Alternative Compliance Payments, a fee levied against utility companies that fail to meet the District’s renewable portfolio standard, provide the capital for the REDF.

Making solar affordable for everybody

Low-income households often spend a higher proportion of their income on electricity, making access to cost-saving solar photovoltaics especially important for low-income families. One product of the Renewable Energy Development Fund is the Solar Advantage Plus program. Here’s how it works: the DCSEU contracts six developers to install solar energy systems on low-income households, offering energy savings for customers and expanded opportunities for installers. Then, to help provide additional funding for the installations, the contractors can sell the Solar Renewable Energy Certificates (SRECs) that the system generates. Solar Advantage Plus and other programs like it will also help to expand the geographic diversity of residential solar installations, an outcome worth pursuing given the high concentration of solar installations in the District’s wealthier Northwestern quadrant.

Looking to the future

The siphoning of utility-imposed surcharges warrants concern from ratepayers and utilities alike. Under the current funding structure, both contribute more than their fair share to the District’s solar energy development efforts. By continuing to supply the DC General Fund with diverted SETF funds while also requiring Alternative Compliance Payments be sent to the REDF, the DC Council double-charges its utilities for investments that are not earmarked for renewable energy development. For now, the Council has at least secured short-term alternative funding for solar energy installations. However, with Alternative Compliance Payments and SREC prices set to decline in 2017, the future of low income solar in the District remains to be seen.

ABOUT SOL SYSTEMS

Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for over 200MW of distributed generation solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. Sol Systems provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. The company’s tailored financial services range from tax structured investments and project acquisition, to debt financing and SREC portfolio management. For more information, please visit www.solsystems.com.

Sol Systems’ Summer Intern Spotlight

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Left to right: Olivia Chen, Will Patterson, Andrew Dewey, Jeffrey Popkin, Joseph Kraut and Louis Winkler. Not pictured: Jacob Sandry

Here at Sol Systems, we make investments of all kinds. Our number one investment? Young people inspired to embark on a career in the renewable energy industry. This summer, we welcome our interns Olivia Chen, Andrew Dewey, Joseph Kraut, Will Patterson, Jeffrey Popkin, Jacob Sandry, and Louis “Cuffie” Winkler.

Olivia Chen joins Sol Systems this summer as an SREC Portfolio Intern. In that role, she assists the SREC Trading team with modeling of state SREC markets. Prior to joining the Sol Systems team, Ms. Chen worked at Apple Inc. in Silicon Valley doing Quality Assurance for both Siri and Apple Maps. Ms. Chen holds a Bachelor’s of Arts in Economics and Communication from the University of California at Davis, and is currently pursuing a Master’s degree in Statistics with a concentration in Quantitative Analysis at American University in Washington, D.C.

When Andrew Dewey came to Sol Systems as an SREC Operations Intern in January, he assisted with customer service and processing residential systems for SREC sales. In his new position as Project Finance Intern, Mr. Dewey assists in outreach to developers, as well as analysis and modeling of potential new projects. Prior to joining Sol Systems, he worked as an intern at the Solar Electric Power Association (SEPA). Mr. Dewey is pursuing a Bachelor’s degree in International Business with a minor in Sustainability at George Washington University in Washington, D.C.

Joseph Kraut comes to Sol Systems as an intern in the Tax Equity group. This summer he will help transition tax equity projects to asset management as well as document processes used in financial analysis of tax equity deals. Before interning at Sol Systems, Mr. Kraut served in the U.S. Navy as a Submarine Officer for seven years. Last summer, he interned at a solar energy start-up where he modeled commercial scale tax equity investments. Mr. Kraut holds a B.S.E. in Mechanical Engineering from the University of Michigan and is currently pursuing a dual Master’s degree from the University of Michigan’s Erb Institute. He will graduate with an M.S./M.B.A. focused on energy and finance.

