March 2014 Project Finance Journal

19 Mar 2014

Our monthly project finance journal contains solar finance statistics, trends, industry news, and SREC market information. Contact our team at or 888-235-1538 x2 for your solar project financing needs.

Our monthly project finance journal contains solar finance statistics, trends, industry news, and SREC market information. Contact our team at or 888-235-1538 x2 for your solar project financing needs.

Below, we have included excerpts from Sol Systems’ March 2014 Project Finance Journal, which is a monthly email newsletter that our project finance team distributes to our network of clients and solar stakeholders. Our newsletter contains solar statistics from current real-life solar projects, trends and observations gained through monthly interviews with our solar project finance team, and it incorporates news from a variety of solar industry resources.

If you would like to receive our Solar Project Finance Journal via email every month, please email with a request to be added to our Project Finance Journal distribution list.


Project Finance Statistics

The following statistics represent some high-quality solar projects and portfolios that we are actively reviewing for investment.

Capacity: 180 kW – 44 MW

Average Capacity:  4.5 MW

Developer all-in (asking) prices*:

  • <500 kW:  $2.25-3.50/Watt
  • 500 kW–2 MW:  $2.20-2.95/Watt
  • >2 MW:  $2.15-2.80/Watt

* Note: Statistics may be “above market” because they only represent projects with the strongest financial profiles, and many projects and portfolios have been awarded high rebates or incentives. Our system price statistics continue to exclude projects from Hawaii and Ontario where all-in prices remain over $4.00/W.

Average PPA rates & escalators (20-year terms unless noted):

  • AZ: 12 – 15 cents/kWh with 2% escalator
  • CA:  10 – 17.5 cents/kWh with escalators between 1.50% – 3%
  • CO: 6 – 12.5 cents/kWh with 2% escalator
  • CT:  8.5 – 14 cents/kWh  with 1% escalator (assumes separate zREC contract)
  • MA:  9 –9.5 cents/kWh (assumes separate SREC contract)
  • MD 7 – 10.5 cents/kWh with 2% escalator (assumes separate zREC contract)
  • NC: 8.3 cents/kWh with no escalator, 15-year term
  • NJ:  9.5 – 14 cents/kWh with 2% escalator (assumes separate SREC contract)
  • NY:  10.5 – 18.5 cents/kWh with 2% escalator

Recent Feed-in Tariff Rates):

  • HI: 23.8 cents/kWh for 20 years with no escalator (HECO)
  • IN: 20 cents/kWh for 15 years with no escalator (IP&L)
  • RI: 19 – 29 cents/kWh for 15 years with no escalator (N-Grid)
  • U.S. Virgin Islands: 15 – 18 cents/kWh for 20-25 years with 1.5-3% escalator (WAPA) 

In addition to the markets listed above, we have seen some isolated projects in Oregon and Nevada with promising economics.


Solar Markets

Massachusetts: The much-awaited final regulations on the Massachusetts SREC II program are expected to be released by April 11 and in place by April 25. As these dates approach, many SREC II projects are becoming more attractive to investors. However, many investors continue to confront challenges in accurately valuing SREC II projects and may hesitate to invest until the full regulations are released. Sol Systems launched our own SREC II pricing for 3 and 5-year contracts this week. In addition, we are actively seeking SREC II projects for investment and for SREC financing.  We expect SREC II to be a more controlled, stable market than SREC I, which had prices as high as $570/SREC in 2011.

Despite the expected SREC II stability, uncertainty remains regarding the state’s net metering policy. Two competing legislative bills could remove or adjust the caps on net metering capacity. One bill would replace the current cap with a time cap that would allow all qualified net metering projects to be approved until the end of 2016. The other bill would allow the net metering cap to increase from 3-4%.

Minnesota: Since the passage of the RPS and incentive programs, solar project development is picking up in the land of 10,000 lakes. The Made in Minnesota Productive Incentive for systems under 40 kW has seen high demand and the program is oversubscribed; 10-year REC contracts will be awarded by a lottery system. To date, our team has conducted diligence on some fairly large, high-quality projects; we expect to see a steady flow of commercial-scale projects as the market matures.

New York: With strong political support, lucrative incentive programs in NYSERDA and LIPA, and good overall market fundamentals, there is lots of promising activity in the Empire

State; this is giving hope to many that New York will become one of the nation’s strongest solar markets. We are delighted to report that New York developers have secured a remarkable number of hosts with good credit, which is essential for attracting investment. Beyond its solar incentives, the state and the Big Apple specifically will also have some of the nation’s strongest energy efficiency and energy storage programs.

In less exciting news, the second iteration of LIPA’s feed-in tariff (FiT), now known as PSEG LI, was supposed to be awarded on February 28, but winners have yet to be announced.


Trends & Observations

Below, we have included some trends and observations from our solar project finance team.

New O&M Players (not EPCs) Proving Good Service is Good Business – As the industry matures, the importance of operations and maintenance (O&M) services is becoming more pronounced.  Inevitably, PV systems will need routine maintenance or unscheduled repairs, but not all service providers are providing the same quality of service. Traditionally, the solar company that performed the EPC work also assumed the ongoing role and revenues as the O&M provider, but times are changing.  The vast majority of EPC companies have not allocated sufficient budgets, personnel, equipment, or operational focus to provide proper diagnosis and response times to system owners and investors. Meanwhile, the operating fleet of solar is expanding, and investors and servicers do not want to manage a different O&M provider for every system in their portfolios.

