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When to Go Local in Lending

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In structured finance or cash deals, regional or local lenders may have more competitive offerings than a national bank or debt provider.

In structured finance or cash deals, regional or local lenders may have more competitive offerings than a national bank or debt provider. Often their rates are cheaper by a point or more compared to the traditional debt players in the industry. Some local or regional players may also be more flexible with loan tenors – and may even offer loans for longer than the PPA term. Finally, local lenders may be more comfortable with various state and regional risks, like solar renewable energy credits (SRECs) or other incentives that larger banks may not underwrite.

Local relationships matter. Local lenders may be mission-based in such a way that benefits solar investments. Existing relationships may also make the difference for a developer/investor; for example, developers seeking affordable debt might want to take a look at existing lending relationships at the corporate level or with the host customer. A local lender is more likely to provide an attractive offering if they already understand and work with the parties in question, even if they are unfamiliar with solar generally. Developer and investors alike may be pleasantly surprised with the affordability and flexibility.

For mainstream, clean-cut projects, it is still best to work with institutional lenders capable of writing big checks and handling the complexity of other parties at the table, like tax equity investors. If you have a debt partner already, it is best to hold onto that relationship and not let them go; there is a dollar value one can put on efficiencies that arise from repeat business. But if you are working on a project that falls outside of the typical 5MW+ box, especially in a common solar state, it may be a good idea to think local.

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

ABOUT SOL SYSTEMS

Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 262MW 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, August 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 August 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.

Combination

*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

Georgia – We’ve got Georgia on our minds, and you should too. Bids for Georgia Power’s Advanced Solar Initiative Distributed Generation (ASI DG) Program, which aims for 100MW of solar, closed on August 10. Yet, one of the three bidding groups, Group C, encompassing systems under 100kW, came in undersubscribed. Developers will have until October 27 to find sites to fulfill the remaining 5.7MW. Want to succeed in this bidding group? Aggregate these projects into a 1MW+ portfolio to make them more attractive to investors.  With investment grade offtake, low build costs, and high solar irradiance, these deals should be promising. Meanwhile, third party financing is now live in the Peach State (thank you, HB 57!). Due to net metering restrictions, these projects are most attractive when behind the meter.

Massachusetts Step in line to grab your seat on the solar coaster. In July, State Senator Downing introduced legislation to raise the net metering caps until the state’s 1600MW goal is met. Then, on August 7, Governor Baker introduced his own legislation to raise the caps by 2%. National Grid estimates that Governor Baker’s cap increase would only last the solar industry until October. If you’re thinking that would bring us back to where we are right now in just a couple months, you’re right.

Even more, the Governor’s bill would transition solar from a net metering credit valued at the full retail rate to an avoided cost rate after the 1600MW goal is met. Undoubtedly, this would deliver a long-term blow to the Commonwealth’s solar industry. Massachusetts developers, why aren’t you looking at smooth, reliable, sustainable Maryland again?

New York – We have long heralded that the Megawatt Block is a beautifully designed incentive program – if only rates were high enough for projects to pencil. Since opening in May, its commercial and industrial (C&I) block for projects over 200kW has produced merely 4MW of deals in Con Edison territory, and about 17MW in the rest of the state; the overall capacity potential for the first block is 135MW. To understand how underwhelming the results have been thus far, compare it to Massachusetts, which can fill another 205MW cap increase in NGrid territory by October. Each incentive block will need to be raised by approximately 20 cents if the Empire State’s C&I market is going to take flight. Until then, it’s still stalled for takeoff.

SOLAR CHATTER

  • Hillary Clinton is calling for a 700% increase in solar production by 2020. Is this realistic without an ITC extension?.
  • Massachusetts is not the only state whose growth is threatened by a net metering cap. New Hampshire, which took over a decade to reach 2MW of solar production, is nearing its 50MW net metering cap. Unlike Massachusetts, however, legislative action appears unlikely, at least for now. Too bad; this New Hampshire heavy office was digging that C&I rebate program for projects up to 500kW.
  • Still think YieldCos are solar finance’s magic wand? TerraForm’s shares dropped 17% after its August 6 earnings call, and the debut of TerraForm Global fell short of expectations – currently selling at $10.20 per share. After going public at $21 per share, 8Point3 Energy Partners now trades just above $15.
  • The Latin American solar market continues to boom, with over 363MW of utility-scale solar coming online in Q2 2015.
  • Back from the dead? Commercial deals are starting to re-emerge in Hawaii after the Public Utilities Commission forced Hawaiian Electric Co. (HECO) to release the queue of interconnections that they froze last year. Proper diligence on the distribution circuit should still be conducted when one is applying for interconnection, and it is still important to set expectations; interconnection will still take much longer than it does in other states.
  • Changes to Pacific Gas & Electric’s A-6 tariff have been delayed until the end of 2016. The changes may still slash economics for Northern California projects in the 75kW – 500kW range by about 30%, according to Sage Renewable Energy Consulting.
  • It’s hot over there, yet the solar market is freezing. In Arizona, proposed changes to net metering would compensate facilities at wholesale rates for excess generation. Tucson Electric Power (TEP) withdrew this request but plans to pursue it once again for a 2017 rate case, and, here’s the kicker – they will request for the change to be retroactive to June 2015. Expect for this uncertainty to chill the market. Many developers that we work with are already flocking outside of Arizona in search of better opportunities.