Since joining the Sol Systems team in January as a Marketing and Communications Intern, Will Patterson has assisted with website maintenance, social media metrics and planning, and company marketing. Before coming to Sol Systems, Mr. Patterson worked as a Communications Intern at the American Academy of Actuaries. Mr. Patterson is pursuing a Bachelor’s of Arts in Communications with a concentration in Public Relations at the University of Maryland at College Park.

Jeffrey Popkin joins the Sol Systems team as a Solar Analyst Intern. He will conduct policy research, assist the SREC Operations team, and develop strategy for long-term installer partnerships. Previously, Mr. Popkin interned at the U.S. Department of Justice in the Environment and Natural Resources Division, where he conducted policy and legal research on the EPA’s Clean Power Plan and assisted in congressional relations. He recently graduated from the University of North Carolina at Chapel Hill with a Bachelor’s of Arts in Economics and Public Policy.

Jacob Sandry is a Project Finance Intern at Sol Systems exploring emerging solar markets with new development models and assisting the team with project modeling. Mr. Sandry has previously served as a Fellow at Solar Mosaic where he conducted research and helped to develop a platform through which communities could develop solar projects. He is pursuing a Bachelor’s of Arts in American Studies at Yale University and is an Energy Studies Scholar. Through the Yale Entrepreneurial Institute Summer Fellowship, he founded an organic sports drink company called SÖL Hydration.

Louis “Cuffie” Winkler joins the Sol Systems team as an Asset Management Intern. He performs financial analyses of future solar photovoltaic and solar thermal projects and also assists in the management of closed projects. Before coming to Sol Systems, Mr. Winkler worked as a Project Management Consultant for Eastern Research Group where he did consulting work for the U.S. Environmental Protection Agency. Mr. Winkler holds a Bachelor’s of Arts in History from Hamilton College in New York and is currently pursuing a joint Master’s degree in Environmental Management and Business Administration from Duke University’s Nicholas School of the Environment and the University of North Carolina at Chapel Hill’s Kenan-Flagler Business School.

The Sol Systems team extends a warm welcome to our summer interns and wishes them well as they continue to develop careers in renewable energy.  For more information on internship and career opportunities, please visit http://www.solsystems.com/our-company/careers.

ABOUT SOL SYSTEMS

Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for over 200MW of distributed generation solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. Sol Systems provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. The company’s tailored financial services range from tax structured investments and project acquisition, to debt financing and SREC portfolio management. For more information, please visit www.solsystems.com.

Can We Handle the Truth? What Can an A/B Split Tell Us about North Carolina’s House Bill 332?

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North Carolina has reached a pivotal moment in the trajectory of its solar economy. Will they take the road to solar prosperity?

CAUTIONIf you adhere to the adage, “Don’t ask a question you don’t know the answer to,” read on at your own risk.

Our state and local governments are challenged every day with the demands of delivering public services efficiently while making public investments necessary for long-term, lucrative economic development.

In an ideal world, objective experts provide our policymakers with data-based cost benefit analyses they use to determine if and how incentives and subsidies deliver widespread, positive outcomes for individuals and businesses. In the real world, bias and emotions interject as different alliances petition for the same scarce public resources.

Whatever your personal view of solar tax incentives, would you like to know their true, real-life impacts on your state and local jobs, tax revenues, economic well-being, electricity rates, and of course, the climate?

North Carolina may have your answer. Let’s start with a snapshot of the state’s solar market today (Sources: U.S. Solar Market Insight, The Solar Foundation, and EPA U.S. Greenhouse Gas Equivalencies Calculator):

  • 2nd highest state for solar PV installation capacity with 397MW installed in 2014(2nd only to California)
  • 11th highest number of solar jobs per capita, up from #25 in 20132
  • +2,500 solar jobs in 2014 to total over 5,600
  • 177 solar companies at work throughout the value chain
  • 1,011MW of solar energy currently installed, ranking the state 4th in installed solar capacity
  • $652 million invested in solar installations in 2014
  • Enough solar energy installed in the state to power 110,000 homes or offset carbon emissions from 749 million pounds of coal burned

This solar prosperity evolved after the state’s policy initiatives including a Renewable Portfolio Standard (RPS) target of 12.50% by 2021, a 35% tax credit through 2015, and standard-offer PPA contract from the utilities at a fixed rate of approximately equaling about $0.068/kWh for up to 15 years for projects up to 5MW (AC).

