Since 2012, The Sol SOURCE has been providing readers like you with real-life trends in the world of solar energy finance, development, policy, and customer trends. As we close up another year and another 12 issues of the Sol SOURCE, we reflect on our most-read articles of 2016.
1. The Rise and Stall of the Commercial Market
In June, around the time that the industry reached one million installations, we wrote about a sector of the market that has long fallen behind the rest: commercial solar. Inefficiencies have long plagued the market, including high transaction costs associated with relatively smaller project opportunities, and a lack of investor appetite. Why close a one-off 500kW project when an investor can close a one-off 5MW with higher returns in a similar time period?
All hope is not lost in this market sector. A recent Greentech Media article pointed to an NREL study that found half of rooftop solar’s 1,118GW potential comes from small buildings. And, this quarter’s Solar Market Insight report showed Q3 as the second-largest quarter ever for this “middle” sector of the market, non-residential PV, with offsite solar products such as virtual net metering, community solar, and wholesale projects leading the way. With corporations, universities, and other institutions “upping” their renewable energy targets, we are optimistic that non-residential growth will continue.
2. Immediate Effects of the ITC Extension
Christmas came early for the solar industry last year with the extension of the investment tax credit. While utility-scale projects originally racing toward a December 31, 2016 placed in service deadline caused record growth in PV at the latter end of this year, we have noticed that the urgency to close projects in other sectors has diminished slightly since the extension, as some buyers are patiently awaiting further cost declines.
Regardless, the time to lock in projects is now. With solar energy competing against the low electricity prices, there is no time like the present to lock in a low-cost PPA.
When we wrote this ITC extension article in February, we also foresaw declines SREC markets as states became saturated with more solar build. Indeed, SREC market declines happened much faster than anticipated, with Maryland now nearing Pennsylvania levels. New Jersey’s SREC value decline is also imminent. Will state-level policy prevent a slowdown in these two markets? We are watching for a veto override in Maryland this January, and the pull forward bill in New Jersey, though both markets will need longer term legislative solutions to prevent market slowdowns.
3. Is Community Solar Too Complicated for Tax Equity Investors?
Community solar programs continued to grow in popularity throughout 2016. Shared Renewable HQ estimates that 14 states and D.C. now have community solar programs. Just earlier this month, Illinois passed legislation that will create a new community solar program; rulemaking and implementation will take place throughout 2017. In our region, Virginia is also looking at community solar legislation for next year, Maryland will review its “final” tariffs next week, and D.C. “fixed” its credit rate for residential subscribers this year.
Despite the growth of community solar, not all programs are created equal. Some can be challenging for tax equity investors if not structured with financiers in mind. Because of the relatively small sizes of individual deals, as well as a trend that requires a certain (often high) number of residential and low income subscribers, portfolios of community solar deals may have difficulty attractive tax equity investors. Sol Systems has seen tax equity respond positively to programs where individual project sizes are in the multi-megawatt range and offtaker credit can be primarily comprised of investment-grade or similar subscribers. Similarly, community solar programs are not ideal for corporates given that very few programs today allow for multi-megawatt subscriptions.
Community solar will continue to grow in popularity for residential and low-income subscribers who are unable to solar on their roofs – but without careful structuring or efficient underwriting, challenging for tax equity and corporates, who prefer fewer subscriptions and larger projects that are easier to transact on.
That’s a wrap for 2016. For fun, take a look at our top trends of 2015. My, how much changes in a year.
This is an excerpt from the December 2016 edition of The SOL SOURCE, a monthly electronic newsletter analyzing the latest trends in renewable energy based on our unique position in the solar financing space. To view the full Journal, please subscribe or e-mail firstname.lastname@example.org.
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Sol Systems, a national solar finance and development firm, delivers sophisticated, customized services for institutional, corporate, and municipal customers. Sol is employee-owned, and has been profitable since inception in 2008. Sol is backed by Sempra Energy, a $25+ billion energy company.
Over the last eight years, Sol Systems has delivered more than 500 MW of solar projects for Fortune 100 companies, municipalities, universities, churches, and small businesses. Sol now manages over $650 million in solar energy assets for utilities, banks, and Fortune 500 companies.
Inc. 5000 recognized Sol Systems in its annual list of the nation’s fastest-growing private companies for four consecutive years. For more information, please visit www.solsystems.com.