This shift has created an opportunity for companies like True South, MaxGen, and PowerFactor, who specialize in O&M and who are familiar with a wide variety of monitoring systems and data acquisition software platforms.  Moreover, these O&M service providers have established relationships with major equipment suppliers which enable them to navigate customer service portals, retrieve operational data, and manage warranties and service equipment quickly and effectively. As we assess our clients’ and our own needs, we believe there is a strong future for O&M companies in this arena.

Solar Developers Happy to See More Tax Equity & Take-out Options Our discussions with developers who have good projects indicate that they have more options for tax structured investment than they have had in the recent past. Why so?

First, solar corporations are succeeding and receiving publicity (like SolarCity); this is leading new investors to solar as they become more comfortable with the asset class.  Second, wind projects are drawing to an end as the production tax credit expires, and these investors are taking an interest in solar. Third, the solar asset class is large enough that it is drawing in new investors who had previously been waiting on the sideline. Some of these new investors are just starting to announce their interest in solar investments. For example, Sol Systems recently announced a fund deployment for a 13.4 MW portfolio on behalf of Nationwide Mutual Insurance.  Although it was Nationwide’s first solar announcement, it was one of several solar projects that they have completed with Sol Systems.

Last, but not least, the time is right: it’s the beginning of the year, and the usual tax equity suspects are making money. They know their 2013 tax appetite, have a good sense of their 2014 tax appetite, and are in hot pursuit of pipeline that can be built by the end of the year.  In short, the table is set for a number of new investors and the veteran solar investors are ready to execute.

In spite of the increased availability of tax equity options, tax structured investments are still not the optimal financing option for the majority of commercial and industrial solar projects. Most tax equity players have a minimum threshold of $20 million for their investments and require developers to have strong balance sheets (which most privately held solar companies cannot provide). The good news for these solar developers is that there also seem to be new take-out investors with sponsor equity and their own tax appetite.  For example, we are working with new investor clients who are looking to purchase commercial and industrial scale solar projects.

One word of caution for developers (and, really, everyone): be careful when choosing your partners. As the number of investors expands in the solar industry, there are a number of new entrants who lack significant experience and/or who have a limited ability to execute. We have seen our fair share of instances when a developer chooses a “higher, better project offer” from a take-out investor – only to hear later that the deal has fallen apart (and the developer wants to know if our original offer still stands).  In all cases, developers should assess the likelihood that their financing partners will be able to execute on time, evaluate their track record, put firm timelines in place, and understand the sources and current status of the buyer’s tax equity.


Solar Chatter

  • Efficiency and cost improvements for 20-30 kW string inverters, such as those offered by SMA and PowerOne, are making these inverters more economically viable. This has led to a shift away from central inverters for many commercial and industrial scale projects.
  • Solar PPA rates are hitting record lows in the Southwest and Southeast.  At slightly less than 5 cents/kilowatt-hour, Austin Energy is about to contract for some of the lowest priced solar electricity in the country (a 150 MW plant in New Mexico). Similar solar rates have been contracted in North Carolina. This is particularly exciting because solar prices are starting to beat natural gas rate projections. We appreciate the wise words of Georgia Public Service Commissioner, Bubba McDonald. “I don’t know what gas prices will be in six years. But I know the sun will come up, and it’s free…to deprive people of the opportunity to take advantage of technology, to me, is wrong.”
  • On February 18, the Edison Electric Institute (EEI), a trade association representing investor-owned utilities, filed official comments with Arizona regulators claiming that the value of grid security, grid reliability, environmental benefits, and social externalities should not be considered when deciding on rates for distributed generation.   On the other hand, EEI has formed a recent alliance with the National Resources Defense Council (NRDC) to devise policies “supporting fair and adequate cost recovery for maintaining the evolving grid.”
  • Interconnection issues in HECO territory persist.  Unfortunately, the interconnection uncertainty is undermining investors’ ability to evaluate projects, which puts a wet blanket on a market with enormous solar potential.


Company News, Events & Updates

Sol Systems, Nationwide Mutual, SunEdison, and National Bank of Arizona Announce Financing for 13.4 MW Solar Electricity Portfolio

Sol Systems is proud to announce the closing of a 13.4 MW tax equity transaction with Nationwide, SunEdison, and the National Bank of Arizona. Sol Systems advised Nationwide Mutual Insurance, the investor, on the acquisition of the equity in the transaction. The tax equity transaction is representative of Sol Systems’ ongoing success in bringing new investors to the booming solar industry.

Sol Systems is Hiring!

We are actively looking for smart, driven candidates to join our rapidly expanding team. We are currently hiring for: Project Managers, Project Finance and Tax Equity Associates, a Tax Equity Senior Director, and an MBA Marketing Intern. Please view the careers page on our website for opportunities.


Members of the Sol Systems team will be speaking at or attending the following events in the upcoming month. Please let us know if you would like to arrange an in-person meeting.

ACORE’s National Renewable Energy Policy Forum
March 27-28
Washington, DC

SEIA Tax & Finance Seminar
April 3-4
San Francisco, CA

Platts 29th Annual Global Power Markets
April 7-9
Las Vegas, NV


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 facilitated financing for thousands of projects and hundreds of millions in investment on behalf of Fortune 100 companies, private equity, family offices and individuals. For more information, please visit


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Natacha Kiler

Natacha Kiler