ABOUT SOL SYSTEMS

Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 262MW 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.

Employee Spotlight: Jason Cimpl, Director of Trading

“Our team is changing the way solar is financed, and the industry is small enough where the ripples we make are felt by everyone in the water.”

“Our team is changing the way solar is financed, and the industry is small enough where the ripples we make are felt by everyone in the water.”

Over the past seven years, Sol Systems has grown from two college friends with a bright idea to an industry leader in solar project finance with offices in San Francisco, D.C., and Philadelphia and nearly 50 full-time employees. We’ve brought some of the industry’s most talented professionals along for the ride, and we want you to get to know them. Meet Jason Cimpl, Sol Systems’ Director of Trading. Jason got his MBA at the University of Wisconsin and hasn’t looked back since.

What got you interested in the solar industry?

Before I came to Sol Systems, I was doing equity research here in D.C. I was naturally a good trader, and solar appealed to me because it’s a relatively new market with only a few players. Plus, I’m a big a believer in renewables.

Now that I’ve been in the industry for a few years, I really feel like I’m on the ground floor of something special. In solar, you can have a noticeable impact on a technology that’s not only beneficial to society, but one that’s going to scale tremendously.

What do you like most about working at Sol Systems?

Figuring out ways that solar renewable energy credits – or SRECs – can finance solar projects has been fun and challenging. It’s required building a team to better understand the SREC markets, and Sol Systems gives us the ability to take smart risks. SRECs are exciting because they’re more than just a tradable commodity – they are a true incentive. Successful traders make a capital gain on the trade and finance a solar project. Equities, debt, or other commodities don’t have the same social impact, which has made learning the SREC market so exciting.

Beyond that, Sol Systems gives you the freedom to take professional risks as a person, no matter what gender or age you are. Regardless of what level of experience you have, Sol Systems says, “Hey, we’re going to treat you as equal if you have a good idea. We’re going to allow you to grow and we’re going to take your idea seriously.” You can’t really find that type of culture anywhere else. Our team is changing the way solar is financed, and the industry is small enough where the ripples we make are felt by everyone in the water.

What’s one thing about the solar industry you’d like to see change?

When I think of all of the incentive packages that exist for conventional fuel sources, I don’t see why solar shouldn’t be given similar support. Solar is a proven technology that has widely accepted economic and social benefits. As proof, many big businesses advocate for the use of and investment in solar.

What do you like to do when you’re not trading SRECs?

Anything that’s outdoors, really. Sol Systems is a pretty athletic office, so there’s always something active to do with the team. I think my ideal outdoor activity would be biking 40 miles in one direction and then taking an Uber home.

Sol Systems is currently seeking an asset manager and fall interns. To learn more about solar energy careers with Sol Systems, please visit our careers page.

ABOUT SOL SYSTEMS

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

Sol Systems Offers New SREC Contract. Meet Sol Combo

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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.

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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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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:

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Summary of the Clean Power Plan & Positive Impacts on the Solar Industry

At the direction of President Obama, the U.S. Environmental Protection Agency released the Clean Power Plan, also known as 111(d) on June 2.  It is the first time the U.S. government has sought to cut carbon pollution from existing power plants.  In summary, by 2030, the EPA’s proposed steps should cut national carbon emission from the power sector by 30% – as measured against 2005 levels.

The proposal provides guidelines for states to develop plans to meet state-specific goals to reduce carbon pollution and gives them the flexibility to design their own programs. States can choose a mix of generation using diverse fuels, energy efficiency, and/or demand-side management. States can also choose to work alone to develop individual plans or with other states to develop multi-state plans.