So, here’s the question:  What happens to North Carolina’s solar industry and the state’s economic well-being without these policy tools?

The General Assembly is thinking about this question right now. In fact, the House has already passed House Bill 332 that would: 1) halt North Carolina’s RPS at six percent, scaling its original commitment back by more than half; and 2) reduce the current threshold for Qualifying Facilities eligible for the standard-offer PPA program from 5MW down to 100kW. Now, the Senate is doing their analysis.

Does it make sense to pull the plug half way through a policy initiative that has slingshot North Carolina into national leadership for solar capacity and jobs?  What if North Carolina’s policymakers did what many businesses do to uncover economic outcomes of two possible courses of action? An A/B split, or randomized experiment, is a common, proven method to test two hypotheses over a specific period of time. A population is randomly divided into two groups where one is the control group, maintaining the existing offer, and the other group receives a test offer.

CAVEAT:    The A/B test idea is a hypothetical, folks. It’s meant to elicit ideas about how to test how the true, real-life upside potential and downside risks shake out in the public interest.

North Carolina is ripe for an A/B test. The state could be randomly divided into two groups of counties, where, for one year, one group of counties – Group A – keeps all incentives as they are, and the other group of counties – Group B – operates without the 35% tax credit, and under the scaled back to proposed House Bill 332 levels.

At the end of the year, counties could report the annual changes in solar jobs, solar investments in dollars and megawatts, solar-related tax revenues, electricity rates, and other key indicators to determine if and how the incentives benefit the people and businesses of North Carolina. If the A/B split were to happen, which group would you rather be in?

SIDE NOTE:  We ran a 100kW project in North Carolina through our proven financial model to see if it could pencil should House Bill 332 pass and cap Qualifying Facilities at that size. We plugged in several scenarios of build costs, PPA rates, and other transaction inputs. Each time, it broke the model – meaning there was no cost of capital that can make this size transaction work. The implications of this finding are significant: our investors would have no choice but to seek investments in other states.

ABOUT SOL SYSTEMS

Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for over 200MW of distributed generation solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. Sol Systems provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. The company’s tailored financial services range from tax structured investments and project acquisition, to debt financing and SREC portfolio management. For more information, please visit www.solsystems.com. 

Sol Systems to Sponsor Intersolar Women In Solar Energy Breakfast

WISE-LOGO-FINAL

WISE is the solar industry’s only 501(c)3 non-profit membership association dedicated to the advancement of women in the solar energy industry.

Sol Systems will sponsor the Women in Solar Energy (WISE) Intersolar Breakfast, which will take place on Tuesday, July 14 at the Intercontinental Hotel in San Francisco.  WISE is the solar industry’s only 501(c)3 non-profit membership association dedicated to the advancement of women in the solar energy industry.

During the breakfast, which is included in the official Intersolar program schedule, successful women in the solar industry will share their stories and discuss ways that solar companies can work toward a more diverse workforce.

Sara Rafalson, Senior Associate at Sol Systems, serves in a volunteer capacity as President of WISE and will deliver opening remarks at the breakfast. Sol Systems’ Stephanie Smith (COO), Rebecca Tilbrook (Project Engineer), and Jessica Cowan (Office Manager & Special Projects) will also be in attendance.

Diversity is at the heart of Sol Systems, where 36 percent of the team is comprised of women, as compared to 21.6% of the solar workforce at large. In addition to their support of Women in Solar Energy, the women of Sol host monthly brown bag lunches focusing on professional development; the men of Sol are also included.

Interested in meeting up with Sol Systems at the WISE Intersolar breakfast? RSVP today; seats are limited.

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.

SOURCE: The Sol Project Finance Journal, June 2015

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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 June 2015 edition.  To receive future Journals, please email pr@solsystems.com.

