Nobody likes to sleep on a lumpy mattress, or to eat lumpy mashed potatoes, cream of wheat, or grits. Solar developers and investors don’t like lumpy solar markets either, but that is the reality of the industry today.
Many solar markets have become “lumpy,” meaning it is difficult to find states or utility territories in which a developer can reliably develop profitable projects and consistently interconnect. Because of the scarcity of solar incentive programs, when a new incentive regime opens, developers flood the market with projects, and soon, the program has filled its capacity. Often grid saturation is an issue, or, a utility may be too understaffed to handle interconnection applications, halting solar development.
We could discuss this topic for days, but a few conspicuous examples come to mind. Think of the net metering cap (this year and last), and the wait between SREC I and SREC II (with the Managed Growth scramble) in Massachusetts. Think of the boom and bust of the New Jersey SREC market, and Hawaii and California’s interconnection challenges. Or, think of the “hurry up and wait” cycle in a feed-in tariff market: the program opens, you hope your bid makes it in, you rush to get the project done by the prescribed deadline, and then you wait again. Or, even worse, what if your bid doesn’t win? How do you keep payroll? In a lumpy solar development cycle like this, how can one build a sustainable business?
The reality is that commercial-scale solar developers looking to build a long-term, viable business will need to specialize in many state markets to be successful, or at least look to regionally specialize. Don’t focus on just one state. Or, if you do, pick one of the underrated solar markets, like Maryland, where projects pencil, but not at a rate that encourages the typical gold rush of other markets like Massachusetts.
If you are going after the more saturated, incentive-rich programs, get involved early before the gold rush. Sound too challenging for your business? Then rely on your financing partner for help. Sol Systems often provides developers with tips on where to get involved before it’s too late – you’ll even find some in our Project Finance Journals (check out past entries on Illinois and Option R in California).
It’s lumpy out there, but we’re here to help. Got questions on where you should focus your development efforts? Contact our team at 888-235-1538 or firstname.lastname@example.org.
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 email@example.com.
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Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 180MW of 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.