SOURCE: The Sol Project Finance Journal, October 2016

20 Oct 2016


SOURCE is a monthly solar project finance journal that our 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 industry resources.

Below, we have included excerpts from the Octoberr 2016 edition. To receive future Journals, please subscribe or email


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




Massachusetts – The commercial solar market is at a standstill for all but a small number of projects that will be eligible for a May 2017 SREC II extension. Potential host customers continue to issue requests for proposals (RFPs), but without firm program guidelines in place for a successor program, submitting accurate, honest pricing for these RFPs remains impossible. While the industry awaits the new program – which is set to go into effect in summer 2017 – new commercial development has come to a halt, and will stay that way if no extension to SREC II is granted. Meanwhile, the Massachusetts Department of Energy Resources (DOER) has convened weekly stakeholder meetings to work through many remaining questions about their straw proposals. Expect for the new program to be very rooftop heavy; strict land restrictions have been proposed that will limit most greenfield development.

We’ve always considered the Northeast market to be fundamentally different. It is deregulated, electricity is expensive, the utilities are not nearly as powerful as they are in the Midwest or South, and land is relatively more challenging to secure and purchase (because of restrictions and costs). As a result, we expect the Northeast to increasingly move toward commercial and residential distributed generation and away from utility-scale projects.

Virginia – After installing only 10MW in 2015, Virginia is on its way to install over 1GW of solar capacity over the next five years. In fact, SEIA estimates that the installed solar capacity in Virginia has grown by 72% over the last year. Solar legislation has had limited success at the state house year after year. So, what gives? The reasons for this dramatic uptick are multi-fold: Dominion has pledged 400MW of solar by 2020, for one, and corporates continue to enter into creative financing arrangements in the Commonwealth. With renewable pledges from the McAuliffe administration and pending changes to Dominion Power’s Renewable Generation Tariff, expect this growth to continue. However, given PPA legality issues – except for a very limited pilot program – most solar development in Virginia will remain utility-scale. The state’s market profile is in stark contrast to Massachusetts for all of the reasons mentioned above. In other news, MDV-SEIA and the Solar Research Institute published the results from its community solar listening sessions and request for information (RFI) earlier this month. Will we see community solar legislation in Virginia in 2017?

Texas – The Lone Star state’s unique regulatory environment – as well as its ample transmission infrastructure – offer options for traditional PPA projects, utility offtake, and hedged corporate offtake contracts. Land and labor costs are affordable, solar irradiation is high, and permitting is favorable. However, given high penetration and the possibility of congestion at certain hubs, a project’s suitability for solar is no longer enough. A truly optimal project must be certain of the long-term transmission and distribution outlook, the local tax regime, and interconnection costs to be compete. Still, expect to see a lot of capacity with slim margins coming out of the Lone Star state. According to SEIA, Texas is expected to install more than 4.6GW of solar electric capacity over the next five years, second only to California during that time span.


  • 2016 saw two major shifts in the tax equity market: the ITC extension, and the IRS ruling regarding 50(d) income. The ITC extension means more projects are fighting for scarcer tax appetite, which is also exacerbated by the extension of bonus depreciation. The 50(d) ruling provided much-needed clarity for investors and developers utilizing the lease pass-through structure, though the verdict does limit the amount of depreciation an investor can absorb compared to previous tax interpretation. Developers may also find terms tightening up in the coming months as a result of these changes. As the market continue to mature, we expect (and hope) to see a more apples-to-apples understanding of tax equity pricing across the market in 2017.
  • Pricing is quickly heading under $1/Watt for utility-scale projects. Despite strong economics for onsite behind the meter projects, a number of commercial customers are increasingly expressing their preference to scale with offsite solar. Much of this can be attributed to aggressive corporate and institution goals targets to procure a certain percentage of renewables by a certain date.
  • Our team is starting to see more sub-investment grade credit opportunities. We predict for more of these projects to emerge as many lower hanging fruit, investment grade counterparties have been picked over.
  • Applications for the latest enrollment of Rhode Island’s RE Growth program are due on October 21. Rhode Island – and its very pro-solar Governor Raimondo – proved its commitment to solar energy after passing a package of renewable energy bills earlier this summer.
  • Legislation to “pull forward” New Jersey’s solar carve-out to 4.1% by 2021 passed committee earlier this month. If it passes through the General Assembly, will Governor Christie sign it? More importantly, is this bill enough to mitigate future oversupply? On a related note, May, 31 2017 is the deadline for Grid Tied Subsection Q projects to be delivered.
  • The buzz around storage is starting to reach host customers, who are more frequently asking RFP respondents to include both a solar only option, and an option with a storage adder. While the buzz exists, when will storage be a viable solution across all markets? Storage is being discussed more in New York, and given the Massachusetts Department of Energy Resources’ recent straw proposal, MA is piquing the interest of storage developers. In places like California and Hawaii, storage is becoming a critical component to customer facing solutions and even utility-scale projects.
  • It’s that time again. As the industry rushes to meet Q4 closing deadlines, developers and financiers are also starting to line up early stage 2017 pipeline. We see a far expanded solar market in 2017, both in terms of size and geographic diversity. We expect big news out of the South in the coming years.
  • Maryland projects are harder and harder to pencil as SREC prices continue to fall, and no other incentive regime exists for non-residential projects. The industry has its eyes on a veto override in January, which could provide short-term price support. Unfortunately, the expected boost may still not get solar projects to the level of economic viability that developers and customers require.
  • Time of use (TOU) rates are very much top of mind in California, where rate cases are pending for the investor owned utilities (IOUs) that would push peak periods later in the day. San Diego Gas & Electric – also the first IOU to hit its net energy metering (NEM) 1.0 cap –is the farthest along. Meanwhile, California is already beginning to discuss NEM 3.0, and advocates are getting up to speed on solar + storage analytics, which will be important to future NEM frameworks in the state.


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.

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Sara Rafalson

Sara Rafalson