PROJECT FINANCE STATISTICS

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

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*Our all-in price statistics exclude projects from Ontario, Hawaii, the U.S. Virgin Islands, and Puerto Rico where all-in prices remain over $3.50/W.

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STATE MARKETS

California: Because you know it’s all about that rate, ‘bout that rate… The gold rush is here. Already, 184MW out of the eligible 400MW have been filled for Southern California Edison’s (SCE) Option R rate. Remember, Option R allows developers to better pitch ROI to hosts by focusing on Time of Use (TOU) rate charges instead of demand charges. Get it while you can; we expect the remaining 200MW+ to fill up quickly. Meanwhile, Pacific Gas and Electric’s (PG&E) Option R became available on June 1; look for that to open the market for commercial solar projects in PG&E territory. Unlike Option R in SCE territory, PG&E’s has no cap on the number of customers or megawatts.

New Jersey:  We are consistently surprised by the lack of commercial-scale pipeline coming out of New Jersey. Perhaps many hosts are opting for cash purchases instead of third-party financed deals. Or perhaps developers look at the $225 SREC prices of today and long for the $600/mWh pricing from yesteryear. Maybe more third-party financed deals going to leases? We’re stumped; you tell us. Meanwhile, the Garden State seems particularly primed for merchant opportunities.

Rhode Island: Unfazed after falling slightly short of its goal to procure 40MW of renewable energy by 2014, the Ocean State upped the ante with an even more ambitious goal: 25MW of renewable energy for 2015, increasing to 40MW each year for 2016-2018. Applications for small-scale solar (<25kW) opened up on June 15, while applications for projects 26kW – 5MW will be accepted between August 3 and 14. Take note, highly creditworthy utility off-take and above-market rates in this state will continue to appeal to investors. We strongly suggest this market for Northeastern developers, especially as Massachusetts remains stalled, and New York has fallen short of expectations. There’s much to consider for this state that runs only 48 miles long and 37 miles wide.

SOLAR CHATTER

  • Ready, set, go! Bids for 15-year Connecticut ZREC contracts are due on June 18th at 1pm. We expect for LREC and ZREC pricing to ultimately get closer to the price of Class I RECs.
  • Residual value is a hot topic among financiers who realize that they must take into account the value of the asset once the PPA expires in order to maintain their competitive edge over the other sources of capital flooding the space. How does Emilio Estevez feel about this?
  • This is your monthly reminder that Maryland is the best market where nobody else is doing business. Hint, hint.
  • Watch for the Illinois solar market to pop now that its first SREC procurement deadline has passed. Subsequent rounds will take place in November 2015 and March 2016. Meanwhile, pending legislation pushes for a longer term, more robust solar market in the Land of Lincoln.
  • Vermont has been gaining traction among developers for its high electricity prices, SPEED program, and Green Mountain Power’s solar adder for projects under 500kW AC. The challenge with the Green Mountain Power program, however, is that its floating rate PPA structure spells out risk to many investors. To increase the likelihood that these deals are financed, put a floor in the PPA to make the investor more comfortable with underwriting the deal.
  • The latest Solar Market Insight report showed that residential and utility-scale solar each added more capacity than the natural gas industry brought online in Q1 2015.
  • The verdict is still out on Massachusetts net metering, though many in the industry are cautiously optimistic that a solution will be put in place to keep the industry going until the end of 2016. Support is strong in the state senate, while the support from state house of representatives is questionable. In the meantime, developers should look into NSTAR territory.
  • According to the International Monetary Fund (IMF), 6.5% of 2015 global GDP – or approximately $5.3 trillion – will subsidize fossil fuel use. Hopefully that will put the solar-haters to rest.
  • Got a project in PJM territory that wouldn’t mind a little cash flow boost? Sol Systems is offering compelling SREC contract to projects in PJM territory; some North Carolina, Illinois, Indiana, and even Virginia projects are eligible. Contact srecs@solsystems.com for more information.

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.

