Sol Systems, a Washington D.C.-based solar finance firm and the largest solar renewable energy credit (SREC) aggregator in the nation with more than 2,300 customers and more than 20 MW of solar capacity under management, recently announced its new solar finance platform called SolMarket.
“We talk to hundreds of solar developers about prospective commercial and utility-scale projects and unfortunately many of these solar
projects are never built due to an inability to efficiently locate financing,” said Yuri Horwitz, CEO of Sol Systems. “We have created SolMarket to help drive efficiencies into the solar market and connect investors and developers effectively. SolMarket will reduce the cost of financing transactions and enhance the tempo of solar project development.”
George Ashton, vice president and CFO at Sol Systems, said that as the interest in projects increases, so have buy-siders become more keen. That, according to Ashton, has been the impetus behind the platform to create an organized way of bringing together solar developers and investors.
“Banks and institutional investors are starting to get more comfortable with solar projects, so they started financing these solar projects at much lower yields than private money would care to entertain,” he said. “Private money has to look for the same yields but in smaller projects. The problem is that you need several of them to get to a notional amount that makes sense to pull together for financing purposes. Now you have increased project discovery costs and increased underwriting costs because finding the 10 projects that are well organized that can be put together in the fund is difficult.”
With SolMarket, developers can group similar projects into one portfolio either by location or similar by host site. For instance, a developer can be doing a solar installation in branches of Walmart in Ohio, and the developers can group those projects into one portfolio to be financed.
However, Ashton pointed out that in creating a new security, some sort of standard in terms of underwriting and credit quality needs to be established. A very important quality of the securitization market is that it works best with normalized asset classes.
“The great thing about the market is that you hope it will derive liquidity, but you need to prove the performance of the assets, in a normalized fashion, down the line,” Ashton said. “One thing we focus on is providing templates for some of the legal documentation and fairly well-defined project guidelines, all of that with the idea of creating one normalized asset class in solar energy projects.”
According to Ashton, there is a significant step toward making solar energy projects an investment-grade class, and the next step is securitizing these projects.