Ultimately, as we look into our crystal ball, we see a large increase in the number of rate cases that utilities bring before their state’s Public Utility Commissions, and subsequent changes in the way utilities are regulated. We also see the following positive impacts for the solar and energy efficiency industries:

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Ohio Becomes the First State to Freeze its Renewable Portfolio Standard

The passage of Senate Bill 310 (SB310) has frozen Ohio’s Renewable Portfolio Standard until 2017, making Ohio the first state to roll back renewable energy and efficiency measures.

The passage of Senate Bill 310 (SB310) has frozen Ohio’s Renewable Portfolio Standard until 2017, making Ohio the first state to roll back renewable energy and efficiency measures.

With the signing of Senate Bill 310 (SB 310), Ohio has become the first state to “freeze” its Renewable Portfolio Standard (RPS). Ohio Governor John Kasich signed the bill into law on June 13th, effectively halting the state’s mandates for efficiency and renewables until 2017. Come 2017, these mandates will pick up where they left off when the freeze occurred, as opposed to the annual increases in renewable energy and efficiency measures that would have occurred with the RPS.

SB310 will significantly harm Ohio’s solar industry by driving SREC prices down in both the Buckeye state as well as the surrounding states such as Kentucky, Pennsylvania, West Virginia, Indiana, and Michigan that sell their SRECs into Ohio. The bill faced tremendous opposition from health and environmental coalitions, as well as a group of 70 businesses and organizations, including Honda and Whirlpool, who urged Governor Kasich not to sign the bill.

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Formal Rulemaking Process Begins for Massachusetts SREC-II Program

On January 3, 2014, the Massachusetts Department of Energy Resources (DOER) announced that they filed revisions to the Renewable Portfolio Standard (RPS) Class I regulation, thus beginning the formal rulemaking process for establishing a framework for the SREC-II program.  The official version of the draft regulation will be published in the Massachusetts Register on January 17, 2014, but in the meantime, the DOER has provided an unofficial version on their website.

Timeline for the Formal Rulemaking Process

The formal rulemaking process begins with a public comment period which includes holding a public hearing.  Written public comments will be accepted from January 3 through 5:00pm on January 29, 2014 and the public hearing will be held on January 24, 2014 from 1:00 to 3:00 pm in the Gardner Auditorium of the Massachusetts State House in Boston.  Following the public comment period, the DOER will submit this proposed final regulation to the Joint Committee on Telecommunications, Utilities and Energy and will incorporate any changes deemed prudent from the public comments.  Within the following 30 days, the Joint Committee will review and submit comments on the regulation back to the DOER.  To conclude, the DOER must consider the Joint Committee’s comments for a period of not less than 30 days, and thereafter, the final regulation will be promulgated as soon as possible.  Based on the estimated outline in the table below, the SREC-II program should become effective in April 2014.

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Everything You Need to Know about the Most Recent Updates to Massachusetts SREC II

Massachusetts Department of Energy Resources (DOER) Commissioner Mark Sylvia recently shared the DOER’s most recent developments regarding its SREC II program.

Massachusetts Department of Energy Resources (DOER) Commissioner Mark Sylvia recently shared the DOER’s most recent developments regarding its SREC II program.

Massachusetts Department of Energy Resources (DOER) Commissioner Mark Sylvia recently shared the DOER’s most recent developments regarding its SREC II program with a packed house at the recent Electricity Restructuring Roundtable on Solar in New England and California.  The official draft has not been published for the public, but is expected to be filed any day now.  Here’s what you need to know.

  1. SREC-II Policy Objectives: Unchanged

The overall policy objectives remained unchanged under this most recent draft. The DOER’s main goals are still to provide sufficient economic support, control ratepayer costs, and create competitive, robust, and progressive market conditions that will maintain and expand PV installations in Massachusetts to reach Governor Deval Patrick’s 1600 MW goal by 2020.  The most significant updates and changes to the original SREC-II draft regulations came instead in the announcement of the key design features, which will drive the structure of the SREC-II Program.

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Ohio’s Renewable Portfolio Standard under Attack… Again

The Ohio SREC market in 2013 is projected to be more than two times oversupplied with an expected 129,000 SRECs to be issued compared to a demand of only 60,000 SRECs.

The Ohio SREC market in 2013 is projected to be more than two times oversupplied with an expected 129,000 SRECs to be issued compared to a demand of only 60,000 SRECs.

As the Ohio General Assembly approaches the final few months of its 2013 legislative session, attention has been brought to the Senate Bill introduced to repeal the state’s Renewable Portfolio Standard. Ohio State Senator Kris Jordan introduced Senate Bill 34 (SB 34) which, if passed, would “repeal the alternative energy resource requirements imposed on electric distribution and electric services companies to provide, by 2025, 25% of their electric supply from alternative energy.” To put it simply, if passed, this legislation would repeal Ohio’s Renewable Portfolio Standard (RPS), and the Ohio SREC market would be dismantled.

