New Law in Maryland will Add Approval and Financing Requirement for Solar PV Systems 2 MW or Larger
Governor O’Malley of Maryland signed Senate Bill 0887 into law on Thursday, May 16th 2013, effectively adding a new approval process and financing requirement for certain large PV solar systems. The Bill will require systems that are 2 MW or larger to file for approval to construct from the Public Service Commission (PSC), six months ahead of construction. This will apply to systems that are exempt from obtaining a Certificate of Public Convenience and Necessity (CPCN), the licensing requirement for the construction of a generating station in Maryland.
Solar PV systems that meet either of the following criteria do not have to file for a CPCN:
a) Does not exceed 70 MW; Produces onsite electricity; At least 80% of total electricity produced is consumed on-site
b) Does not exceed 25 MW; At least 20% of total electricity produced is consumed on-site
With the new law in place, systems that are 2 MW or larger, and do not meet either of these two criteria, must seek the newly required approval from the PSC. The system will have to file for approval six months prior to construction. A “deposit” of one percent of total installation costs is an application requirement, and will be held in escrow by the PSC. Once the project begins construction, the deposit will be refunded. Systems will have 18 months to begin construction following approval to construct.
If construction does not begin within 18 months, the deposit will be lost, and allocated to the Maryland Strategic Investment Fund. It seems that the system would then have to re-apply for PSC approval to construct, including submitting a new deposit, to be reconsidered. There may be exceptions to this rule, if an extension of the initial 18 months is granted by the PSC. The Bill states that “The Commission may grant the [extension] request based on factors the Commission considers compelling, including the occurrence of events outside the person’s control.” The Commission has not yet issued guidelines or comments on how or when it plans to implement the law, or whether the law will apply to existing projects that have not yet reached COD.
The new requirement will not add any additional overall cost to solar projects; however, it will shift a portion of the installation costs to an upfront payment in the form of the deposit. The below table shows the hypothetical deposit—one percent of installation costs—for a range of system sizes. Assumed installation costs are what Sol Systems is currently seeing in the Maryland solar market.
|
Project Size (MW) |
Install Cost ($/kW) |
Install Cost ($) |
Deposit ($) |
|
2 |
$2,250 |
$4.5 million |
$45,000 |
|
5 |
$2,000 |
$10 million |
$100,000 |
|
10 |
$1,750 |
$17.5 million |
$175,000 |
|
20 |
$1,750 |
$35 million |
$350,000 |
Sol Systems is continually monitoring the activity of the Maryland PSC and General Assembly for important updates relevant to solar financing and SREC markets. Please contact info@solsystemscompany.com with questions about the Maryland solar market.
About Sol Systems
Sol Systems is a boutique financial services firm that offers investor clients direct access to the renewable energy asset class and provides developers with sophisticated project financing solutions. Founded in 2008, Sol Systems focuses on meeting the most critical needs of the industry, including SREC monetization, capital placement, tax equity, and New Market Tax Credits. To date, the company has arranged financing for thousands of projects and facilitated hundreds of millions in investment on behalf of Fortune 100 companies, private equity, family offices and individuals.
For more information, please visit www.solsystemscompany.com.
May 2013 Solar Project Finance Statistics
Every month, Sol Systems distributes a newsletter, the Sol Systems Project Finance Journal, to our community of solar developers and
Sol Systems’ investor network is actively seeking California projects. Projects can be 10-20 MW in size and in need of tax equity, or mid-size commercial projects seeking take-out financing.
investors. The journal features solar finance statistics, trends, industry news, and SREC market information. We gather this information from our relationships and experience aggregating SRECs and financing commercial and utility scale solar projects.
We have included excerpts from our May Project Finance Journal below. If you have any questions about this information, wish to receive our monthly newsletter via email, or have a solar project in need of financing, please contact our team at finance@solsystemscompany.com. We would love to hear from you.
Project Finance Statistics
Characteristics of “Hot Projects”
Capacity: 300 KW – 3.6 MW
Average Capacity: 1,423 kW
Competitive all-in (asking) prices* currently include:
- <500 kW: $3.00-3.25/Watt
- 500 kW – 2 MW: $2.57-$3.00/Watt
- >2 MW:$2.00-$2.62/Watt
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Sol Systems’ Advisory Services Strengthen Developer RFP Applications, Increase Financing Success Rate
Through our Developer Advisory Services, Sol Systems works alongside its developer partners to strengthen applications for RFP’s and competitive bidding programs.
More than a dozen states and municipalities across the Unites States have turned to competitive bidding programs or feed-in tariff (FiT) programs to scale solar investments. For example, Rhode Island and the LA Department of Water and Power (LADWP) are both currently offering attractive FiT programs for qualifying solar projects. Along with tax credits and tax equity financing, solar programs that offer long-term contracts can be important in financing small-scale commercial solar energy projects. Private and public entities utilize RFPs to attract the most qualified developers to fulfill renewable energy allocations, and these are increasing becoming structured as competitive bidding processes rather than simply lottery programs. Several factors can determine which developers win RFPs, including overall strength of application and competitive pricing.