Always Be Closing…Efficiently

Always Be Closing

Developers, next time you are closing a deal with us (which we hope will be soon), you will notice several key differences in our closing process.

Standardization and efficiency are the “it” topics in commercial and small utility-scale solar, where high transaction costs for one-off, relatively smaller deals has stifled the market’s potential. We’ve previously covered ways to achieve standardization through legal documents, but what about more standardized and efficient processes?

One way that we are introducing efficiency to the sector is through the improvement of our own internal processes. For projects in the 200kW – 5MW space to succeed, every efficiency improvement during the project financing process matters. After meticulous review of our own internal data and metrics, we crafted innovations to our closing process to ensure that deals with our developer partners will move to financial close in a manner that creates the most value for all parties.

Developers, next time you are closing a deal with us (which we hope will be soon), you will notice several key differences in our closing process. Without revealing too much of our secret sauce, we can say that:

A(lways) After reviewing three years of transaction data, we have been able to identify probabilities of success for projects based on stage or remaining development tasks. This allows us to cost-effectively prioritize key issues to address, and deals to execute.

B(e) Substantial binary risks (e.g. key permits, off-take commitments, net metering allocations, etc.) will be resolved, or at least completely understood, before transaction documents are negotiated. Once development issues are clear, we expedite the exchange of transaction documents to bring the fleshed-out deal to financial close, effectively preserving maximum value for each party.

C(losing) Diligence, transaction, and closing teams have been clustered into sub-processes to allow each team run even more efficiently.

Cheers to a new era of closing solar deals. We think you’re going to like it.

This is an excerpt from our 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 solar energy finance and investment firm. The company has facilitated financing for nearly 200MW of distributed generation solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. Sol Systems provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. The company’s tailored financial services range from tax structured investments and project acquisition, to debt financing and SREC portfolio management. For more information, please visit www.solsystems.com. 

Ripe and Riddled: Is Commercial Really “the next big, emerging, growing sector” in Solar?

The Williams Building in downtown Boston, MA now has a 3 kW DC, 28 kW AC, PV system integrated into the roof consisting of 372 panels; Boston, Massachusetts;  General Services Administration Building; 408 Atlantic Ave.

Glowing optimism about commercial-scale solar at Sol Systems is backed by our nearly 200MW of financing arranged for commercial and small utility scale projects ranging primarily from 200kW – 5MW (sometimes up to 10MW).

Commercial-scale solar is the new media darling these days. Industry and mainstream news media have reported projections of a sector “ready to rebound” and “cleared for take-off.” Some outlets have quoted industry executives saying things like “our next big growth area” and “this investment reflects growing optimism about the C&I sector.”

Glowing optimism about commercial-scale solar at Sol Systems is backed by our nearly 200MW of financing arranged for commercial and small utility scale projects ranging primarily from 200kW – 5MW (sometimes up to 10MW). We are hearing from more and more investors who are ready to explore this asset class, and are interested in our track record of aggregating, investing in, and financing this market segment.

We believe our days of blogging about how underserved this sector of the market is (despite its promise) could be numbered now. But, what exactly is that potential?

To answer that question, Sol Systems dove deep into research from industry sources including Bloomberg New Energy Finance (BNEF), Greentech Media Research (GTM) and Solar Energy Industries Association (SEIA). We compared projections and historical cost estimates from all sources to Sol Systems’ own pipeline.

The answer? We estimate, conservatively, that the commercial and small-utility sector of the market will grow to $4.9 billion by the end of 2015, and $5.7 billion in 2016. But, you won’t get it handed to you on a silver plate. This sector is ripe with opportunity and equally riddled with challenges. Let’s crack the code together.

This is an excerpt from our 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 solar energy finance and investment firm. The company has facilitated financing for nearly 200MW of distributed generation solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. Sol Systems provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. The company’s tailored financial services range from tax structured investments and project acquisition, to debt financing and SREC portfolio management. For more information, please visit www.solsystems.com. 