This is not the first time that Senator Jordan has attacked the Ohio RPS; similar legislation was introduced by Senator Jordan in 2012, but those previous bills failed to gain any support.  It remains to be seen how SB 34 will move forward in this current legislative session, as it has only been assigned to the Public Utilities Committee. A hearing has yet to be scheduled.

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Sol Systems to Speak at Distributed Solar Summit 2013

Sol Systems to Speak at Distributed Solar Summit 2013

Sol Systems George Ashton and Andrew Gilligan to Speak at Distributed Solar Summit 2013

Another week, another conference.

Next week, Sol Systems will speak at the Distributed Solar Summit in San Diego, California. Sol Systems CFO, George Ashton, and Senior Associate, Andrew Gilligan, will both be featured on Monday, November 18 during the U.S Distributed Solar Markets: Outlook and Analysis portion of the conference. George will speak about policy and incentive frameworks in New Jersey’s solar market. Andrew will discuss the solar policy and incentive frameworks in New York.

Developers interested in financing options for New Jersey or New York solar projects can contact our project finance team at finance@solsystemscompany.com or (888) 235-1538 ext. 2.  Our team is happy to discuss your project with you and assess financing opportunities. Solar installers with customers in need of SREC options in New Jersey can contact our SREC services team at info@solsystemscompany.com or (888) 235-1538 ext. 1.

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Sol Systems Welcomes Bridget Callahan

Sol Systems Welcomes Bridget Callahan

Sol Systems Welcomes Bridget Callahan to help with the firm’s SREC operations and analytics.

Sol Systems is continuing to expand to accommodate its rapid business growth. This week, Sol Systems is proud to announce the arrival of our new SREC Operations Analyst, Bridget. Welcome to the team, Bridget.

Bridget Callahan joins Sol Systems after graduating from the University of Michigan. Prior to joining Sol Systems, Ms. Callahan worked with the State of Michigan, as well as with several environmental non-profit organizations. As SREC Operations Analyst, Ms. Callahan answers inquiries for Sol Systems’ 4,000 person customer network, manages customer meter readings and production monitoring, conducts policy research and analysis, and interacts with the various public utilities commissions for SREC registrations. She holds a Bachelor in Arts in Public Policy from the Gerald R. Ford School of Public Policy, with a concentration in environmental policy.

At Sol Systems, our biggest asset is our team, and we will continue to hire sharp, passionate team members. We are currently hiring for a Controller. To learn more about careers with Sol Systems, please visit our careers page.

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Massachusetts SREC-II Market Outlook – The New Market Equilibrium?

Sol Systems has put together a prospective view of the supply and demand dynamics of the SREC II market in Massachusetts, based on the DOER’s recent presentation of proposed policies for the program.  The principle takeaway for solar developers in the MA market is that the SREC Factor they bid in a competitive solicitation for projects in the ‘Managed Growth Sector’ will need to be determined at the time of bidding, as the SREC-II market dynamics will be ever-evolving.  They should do this by analyzing the market using the project and SREC data that the DOER is promising will be extensive in the SREC-II program.  This should give project owners assurance that they will not have to blindly determine a competitive SREC Factor to bid for their projects.  

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Legislation Introduced in 2013 to Increase the Pennsylvania Solar Carve-Out

On February 25, 2013, Representative Greg Vitali introduced House Bill (HB) 100 to the Pennsylvania House of Representatives, legislation that would amend the Pennsylvania Alternative Energy Portfolio Standards. HB 100 was later referred to the House Environmental Resources and Energy Committee, and hearing has not yet been scheduled. If passed, HB 100 would take steps to revive the suffering PA SREC market. Similar legislation (HB 1580 and SB 1350) was introduced to the PA legislature in 2012; however, neither of these bills made significant progress in the General Assembly.

The original Pennsylvania Alternative Energy Portfolio Standards Act currently requires Pennsylvania’s electric utilities to obtain eight percent of their power from renewable sources by 2021, and of that eight percent, 0.5 percent of their power must be generated by solar energy systems.

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PUCO Releases New Generation Start Date Eligibility

The Public Utilities Commission of Ohio (PUCO) recently ruled on changing the generation start date for all eligible renewable energy resource generating facilities submitted for approval to the PUCO in 2013.

The Public Utilities Commission of Ohio (PUCO) recently ruled on changing the generation start date for all eligible renewable energy resource generating facilities submitted for approval to the PUCO in 2013.

