The following is an excerpt from our Solar 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.
The middle market, particularly projects in the 50kW – 200kW range, pose challenges to all financiers, including us. So, what do we do when developer partners call us to finance projects in this range, or any other deals under 1MW? It has been our experience that we can solve their financing gap with two strategies:
a) Portfolio-ize (If you are an avid Solar Project Finance Journal reader, we hope that you know this by now); and/or
b) Demonstrate pipeline! Investors are more likely to be flexible on size when it is understood that there is a steady stream of pipeline behind a given deal, and if repeat business between both parties is a sure bet.
While solar deals 200kW – <1MW are feasible, there are some states where these are more financeable than others. Hawaii is one such example. If you’re developing a 1MW+ project in the Aloha State, interconnection is challenging if not impossible. Smaller project sizes have a much better chance for success, especially if the project is located on an unsaturated feeder. Plus, with a generous state tax credit and high electricity rates, the returns are high enough to warrant the transaction costs associated with a smaller deal. Sol Systems Tip: If you are looking at smaller Hawaii deals: make sure to conduct an upfront credit review before you pursue a host in earnest –or consult with Sol Systems or another financing partner early on.
Washington, D.C. is another place where smaller commercial deals pencil. This is largely due to an aggressive renewable portfolio standard (RPS) has created a robust market for solar renewable energy credits (SREC). The smallest deal we’ve done in D.C. is 227kW, and we would be willing to go even smaller.
Massachusetts is another state that by program design will have plenty of financeable sub-1MW deals. This statement became even more real on August 26th when the Massachusetts Department of Energy Resources (DOER) announced that its 2016 Managed Growth Capacity block allocates for zero 650kW+ solar projects (read our blog Interested in Developing a 650kW+ Solar Project in Massachusetts? Think Again for more information). In other words, Massachusetts developers must transition away from larger ground mount projects toward landfills, brownfields, and yes, rooftops. The Massachusetts solar market is booming and is ripe with opportunity in the middle market.
In sum, middle market challenges are not insurmountable, particularly if you can work with a financing partner you trust to help you bring your solar projects, no matter the size, to the finish line.
About Sol Systems
Sol Systems is a renewable energy finance firm that provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. Founded in 2008, Sol Systems focuses on meeting the industry’s most critical solar financing needs, including tax structured investments, capital placement, debt financing, and SREC portfolio management. To date, the company has facilitated financing for thousands of distributed generation solar projects and hundreds of millions in investment on behalf of Fortune 100 corporations, utilities, banks, family offices, and individuals. For more information, please visit www.solsystemscompany.com.