June 2013 Solar Project Finance Statistics

17 Jun 2013

Massachusetts SREC policy discussions dominated the project finance headlines this week, inspiring a hesitantly optimistic outlook among developers and investors alike.

This month’s project finance journal includes updates on hot solar markets, PPA and FIT rates, and solar finance trends and observations.

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 June 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 finance@solsystemscompany.com.  We would love to hear from you.

Project Finance Statistics

Characteristics of “Hot Projects”

Capacity: 100 kW – 24 MW
Average Capacity: 3,543 kW
Competitive all-in (asking) prices* currently include:

  • <500 kW: $2.12 – $3.03/Watt
  • 500 kW – 2 MW: $1.75 – $3.15/Watt
  • >2 MW:$1.75 – $3.02/Watt

*Does not include Hawaii, Caribbean, or carport projects where the respective competitive prices currently average $4.58/Watt, $3.20/Watt, and $3.72/Watt.

Average PPA rates (20 year terms unless noted)

AZ: 7 cents/kwh with 2% escalator
CA: 11.9 cents/ kwh with .85% escalator
CT: 12.0 cents/ kwh with 2.25% escalator
GA: 13.0 cents/ kwh with 0% escalator
HI: 21.3 cents/ kwh with .6% escalator
MA: 9.0 cents/ kwh with 2% escalator
MD: 9.0 cents/ kwh with 0% escalator
NC: 7.1 cents/ kwh with 0% escalator (10-20 years)
NM: 8.5 cents/ kwh with 1% escalator (25 years)
OH: 8 cents/ kwh with 3% escalator
TN: 10 cents/kwh with 0% escalator

Average Feed-in Tariff Rates

CA: 13.4 cents/ kwh
FL: 18 cents/ kwh
HI: 23.8 cents/ kwh
IN: 23 cents/ kwh with 1% escalator (15 years)
RI: 30.5 cents/ kwh (15 years)
Caribbean islands: 16 cents/ kwh

Trends and Observations

Cheers to you, TOU

In the last few months, we have seen a wave of projects that rely on Time of Use (TOU) multipliers, particularly in California. Developers of these projects have been awarded 20-year energy contracts with utilities like PGE and SCE, and the project economics seem to work even without CSI incentives. The TOU multipliers enable developers to ratchet up their project’s energy cash flows during periods of peak demand, thus improving overall project returns. Investors, of course, may have more conservative evaluations than developers when it comes to modeling, which is often demonstrated in project valuation negotiations. In order to expedite the negotiation process, we encourage our clients to be explicit about the assumptions they make in their TOU calculations. Please reach out to our team if you have questions about TOU calculations or project valuations; we are more than happy to facilitate financing for these types of projects.

Module Prices to Rise?

With few exceptions, solar panel prices have been falling quarter after quarter for the last five years. However, changing market conditions are putting upward pressure on panel prices. Through anecdotal evidence, we can confirm that a number of companies within our network are seeing increased module pricing. We see this is a result of a few different factors. First, as various international trade cases may begin to limit panel supply, demand is ticking up globally. Increased demand can be seen particularly in Japan, where an aggressive feed-in-tariff (spurred by the 2011 Fukushima Daiichi nuclear disaster) has created notable demand in the global market for solar panels. Second, many projects are rushing to acquire panels to meet the double depreciation schedule which is applicable in 2013, but not 2014. Although we believe that industry consolidation of manufacturers will temper the module oversupply of late, we expect that module prices will continue to decrease in the long-term.

Markets: What’s Hot

Here is a brief update of the latest solar market news, according to our project finance team:

  • Massachusetts: Developers should be advised that the SREC program in the Commonwealth is being re-calibrated, and that SREC strategies may need to be reset. As a surprise and relief to many Massachusetts developers, the DOER announced an “emergency regulation” on June 7th to manage the massive growth of solar development. The new legislation will protect SRECs for all projects under 100 KW, and will specifically protect those projects over 100 KW if those projects have their Statement of Qualification, interconnection approval, and meet specific construction deadlines. Projects that do not qualify for this program will be eligible for the SREC II program which has yet to be finalized. There will be no more extensions for the first program, which makes it critically important for developers with qualified projects to meet construction (and financing) deadlines. Amid this rush, we continue to advise our developer clients to work with investors who are reliable, experienced, and have knowledge about (and appetite for) MA SRECs. We encourage you to approach us if you have eligible projects which require financing, or if you are interested in learning about our SREC management and monetization services.
  • Minnesota: The Land of 10,000 Lakes has implemented a 1.5% solar carve out, which amounts to a 450 MW program by 2020. Provisions of the bill allow for a PBI for small projects, community solar gardens at capacities of 200 kW+, and a standard offer for projects under 1 MW. Read our analysis of the Minnesota solar market.
  • New Jersey: This SREC market has made a slight comeback, but it should be noted that New Jersey is the “Come See for Yourself” state. In the last month, we have seen an increase in New Jersey project flow, especially with state agency off-takers and brownfield projects (although green field projects seem to be facing bigger hurdles). We are especially interested in speaking with New Jersey developers who have projects with double digit PPA rates, escalators, and multi-year SREC contracts, as these projects have the best potential for third party financing.

SREC Roundup

Sol Systems has increased pricing for three and five-year fixed price strips in New Jersey following recent efforts to limit the oversupply in the state. The rest of our SREC pricing remains unchanged this month.

The Sol Systems team offers three SREC monetization options: Sol Annuity, Sol Upfront, and Sol Brokerage. Sol Annuity and Sol Upfront options depend on system size and location, while Sol Brokerage is offered to 12 states and can be offered to developers with projects of all sizes.

To learn about our SREC services, which include SREC portfolio monetization and management, please contact us at info@solsystemscompany.com 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

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Natacha Kiler

Natacha Kiler