Local and regional developers often seek our project finance team’s advice on bidding into requests for proposals (RFP’s), and how they can win against larger players. Truthfully, RFP’s continue to be a race to the bottom for solar developers where the lowest bid wins, often assisted by unbeatably low costs of capital. There are, however, strategies that local and regional players may pursue to build their businesses by focusing on the most promising opportunities.
Generally, RFP’s lean heavily towards the attributes that only larger solar companies can meet. For this reason, we recommend that smaller developers – or even larger regional players – focus on RFP’s that either a) have a strong preference for local developers b) split allocations among multiple parties, or c) have an offtaker whose credit picture, while of high quality, is not publicly rated. It also helps for a developer to have a strong relationship with their local RFP provider. As always, relationships matter.
Given the inherent challenges with RFP’s, we advise many local and regional developers to focus on unrated commercial entities and non-profits. Local and regional players may have a leg up over national competitors with local businesses (ie: a YMCA) where they may have relationships with the host who may have a strong preference to “buy local.” Similarly, national developers, focused on developing projects that ultimately support a YieldCo or securitization, are less likely to accept strong-but-unrated financials
So, what’s the best strategy for local developers to go after non-investment grade entities? To start, we recommend involving a financing partner early in the project development process. This is beneficial to developers because a financing partner:
- Provides access to tools and knowledge needed to price the EPC and PPA at rates where the project can actually pencil. Financing partners may also have experience with various incentive regimes that may be more unfamiliar to the developer;
- Enables the developer to tell the host that financing has already been secured;
- Identifies fatal flaws early that can kill deals or reduce the value of a project. This may include undertaking an upfront host credit review; and
- Has both clients in mind: the host and the investor, who is the ultimate buyer of the project.
Together, these partnerships help the deals make it to the finish line so you can pivot to the next opportunity, grow your business, and stand your ground on your local turf.
About Sol Systems
Sol Systems is a renewable energy finance firm that provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. Founded in 2008, Sol Systems focuses on meeting the industry’s most critical solar financing needs, including tax structured investments, capital placement, debt financing, and SREC portfolio management. To date, the company has facilitated financing for thousands of distributed generation solar projects and hundreds of millions in investment on behalf of Fortune 100 corporations, utilities, banks, family offices, and individuals. For more information, please visit www.solsystemscompany.com.
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