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 October 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 firstname.lastname@example.org. We would love to hear from you.
Project Finance Statistics
Characteristics of “Hot Projects”
Below you will find statistics on some high-quality solar projects and portfolios that are seeking third party financing.
Capacity: 205 kW – 4.85 MW
Average Capacity: 1,404 kW
Developer all-in (asking) prices**:
- <500 kW: $2.65-3.03/Watt (rooftops)
- 500 kW – 2 MW: $2.45-2.65/Watt (ground-mounted)
- >2 MW: $2.18-2.60/Watt (ground-mounted)
**The prices above reflect actual projects that are under review by investors within our network. The projects have particularly strong financial profiles, and therefore may have asking prices that are “above market.” We have intentionally excluded statistics on projects that have abnormally high and low prices, including: real projects in Hawaii where asking prices are over $4/Watt, a California portfolio with single-axis trackers, and operational portfolios in New Mexico and Ohio.
Average PPA rates & escalators (20-year terms unless noted):
- CT: 15 cents/kWh with 3% or CPI escalator
- MA: 8.5 cents/kWh with CPI as escalator
- MD: 9.3 cents/kWh with 1.8% escalator
- NM: 8.1 cents/kWh with 2.5% escalator (25 years)
Average Feed-in Tariff Rates (20-year terms unless noted):
- CA: 17.2 cents/kWh with no escalator (CREST)
- HI: 23.8 cents/kWh with no escalator (HECO)
- VT: 27.1 cents/kWh with no escalator (SPEED, 25 years)
Compared to prior months, we have witnessed a slowdown in the number of new projects which are seeking financing, which we attribute to developers’ focus on closing out their 2013 projects. We expect to see more new project activity in the coming months. Please let us know if you have any projects which require financing, or if you are looking to sell any operational solar assets. We welcome the opportunity to help you with your solar financing needs.
Trends & Observations
Here are some brief updates on a few of the solar markets that we follow.
- District of Columbia: DC recently became the 10th state to pass a community solar bill Community solar is a critical legislative framework for distributed generation because it helps address the ongoing issues of credit risk for commercial and small-utility projects because it creates the potential for hundreds of individuals (homeowners and renters) to purchase electricity from new solar energy systems. This diversification of solar electricity off-takers provides a more stable income stream for investors, thus minimizing the risks associated with host credit. If the nation’s capital can find enough credit worthy subscribers and suitable sites, this bill should aid DC in meeting its aggressive RPS targets.. Read more.
- Georgia: Georgia Power recently announced a short list of developers and projects that are eligible for their utility-scale RFP program. This program provides a 20-year contract for 1-20 MW projects at a competitively-solicited rate not higher than $0.12/kWh. However, the project economics are fairly tight for most investors and only those developers who have extremely low installation costs (below $2/watt) may be positioned to secure third party financing.
- Hawaii: Permit fees, interconnection, and monetization of the Hawaii state tax credit continue to pose major problems for commercial and utility scale projects in Hawaii, but these factors do not typically pose hurdles for residential solar. SolarCity and SunRun are both moving more aggressively into the market with residential PPAs, and when considering Hawaii’s high electricity prices and insolation, it seems that Hawaii’s residential market is primed to prosper.
- New York: The LIPA FIT 2 was recently approved, and this time around pricing will be determined through a competitive clearing price auction mechanism, which will cause FIT prices to drop below the levels seen in the first LIPA FIT program. All submitted projects between 100 kW – 2 MW in size will go through this competitive solicitation, but projects located on the South Fork of Long Island are eligible for a 7 cent premium. Read more.
Solar Chatter Stew
This month our team had a stew of short, unrelated, and interesting observations that deserve mention; our very own Solar Chatter Stew…
- The Short List of Panel Manufacturers: It seems that developers seem to be using a smaller set of panel suppliers these days. There are exceptions of course, but most often we are seeing project specifications that detail panels from SunPower, Yingli, Hanwha, Trina, Canadian Solar, and Jinko.
- Procuring New Tax Equity for Developers Big and Small: The dearth of tax equity from experienced solar investors continues to be the major limiting factor on solar development, especially for small projects or portfolios of small projects. Sol Systems has been able to find tax advantaged equity for some of these developers’ commercial portfolios, and we recently closed our first residential solar tax equity transaction.
- Media and Investors Bullish on Solar: Mainstream media sources such as the Wall Street Journal and Bloomberg have increased their coverage of solar, and smaller financial commentary sources, like Motley Fool and 24/7 Wall St. are getting pretty bullish on solar. This is coinciding with a rise in the trading prices of select solar stocks and we have seen an increase in the number of investors that are chasing the highest quality projects.
Predictions for the Next Good Solar Markets
Many of our developer partners ask our opinion on the strength of various solar markets, and as we research and create briefs on the various regional incentive programs (see our blog below) we have often suggested that developers pursue markets with lucrative incentive programs. And rightly so. It used to be that a developer’s ability to lock incentive programs down quickly was a big determinant of success within the solar industry. (Think of the nation’s best solar markets and you will have found the largest incentive programs: California’s CSI, New Jersey’s PSEG and JPL loan program, Massachusetts SREC Clearinghouse, Hawaii and North Carolina’s 35% state tax credit to name a few. And there were small pockets of opportunity, like Gainesville Regional Utility, Indiana Power and Light and Northern Indiana Public Service Company’s Feed In Tariffs where developers were able to develop and finance projects with strong profits.)
To a large extent, it is still true that local and state solar incentives drive the U.S. solar industry, but things are evolving. Of course, insolation, net metering policy, and a variety of other factors are critical, but with reduced panel prices and incentive programs drying up, it seems to us that, in the future, the single best predictor of a promising project will no longer be the presence of an incentive award but high electricity offtake prices. If you expect the investment tax credit (ITC) will truly go away in 2016, markets with high electricity prices (which support strong PPA and lease prices) will be the real solar industry growth drivers. With this in mind, we suggest that developers and investors become familiar with markets like California, Hawaii, New York and other regions (like the East Coast) where electricity prices are highest.
Sol Systems’ SREC contracts for 3, 5, and 10 year strips remained the same this month thanks to relatively stable market conditions.
In Massachusetts, we continue to offer 3, 5, and 10-year annuity SREC contracts for SREC I projects. We are also offering a spot market brokerage service for projects that will be in SREC II, and in certain cases, Sol Systems is offering upfront financing for SRECs in Massachusetts.
Interested in learning more about how to finance projects in SREC states? Our webinar, Financing Projects in SREC States: DC, MA, MD, NJ has been posted to our website. To learn about our SREC services, you may also contact us at email@example.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 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 www.solsystemscompany.com.