Hungry, Hungry YieldCos: Will They Find Project Pipeline to Satisfy their Appetites?

16 Sep 2014

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

YieldCos remain one of the solar industry’s biggest buzz words, as they should be; they offer a very competitive cost of capital. However, it’s important to remember that all that glitters isn’t gold.

YieldCos are hungry for perfect solar project pipeline. So is everyone else.

YieldCos are hungry for perfect solar project pipeline. So is everyone else.

By definition, YieldCos need a consistent stream of financeable deals to feed the beast. YieldCos are hungry for project pipeline — but not just any pipeline. As of right now, only the most clear cut, “perfect” projects are being placed into YieldCos — generally, multi-megawatt ground mount projects with an investment-grade offtaker, likely a utility or publicly-rated corporate entity. YieldCos predilection for the safest solar investments reminds us of the old saying: “banks lend money to those who need it least.”

Given that the WalMart’s and other big box and corporate hosts of the world have already been picked over, we see YieldCos facing challenges if they attempt to take on distributed generation (DG) projects on host sites with unconventional credit, such as churches, schools, and non-profits; in fact, these hosts may be impossible for these very credit-conscious, conservative YieldCos.  They may also eventually have to compromise on size and will certainly face challenges taking on some of the “hairier” one-off rooftop DG deals that more flexible financiers have accepted. For instance, Sol Systems has executed on solar projects ranging from a couple hundred kilowatts with nonprofits to 20+MW investment-grade portfolios, and everything in-between.

While YieldCos are an effective means to cost-efficiently finance solar projects, they are hungry for more homogeneity than exists in today’s solar deals.  Their financing vehicle requires a constant stream of standardized projects, and the solar industry has yet to achieve this standardization at scale.

The YieldCos that will be most successful are the ones that can efficiently execute on tax equity transactions – and those who can feed the machine with their own project pipeline. Still, what will happen when that pipeline dries up or becomes inconsistent remains to be seen.

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

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Sara Rafalson

Sara Rafalson