Every month, Sol Systems distributes a newsletter, the Sol Systems Project Finance Journal, to our community of solar developers and investors. The journal features solar finance statistics, trends, industry news, and SREC market information. We gather this information from our relationships and experience aggregating SRECs and financing commercial and utility scale solar projects.
We have included excerpts from our April Project Finance Journal below. If you have any questions about this information, wish to receive our monthly newsletter via email, or have a solar project in need of financing, please contact our team at email@example.com. We would love to hear from you.
Project Finance Statistics
Characteristics of “Hot Projects”
Capacity: 300 KW – 3.6 MW
Average Capacity: 1,293 KW
Competitive all-in costs range currently range between $2.00-3.00 *
- <500 kW: $2.57-3.00/ Watt
- 500 kW – 2 MW: $2.85-3.00/ Watt
- >2 MW: $2.00-2.62/ Watt
*Does not include Hawaii projects where competitive costs are currently ~ $4.25/watt
Average PPA rates:
- CA: 11.7 cents/ kwh with 0% escalator
- CT: 9.0 cents/ kwh with 2% escalator
- DE: 10.1 cents/ kwh with 2% escalator
- HI: 22 cents/ kwh with 2.5% escalator
- MA: 9.9 cents/ kwh with 2% escalator
- NC: 8.3 cents/ kwh with 0% escalator
- NM: 8.1 cents/ kwh with 1% escalator
- OH: 7.5 cents/ kwh with 0% escalator
Trends and Observations
Permanent Debt Becoming More Accessible to Solar
In recent months, we have seen an increased number of lenders, such as local and cooperative banks, show interest in providing permanent debt to solar projects. These financial institutions have become more comfortable with solar technology and how to underwrite solar assets, and seem to be most interested in the 1-5 MW project size range. With the entrance of these new financiers, the terms of debt have improved, with 5.5 – 7% interest rates and 1.25 coverage ratios for 10-15 year loan terms. Permanent debt may be an interesting financing option for developers who have access to capital as well as tax equity and/or their own tax appetite. Of course, debt financing may also be a great option for safe-harbored projects.
Financing Timelines: Hurry Up and Wait
While it may be possible for some solar projects to secure financing within a matter of weeks, we advise our developer clients that more realistic timelines are in the range of 6-8 weeks for financing agreements to be finalized (and sometimes many more months before financing dollars are received). Our project finance team often helps clients move from introduction to term sheet within 1-2 weeks, but getting to a term sheet may take 4 weeks.
Once term sheets are in place, investors must conduct due diligence and get comfortable with specific project nuances before they deploy capital. The due diligence process typically takes 30-60 days, but timing always depends on the complexity of a project.
Sol Systems abbreviates financing timelines and improves our developer clients’ velocity to secure capital by understanding the specific parameters of our investor clients’ investment preferences (geography, project size, credit of the electricity offtaker, IRR targets, market concentration, SREC risk appetite etc.) and their internal approval processes. We often perform due diligence on behalf of investor clients prior to, or during term sheet negotiations. Nevertheless, developers would be wise to budget 2-3 months for the financing process.
Markets: What’s Hot
In the last month, we have seen significant market activity in Georgia, North Carolina, and Rhode Island. As always, we encourage developers within these states, and all states, to approach us with their project financing needs.
- Georgia: Georgia Power has announced the winners to its recent RFP for projects under 1 MW. The lottery based program was extremely competitive (we understand that there were nearly 1,000 applications and only 30 recipients). We believe that the developers that have secured the 20-year $0.13 cent/kWh rate will need low EPC, lease, and interconnection costs in order to be successful in attracting project financing from investors.
- North Carolina: North Carolina is still showing an abundance of project pipeline, and it remains a buyer’s market, but there has been fresh talk of new sources of tax equity that may help loosen up the market. Unfortunately, there is a conservative political movement in North Carolina to eliminate the state’s renewable energy tax credit. This would certainly undercut and potentially kill North Carolina’s solar industry. In the meantime, we have a small number of investors in North Carolina who are looking to provide tax equity, as well as take-out financing.
- Rhode Island: Last week, National Grid announced the recipients of the FiT for projects under 500 kW. The successful applicants will receive $0.284/kWh for 15 years. Despite being a small state with a small solar program, Rhode Island continues to show promise. We are actively working with a number of project developers in Rhode Island as a financial partner and remain interested in assisting developers with projects that have secured the FiT incentive.
In April, our pricing for multi-year SREC contracts remained the same, thanks to stable market conditions. If you are interested in an in-depth analysis of SREC pricing, trends, and legislation in each market, please view our most recent quarterly SREC roundup webinar, which we hosted on April 3rd.
As the oldest and largest SREC aggregator and financier in the United States, Sol Systems has a proven track record in maximizing the value of SRECs through monetization options such as spot market transactions, forward contracts, and prepaid lump sum payments. While our forward contracts and upfront payments are more limited in availability and proffered to SREC Partners, our spot market solution, Sol Brokerage, is offered within 12 state markets, and is accessible to all developers of all system sizes.
To learn about our recent spot market clear prices and how we can help maximize the value of your SRECs, please contact us at firstname.lastname@example.org or 888-235-1538 x 1.
About Sol Systems
Sol Systems is a boutique financial services firm that offers investor clients direct access to the renewable energy asset class and provides developers with sophisticated project financing solutions. Founded in 2008, Sol Systems focuses on meeting the most critical needs of the industry, including SREC monetization, capital placement, tax equity, and New Market Tax Credits. To date, the company has arranged financing for thousands of projects and facilitated hundreds of millions in investment on behalf of Fortune 100 companies, private equity, family offices and individuals.
For more information, please visit www.solsystemscompany.com.