The Public Utilities Commission of Ohio (PUCO) recently ruled on changing the generation start date for all eligible renewable energy resource generating facilities submitted for approval to the PUCO in 2013.  For all applications received after December 31, 2012, all facilities submitted to the PUCO for approval will have a generation start date of the date the application was filed with the PUCO.

Credit will not be given for generation that occurred before the date of the facility’s application for certification as an eligible Ohio renewable energy resource generating facility. Facility owner’s will be able to report generation from the date of application for Ohio’s purposes, unless the facility is not yet online, in which case the facility owner can begin reporting from the in-service date.

Previously, solar facilities submitted to the PUCO for approval would receive a generation start date beginning on the date the application for the system was approved by the PUCO (which is 61 days after the date filed), or a facility could receive retroactive credit back to the date the facility began reporting so long as there was supporting documentation from a remote monitoring system.  Solar facilities will no longer be able to submit remote monitoring information or documentation to the PUCO for retroactive credit.

This generation start date change will only affect facilities located in OH and adjacent states. Sol Systems has reviewed these generation start date changes and is making the necessary changes to our registration service to allow for timely registration of solar facilities to the PUCO.  Please continue to follow our blog for any further updates to the registrations process.

About Sol Systems

Sol Systems is a solar finance firm and a leader in financial innovation in the renewable energy industry.  Since its inception in 2008, Sol Systems has partnered with 350 solar installers and developers to bring over 3,000 solar projects from conception to completion by offering innovative financing solutions for residential, commercial, and utility-scale projects.

Sol Systems’ financing programs catalyze investments for a broad set of solar projects by simplifying their origination, diligence, and financing processes.  Developers seeking financing for solar projects can access over $2.5 billion in capital through the Sol Systems investor network.

In addition to providing financing, Sol Systems also offers project due diligence, deal structuring, and asset management services – all designed to reduce overhead and transaction costs and quicken project development timelines.

For more information, please visit www.solsystemscompany.com.

Connecticut Small ZREC Program Open and Accepting Applications

Sol Systems is currently aggregating several small ZREC projects, specifically projects that are 50 kW or larger, have or will be submitted into the CT Small ZREC Program, and are looking for third party financing.

Sol Systems is aggregating projects that are 50 kW or larger submitted into the CT Small ZREC Program and are looking for third party financing.

Connecticut Light & Power (“CL&P“) and United Illuminating (“UI“) officially opened the window for submitting applications into the Connecticut Small ZREC Program on January 8, 2013.  This program will be accepting applications through January 22, 2013.

The Small ZREC Program offers a unique opportunity for projects under 100 kW (AC) to receive financing through a fixed price ZREC contract for 15 years.  The pricing differs between CL&P and UI and is based on the weighted average price of the approved medium ZREC contracts, awarded to projects between 100 kW and 250 kW in later 2012 through a competitive RFP bidding process.  The pricing for each utility is as follows:

UI Rate: $148.89/ZREC
CL&P Rate: $164.22/ZREC

To participate in the Small ZREC Program, projects must meet the following criteria:

  • Located behind contracting utility revenue meter and have a dedicated REC meter
  • Must not have received funding or grants from the Clean Energy Investment Authority or its predecessor, the Connecticut Clean Energy Fund
  • Projects must be in service on or after July 1, 2011
  • No larger than 100 kW (AC)
  • Must have zero emissions – this may include solar, wind, and hydro
  • Developers must have site control

The total number of applications selected will be based on a set budget of committed funds, which is approximately $2.7 million between the two utilities.  In total, $2.36 million is attributed to CL&P and $552,310 is attributed to UI.  The selection process is a first come, first serve process based on date and time of application submission.  All projects submitted in the two week window does not exceed the allotted budget, then all applications will be accepted.  If the total number of projects submitted does exceed the allotted budget, random selection will occur.

Sol Systems is currently working on behalf of several investors who are interested in ZREC-eligible projects.  Our team is currently aggregating several small ZREC projects, specifically projects that are 50 kW or larger, have or will be submitted into the CT Small ZREC Program, and are looking for third party financing.  By aggregating a pool of smaller projects, Sol Systems is helping to bring capital to project sizes that traditionally lack capital, while also providing our investors with the opportunity to diligence and purchase multiple projects in one round of transactions.

If you have a project that has been awarded a ZREC contract and is looking for financing, please contact our team at info@solmarket.com or (888) 235-1538.  Our team would be happy to discuss your project with you and assess financing opportunities.