SunFarmer: Powering Nepal’s Recovery

On April 25, a 7.8 magnitude earthquake hit Nepal. Most rural health clinics were completely destroyed, and emergency teams are currently working out of makeshift structures without electricity; there is no power available to charge cell phones, let alone to treat patients.

In the aftermath, SunFarmer, a non-profit that has been focused on solar installations in Nepal for the last two years, is stepping up to the effort and providing electrical and solar water purification systems to hospitals,  health clinics, and shelters.

SunFarmer needs your help to power Nepal’s recovery.  Donate to their Earthquake Relief Fund today.

For blog

This cause is important to the Sol Systems team. Joe Song, Senior Director, is on the advisory board of SunFarmer, where he advises on the technical specifications of the non-profit’s solar installations. In 2013, Mr. Song visited Nepal with SunFarmer to vet solar installer partners and developers, recruit team members, investigate the local solar market, and visit hospitals. SunFarmer is a beneficiary of Sol Systems’ Giving that Matters program.

For more information on SunFarmer, visit www.sunfarmer.org.

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

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.

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

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

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Solar Projects Aren’t the Only Thing We Bring to the Finish Line

Despite the challenging conditions, team members took a few opportunities to discuss the Maryland SREC market with solar energy system owners they spotted along the race course.

Despite the challenging conditions, team members took a few opportunities to discuss the Maryland SREC market with solar energy system owners they spotted along the race course.

Sol Systems Tops 360 Teams to Win 200 Mile Relay Race

On September 12-13, nine members of the Sol Systems team ran a 200 mile relay race stretching from Cumberland, MD to Washington, DC. Winding through hills and valleys, day and night, the team steadily made its way to the finish line, beating over 360 teams to take the first place title. With a final time of 25 hours and 35 minutes, the Sol Systems team finished a full hour faster than the second placed finishers.

The Ragnar Relay consists of 36 individual legs (3 per runner) ranging from 2 miles to 11.1 miles in length with varying difficulties in terrain. The logistics of the race involve two vans of six runners alternating every six legs, trading off at major exchange points at which runners can relax, meet other teams, and attempt to sleep.

The race started for the Sol Systems team (named the Fighting Gibsons after the company’s Chief Technical Officer, Mike Gibson) at 12:30 pm on Friday and continued until just after 2 pm on the following day. By the end of the race, most teammates had only slept for one or two hours.

As the final runner raced down the stretch, all 12 team members came together and crossed the finish line in unison. The team drew together in the face of the relay’s challenges, ultimately coming out stronger. See you next year, Ragnar DC.

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New York Looks to Become a Shared Energy State

New York aims to expand its solar market by introducing shared solar.

New York aims to expand its solar market by introducing shared solar.

On June 3 the New York Assembly Energy Committee approved the Shared Clean Energy Bill A9931/S7727, continuing the momentum that New York has built up in the solar industry. In late April, Governor Andrew Cuomo committed $1 billion in funding to continue the NY-Sun solar program, which aims to increase solar power tenfold in New York by 2023. New York solar power is expanding by enabling families, schools, businesses, and renters alike to come together and hold a share in local, community solar projects.

Sponsored by Energy Committee Chair and Assemblywoman Amy Paulin, the Shared Clean Energy Bill aims to open up renewable energy production on a community scale. Those normally prohibited from participating in solar production such would gain access to cleaner energy. What’s more, the health and environmental benefits come at an appropriate time, jibing well with Obama’s carbon emissions reduction law. There is no major opposition to this bill; the main obstacle appears to be time, as the legislative session closes today: June 19. Should the bill not make it to the floor of the Assembly and Senate today, the bill will be reintroduced at the start of the next session.

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New York Launches New Incentive Round for Large Solar Projects

The New York State Energy Research and Development Authority (NYSERDA) unveiled a new funding program for solar systems over 200kW in size.

The New York State Energy Research and Development Authority (NYSERDA) unveiled a new funding program for solar systems over 200kW in size.

