The Elephant in the Room

12 May 2016

Without a doubt, the industry has gone through some changes in the last few months.

Without a doubt, the industry has gone through some changes in the last few months.

Without a doubt, the solar industry has been rocked these last few months. We’ve shied away from discussing the headlines, but it’s time we address the effects on the marketplace.

  1. Developers are adjusting return expectations. Projects have re-entered the marketplace, and as such, terms must be renegotiated. Developers must readjust their expectations for what their projects are worth. More likely than not, they were being overvalued.
  2. Focus on profitability. For a long time, vertically capable solar developers, especially those that are publicly traded, have been incentivized to focus on their valuation and market cap because that’s what shareholders wanted to see. The more pipeline and growth they could demonstrate, the better. This is already starting to shift (and has been in the last 6 months to a year or so), and investors, project sellers, and even shareholders are realizing the pipeline alone cannot be the sole criterion for judging a company’s value or brand. In other words, solar developers are starting to do focusing on what the solar manufacturers already know: profitability matters.
  3. What’s your contingency plan? No doubt, there will be greater emphasis on the “what if” scenarios. If an entity cannot deliver on Asset Management, can a back-up operator easily be put in its place?
  4. Diversification of counterparty risk. Investors, do you rely on one party for your every portion of your solar investment needs: module procurement, development, EPC, O&M, asset management, etc.? We might see investors diversify their risk, and potentially become more involved on the financial reporting and technical aspects of the solar value chain.

We hate the cliché “the future of solar is bright,” but it’s true. With one million solar installs on the books in the U.S. and another one million projected before the end of the decade, we’re looking forward to riding the solar coaster right on through.

This is an excerpt from the May 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


Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for over 400MW 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, project acquisition 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, visit

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Sara Rafalson

Sara Rafalson