About Sol Systems

Sol Systems is a solar finance firm and a leader in financial innovation in the renewable energy industry.  Since its inception in 2008, Sol Systems has partnered with 350 solar installers and developers to bring over 3,000 solar projects from conception to completion by offering innovative financing solutions for residential, commercial, and utility-scale projects.

Sol Systems’ financing programs catalyze investments for a broad set of solar projects by simplifying their origination, diligence, and financing processes.  Developers seeking financing for solar projects can access over $2.5 billion in capital through the Sol Systems investor network.

In addition to providing financing, Sol Systems also offers project due diligence, deal structuring, and asset management services – all designed to reduce overhead and transaction costs and quicken project development timelines.

For more information, please visit www.solsystemscompany.com.

Solar Opportunities in Maryland, D.C., and Virginia

By Josh Garrett for Sol Systems

In preparation for the MDV-SEIA Conference in Washington DC on November 28, we will be previewing some issues and trends to be addressed at the conference. This blog is a brief examination of the solar market conditions in Maryland, Virginia, and Washington, D.C.

In today’s highly fragmented U.S. solar market, regional solar energy incentives run the gamut from highly supportive to non-existent. In the mid-Atlantic region, we have seen fairly strong support for growth, but the level of support certainly varies from state to state. Both DC and Maryland have encouraged the solar renewable energy credit (SREC) market by increasing the SREC requirements. DC has also introduced new pieces of legislation that would provide additional incentives to push DC residents towards solar. Meanwhile, Virginia is creating new incentive programs.  Below, we  provide an overview of policy and SREC market conditions in Maryland, Virginia, and Washington D.C. as a way to explore the overall prospects of each state’s solar industry.

Maryland

Over the last year, the Maryland legislature has proven its support of solar. It remains to be seen the impact the Maryland legislature will have on solar in 2013; however, previous legislation encourages a promising outlook.

Policy: The Maryland legislature showed continued support for solar in 2012, when Governor Martin O’Malley signed the Renewable Energy Portfolio Standard for Solar Energy and Solar Water Heating Systems Bill (SB 791 and HB 1187) into law. This legislation amended Maryland’s existing renewable portfolio standard (RPS) for solar generation, requiring 2% of the state’s power to come from solar by 2020 instead of 2022. To meet the accelerated schedule, Maryland’s Renewable Portfolio Standard will increase beginning in compliance year 2013 and continue through 2020. The period of greatest demand growth from the RPS is anticipated to be 2016 through 2020. While the new law will have a significant impact on the Maryland solar market over the next eight years, the Maryland legislature has not introduced any further legislation to incentivize the solar market.

SREC Market: Considering the lack of introduced legislation and the oversupply that existed in the 2012 MD SREC market, prices for vintage 2012 SRECs in Maryland have declined year-to-date by 2%, with bids at approximately $160 per SREC and offers at about $185.  However, the volume of trading in SRECs at these price levels is limited. Trading of 2013 SRECs is taking place at higher prices, around $215 per credit, most likely as a result of the boost to the solar RPS requirement in May 2012.  This legislation will truly begin to show its impact starting in 2013.  Sol Systems’ analysis and modeling shows that 2012 will see an oversupply of SRECs, but that 2013-2015 will shift toward undersupply.

Virginia

For a state without its own SREC market, Virginia has begun to show more support for solar over this past year; however, it is important to note that Virginia is reliant on the SREC market in Pennsylvania, thus legislation in Pennsylvania will continue to have an impact on the Virginia solar market.

Policy (in the state of Virginia): Currently, most Virginia utilities meet their RPS mandates by purchasing RECs from existing facilities, leaving little to no room for creating new solar jobs and expanding solar capacity in the state. However, the State Corporation Commission of Virginia is currently considering two solar energy programs proposed by Dominion Virginia Power that seek to expand solar capacity within the state. The first program would allow the utility to directly finance new solar installations totaling 30 MW of capacity on large rooftops inside the Commonwealth. The second program is a residential solar purchasing plan capped at 3 MW of capacity, which has been dubbed a “demonstration program.” These programs will look to expand solar outside of the mandated RPS requirements to create an additional incentive for VA system owners to go solar.