New York is in a solar state of mind. On the heels of the recent announcement to commit an additional $1B to New York solar incentives over the next decade, the New York State Energy Research and Development Authority (NYSERDA) unveiled the next anticipated funding program for large solar systems, over 200kW in size. This round of funding closely resembles previous offerings, and does not appear to be part of the “megawatt block” structure highlighted in the April announcement. PON 2956 (short for Program Opportunity Notice) went live this week, promising $60M in available incentives or more, to be awarded at NYSERDA’s discretion. Applications are due July 17th, 2014 and all systems must come online by April of 2016.

Changes from Previous NYSERDA Large Solar Incentives

Unlike past PONs for large projects, all New York Independent System Operator (NYISO) load zones are in play. Several favorable tweaks to this year’s program, compared to earlier New York solar incentive rounds like PON 2860 and 2589 in the past, indicate a willingness on NYSERDA’s part to see this program drive more project development this year than ever before. In previous PONs for large projects, awardees received the full incentive amount in five payments – 30% at project completion paid out in two upfront installments, and 70% paid out as a PBI split between the first three years of production. PON 2956 will see that 30% upfront payment occur in one installment instead of two, and the remaining 70% condensed to only two years’ worth of production, paid at year’s end. The incentive for any project cannot exceed 50% of project installed costs.

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New York Commits Another $1 Billion to Solar. Here’s What You Need to Know.

Will New York join Massachusetts and California as an enduring solar state?

Last Thursday, New York Governor Andrew Cuomo announced an additional $1 billion in funding for the NY-Sun initiative, making good on his promise to extend the program through 2023. The funding announcement includes an overhaul of New York State Energy Research and Development Authority’s (NYSERDA) current incentive program, previously doled out through Program Opportunity Notices (PONs) with varying availability for different solar project sizes and geographies. The new program will take effect June 1st.

With this new initiative, solar should remain a crucial part of the Empire State’s energy portfolio

New York Solar Incentives Explained

The NY-Sun initiative, founded in 2011, coordinates solar programs between the Long Island Power Authority (LIPA, now PSEG Long Island), the New York Power Authority (NYPA), and NYSERDA. The new program, called “Megawatt Block”, will break out MW capacity allocations to specific regions of the state, and then further break down target capacities in each block. Solar incentives in New York will be awarded on a per watt basis for residential PV (up to 25 kW), small PV (non-residential up to 200 kW), and large PV (over 200 kW). Similar to the popular California Solar Initiative rebates, prices will step down as capacity blocks in each region and sector are filled, allowing the market to grow at a steady pace and eventually stand on its own. If the geographic preference follows the earlier program, we can expect to see preference given to areas downstate near New York City.

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Sol Systems to Travel to San Francisco, Las Vegas, and New York for Upcoming Solar Project Finance Conferences

The Sol Systems team will attend the 2014 SEIA Tax and Finance Seminar this week in San Francisco at the W San Francisco Hotel. George Ashton, Sol Systems’ CFO, will be participating in a panel discussion on securitization and its role in the solar space. The discussion will focus on how securitization has worked in the past, and its prospects moving forward.

Next week, several members of the Sol Systems team will travel to New York Bloomberg’s Future of Energy Summit 2014. Sol Systems’ CEO, Yuri Horwitz, will travel to Las Vegas for the 29th Annual Platts Global Power Markets Conference.

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Sol Systems Seeks Renewable Energy Intern

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

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

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

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

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

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

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

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

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Sol Systems Speaks at the American Solar Energy Society Conference in Baltimore

ASESheader

Sol Systems CFO and co-founder, George Ashton, will be attending SOLAR 2013, an annual conference held by the American Solar Energy Society. This is the 42nd installment of the event, and will be held April 16-20 at the Baltimore Convention Center. George will be participating in a 90-minute panel discussion titled “Financing DG Projects,” where he will speak alongside Rich Deutschmann of Ameresco, Chris Lord of Capiron, and Steve Remen of GroSolar.  The panel will be held on Wednesday, April 17th, from 1 PM until 2:30 PM and will focus on funding distributed generation installations.

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