Increasingly, we are seeing more RFPs for MUSH projects. As developers out there certainly know, RFPs can be tough and highly competitive. On the one hand, a developer may bid too high and lose. On the other hand, RFPs are often a race to the bottom. A developer may bid in low, win, but never actually build the project because their bids are too low for the project to pencil with a financier (we estimate that there are dozens of megawatts held-up in New York at this time for this very reason). The key to winning on price is knowing where that middle ground is. (That is why we encourage developers to check-in with us on pricing before submitting an RFP. We will also bid in and offer our reputation, financial security, experience and other tools as necessary for trusted partners.)
But, even then, submitting materials into an RFP is a time consuming effort, and a dangerous one if they are a developer’s primary means of securing business. For one, time from RFP issuance to award to COD runs so long that often the market looks completely different when it’s all said and done, and then the developer can get caught footing the bill.
RFPs can be especially challenging for local and regional developers. Chances are that if you Google “solar RFPs” and find one, another company – perhaps one with a lower cost of capital and cheaper build costs – has already found it as well. In these cases, a local or regional developer should read the RFP carefully to understand what the host values most; some may prefer the race to the bottom pricing, while others may value “buying local” and may prefer to work with a local player over a national giant. In these race to the bottom RFPs, having a differentiator – whatever that may be for your company – is key. For example, national players often opt-out of bidding into projects with unconventional credit profiles, or where volume is achieved from a larger number of smaller sites. Another advantage local players have is if a project is dependent on renewable energy credits (RECs).
Lastly, we are seeing some hosts issue RFPs to check industry viability without a clear commitment to execute in the near term. If you carefully examine the introductory text, you may sometimes find key phrases that sound like, “Sure, this whole solar thing seems cool. Let’s issue an RFP and see how much it would cost.” We are glad that, more and more, potential hosts are testing the solar waters. But, before you put too much time into a given proposal, read carefully. Recently, we saw an RFP with copied and pasted language from another public opportunity, except that the host neglected to update the document with its own name on some pages, and also described the project as in the PJM interconnection – but it was located in the Deep South! If issuers are not detail-oriented enough to proofread their own work, we recommend being mindful of your company’s time before pursuing such opportunities.
This is an excerpt from our October edition of SOURCE: the Sol 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 firstname.lastname@example.org.
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Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 333MW 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.