Policy (in the state of Pennsylvania): Many Virginia solar energy systems that are eligible to produce SRECs must sell into the Pennsylvania SREC market, as DC and Maryland recently closed their borders to out-of-state systems. These Virginia system owners could be affected by Pennsylvania’s Senate Solar Bill (SB 1350), a three-part bill that was introduced in the state legislature but has not yet reached committee consideration. The Solar Bill would increase the solar carve-out requirements in Pennsylvania’s Alternative Energy Portfolio Standard (AEPS) during compliance years 2013 through 2015, hold them steady from 2016 to 2019, and reduce the requirements in 2020 while extending the overall AEPS through 2025.  The bill would also raise the price of Alternative Compliance Payments (ACPs) to $285 per SREC during compliance years 2013 through 2019 before reducing solar ACPs by 2% per year thereafter. Finally, the Solar Bill would enable solar thermal facilities to qualify for SREC production. If carried forward into next year, the bill could combine with its counterpart introduced in the state House of Representatives in 2011 to promote changes to the AEPS and solar carve-out, which would in turn increase SREC prices in Pennsylvania.

Pennsylvania SREC Market: Considering that most SRECs from Virginia can only be sold into Pennsylvania, it is important to note for Virginia system owners that SREC prices are in the midst of a steady decline in the Commonwealth of Pennsylvania, with bids currently at $23 per credit. Offers for SRECs in Pennsylvania are at approximately $27 per credit, with most volume trading around $26 per credit.  Expectations are that the market will be four times oversupplied (though that estimate does not take into account SRECs that will be retired in neighboring states). Unlike DC and Maryland, the Pennsylvania SREC market may continue to decrease if legislative action is not taken.

Washington, D.C.

With the passage of legislation in late 2011 to increase the RPS and solar requirement, DC set a high bar for solar growth.

Policy: To support solar growth, the DC Council introduced two new solar bills in 2012. The DC Council is currently considering the Community Renewable Energy Act of 2012 (B19-715), which was introduced in March 2012. The bill expands the accessibility of solar energy for D.C. residents by establishing Community Generation Facilities and enabling virtual net metering protocols. If passed, residents could invest in a solar facility in their community and reap the energy savings in proportion to their investment through virtual net metering performed by their electric utility.

In addition, the Council approved the Energy Innovation and Savings Amendment Act (B19-0749), known as the Property Tax Exemption bill, in a first vote on November 1, 2012. If enacted, the new law would exempt solar energy systems from the District’s personal property tax, reducing the tax burden on solar energy systems and further incentivizing the construction of solar energy projects. The bill will potentially require one or two additional approvals from the Council before proceeding to the Mayor for final approval. As we look into the start of 2013, it seems DC will remain a strong market for solar.

SREC Market: The positive effects of the 2011 legislation to increase the solar requirement began to ring true in 2012. With energy suppliers focusing on meeting compliance targets at the end of 2012, prices for SRECs started to climb at a steady rate of 5% per month. As of this month, 2012 SREC bids were consistently above $300 per SREC. The Legislation passed in 2011 will take effect starting in 2013 by increasing the District’s RPS while disallowing SRECs from out-of-district systems (those that were not approved before 2012). We expect those changes to drive 2013 SREC prices even higher with the anticipation of a significant oversupply of SRECs in 2013-2014.

The policy frameworks and market opportunities in Maryland, Washington, D.C., and Virginia present an accurate analogy for state and regional markets across the U.S.: on one hand, there are states that offer strong incentives which are expected to endure for several years; on the other, there are places that offer little to no incentives for solar power and are not home to any SREC markets. An in-depth discussion on the Maryland, Virginia, and Washington DC solar markets will occur at next week’s MDV SEIA conference when the region’s largest solar players come together to discuss the specific challenges and opportunities that the region offers.

About Solar Energy Focus 2012

Sol Systems is proud to be sponsoring the Solar Energy Focus 2012 conference which will host 50+ speakers, 12 breakout sessions, 350+ business leaders, investors, legal experts, developers and policy-makers. The conference will take place on November 28, 2012 at the Marriott at Metro Center in Washington, DC.  To register for the conference, please visit www.solarenergyfocusconference.com.

About Sol Systems

Sol Systems is a solar finance firm and a leader in financial innovation in the renewable energy industry. Since its inception in 2008, Sol Systems has partnered with 350 solar installers and developers to bring over 3,000 solar projects from conception to completion by offering innovative financing solutions for residential, commercial, and utility-scale projects.

Sol Systems’ financing programs catalyze investments for a broad set of solar projects by simplifying their origination, diligence, and financing processes. Developers seeking financing for solar projects can access over $2.5 billion in capital through the Sol Systems investor network.

In addition to providing financing, Sol Systems also offers project due diligence, deal structuring, and asset management services – all designed to reduce overhead and transaction costs and quicken project development timelines.

For more information, please visit www.solsystemscompany.com or www.solmarket.com.

Massachusetts Announces 10 Year Forward ACP Schedule

On December 29, the Massachusetts Department of Energy Resources (DOER) announced a rolling 10 year Alternative Compliance Payment (ACP) Rate Schedule for the RPS Solar Carve-out.  The schedule maintains the ACP Rate at its current level through Compliance Year 2013, and then reduces the Rate at 5% per year.

This change to the Solar Carve-out Program will provide much needed visibility with regards to the ACP and should encourage electric suppliers with compliance obligations to participate in long-term SREC contract talks.

The 10 Year Schedule is below. The full announcement can be found here - DOER Announces Forward ACP Schedule.

Compliance Year ACP Rate per MWh
2012 $550
2013 $550
2014 $523
2015 $496
2016 $472
2017 $448
2018 $426
2019 $404
2020 $384
2021 $365
2022 and after added no later than
January 31, 2012 (and annually
thereafter) following
stakeholder review

As the oldest and largest SREC aggregator in the country, Sol Systems currently offers three different types of agreements for Massachusetts homeowners and businesses: Sol Upfront, Sol Annuity, and Sol Brokerage. However, Sol Upfront is only available for systems installed by one of our platinum partners. Please contact your installer or e-mail our Sol team at info@solsystemscompany.com for information on specific pricing.

In order to obtain specific pricing for commercial systems, we recommend that developers load these projects on SolMarket, our new financing platform. In addition to linking solar developers with quality investors, the SolMarket portfolio team customizes SREC pricing indications for commercial projects and distributes them on a weekly basis.

When is 1 MWh of solar electricity equal to 1 SREC?

Many definitions of solar renewable energy credits (“SRECs”) say that an SREC is equivalent to one megawatt-hour (1,000 kilowatt hours) of electricity generated by a solar facility. While this is mostly true, it’s not always the case that 1 MWh of solar = 1 SREC. In order for an SREC to be created (or “awarded”), the system must receive certification from the state where that SREC will ultimately be sold – and the system must be registered with the regional transmission organization, such as PJM GATS or NEPOOL GIS. These organizations are the entities that acknowledge solar electricity production of 1 MWH and award the system owner with 1 SREC.

In other words, if a solar energy system is not registered with at least one state and registered with PJM GATS or NEPOOL GIS, the system may produce solar electricity without producing any SRECs. This is important because if no SREC is created, no SREC can be sold.

To further complicate matters, each state has different rules about retroactive SRECs — or how far back SRECs can be awarded. In select situations, SRECs can be retroactively awarded years into the past, whereas other circumstances only allow SREC creation from the state’s certification date forward.

Most often, systems are registered with the state in which they are located, but in certain circumstances, SRECs from one state may be sold into another state which has an open SREC policy and a higher price for SRECs.  In cases where the SREC will be sold into a different state, the system must be registered in the state where the SREC will be sold.

In order to ensure that a solar energy system is producing SRECs, the system owner must complete various forms with one or more state agencies.  This paperwork can be submitted by system owners themselves, or it may be done through the installer, or an SREC aggregator, such as Sol Systems — the nation’s largest and oldest SREC aggregator.

Once a system is registered and producing SRECs, the SRECs can be sold to entities that are willing to buy them.

Why would anyone buy an SREC?

Some states in the U.S. have created Renewable Portfolio Standards (RPS) that require energy suppliers and utilities to produce a minimum amount of their energy from renewable energy sources.  These pieces of state legislation essentially create a marketplace for renewable energy at a premium price and thus stimulate the development of renewable energy markets. Some Renewable Portfolio Standards have specific provisions that require a portion of the electricity to come from solar (a “solar carveout”), and these states typically have strong solar energy markets and robust SREC markets.

When faced with an RPS with a solar carve-out, utilities have three options: build solar power facilities and produce the solar energy themselves, purchase Solar Renewable Energy Certificates (SRECs) or pay a Solar Alternative Compliance Payment (SACP) – a set price for each Megawatt-hour (MWh) of renewable energy they fail to acquire.

SREC Prices

The price at which SRECs are sold is dependent on 3 market factors: supply, demand, and the level of the alternative compliance payment (ACP). Demand is driven by state RPS requirements and supply is driven by the number and size of individual solar energy systems which are certified to produce SRECs in a given state.  In markets that are undersupplied, the ACP tends to set a ceiling price on the price of SRECs, so a state with a high ACP often leads to high SREC prices – at least until supply catches up to demand. Depending on the intersection of supply, demand, the level of the ACP, as well as the terms of the SREC contract – SREC prices can vary widely.

For more information about SRECs, please visit www.solsystemscompany.com.