Through our Developer Advisory Services, Sol Systems works alongside its developer partners to strengthen applications for competitive bidding programs. Strong applications exhibit specific characteristics such as site control with the project host, a completed feasibility study, thorough project design details, a clear plan for the financing of the system, and demonstrated experience in completing previous solar projects. Our services identify financial and technical risks for solar projects, and our work with investors provides our team with a heightened understanding of project financeability. Most recently, Sol Systems worked with developers entering National Grid’s Rhode Island’s feed-in tariff program, which aims to add 40 MW of renewable energy capacity, 10 MW of which will be secured this year.
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Governor Patrick Challenges MA Solar Market with Increased Installed Capacity Goal by 2020
On May 1, 2013, Massachusetts Governor Deval Patrick announced that Massachusetts has surpassed his Administration’s original goal of installing 250 megawatts (MW) of solar energy by 2017 – four years early. The Administration used this opportunity to reveal a new goal of 1,600 MW of solar energy installations in Massachusetts by 2020.
Governor Patrick announces new goal of 1,600 MW of solar energy installations in Massachusetts by 2020.
With nearly 100 MW of solar power installed in 2012 alone, this accomplishment propelled Massachusetts to rank sixth last year in total capacity added, representing a jump up from their 12th place ranking in years 2010 and 2011, according to SEIA’s US Solar Market Insight Report. To help provide perspective on what this accomplishment means in Massachusetts, the 250 MW of solar power already installed is enough to power more than 37,000 homes for a year and is the equivalent of eliminating greenhouse gas emissions from nearly 26,000 cars a year. The new goal would generate enough power for an additional 200,000 homes for a year, and eliminate emissions from nearly 140,000 more cars.
With his statement, Governor Patrick confirms the commitment of Massachusetts to an effective and innovative solar market. This announcement comes in the midst of ongoing discussions revolving the 400 MW cap on the current solar carve-out program and the question of whether to expand the program or create a separate and distinct SREC-II program. As Governor Patrick noted in his speech, the proper solution will need to “ensure certainty for the financing world, affordability for customers, and stability for the market.”
Sol Systems will continue to track the developments of the post-400 MW policy discussions through our blog. Please contact info@solsystemscompany.com with any questions about the Massachusetts SREC market.
About Sol Systems
Sol Systems is a boutique financial services firm that offers investor clients direct access to the renewable energy asset class and provides developers with sophisticated project financing solutions. Founded in 2008, Sol Systems focuses on meeting the most critical needs of the industry, including SREC monetization, capital placement, tax equity, and New Market Tax Credits. To date, the company has arranged financing for thousands of projects and facilitated hundreds of millions in investment on behalf of Fortune 100 companies, private equity, family offices and individuals.
For more information, please visit www.solsystemscompany.com.
Renewable Portfolio Standards Face Stiff Opposition Across the Country
Renewable Portfolio Standards across the nation are under re-examination by state lawmakers, aiming to diminish or eliminate these 
programs. Despite benefits to local economies and environments, some politicians and lobbyists feel the programs are unimportant. To date, a number of proposals have reached State Senate and House floors throughout the country. Many lawmakers hold that RPS programs across the board create unduly costs for electricity consumers and taxpayers in order to support an industry that should be able to stand on its own. However, organizations funded by oil and gas interests like the American Legislative Exchange Council (ALEC), the Heartland Institute, and others have also played a strong role in fostering anti-renewables legislation across the country. Our company has been tracking the movement in many states and provides an overview of legislative progress thus far.
Delaware Procurement Program Results in Low SREC Prices for Successful Bidders
On May 1, 2013, the Delaware Procurement Program announced the final results for their 2013 program. The results show a significant decrease in the contracted price per SREC as compared to the 2012 Pilot Program’s pricing.
This year, the Delaware Public Service Commission approved a new structure for the program which resulted in a competitive bid process for all tiers. This differs from the structure of the 2012 Pilot Program, which included an administratively set price for projects under 250 kW and a competitive bid process for projects above that size. The set price was an attractive, guaranteed price of $260/SREC or $240/SREC for the first 10 years of the contract.
2013 Solar Industry Trends, Part 2: A Look at Geographical Markets
Dan Yonkin and Yuri Horwitz had the second part of their article “2013 Solar Industry Trends” published in the April issue of the Novogradac Journal of Tax Credits
2013 Solar Industry Trends, Part 2: A Look at Geographical Markets
Trends in the geography of solar development are determined by three primary drivers: solar insolation (the quantity of sunlight during the year), local electricity rates (the higher the rate the better) and local regulatory and incentive programs. Good projects are found where bountiful solar resources, costly electricity rates, and generous incentive programs overlap. Nevertheless, even if the first two factors are lacking, strong state and local incentive programs and regulations can singlehandedly determine favorable solar markets for financeable projects. In 2013, a number of new state and local programs, including programs in New York, Indiana, Georgia, Connecticut and Washington D.C., in combination with established markets, like California and Massachusetts, will drive solar development trends nationwide.
Sol Systems Co-founders to Travel to New York as Solar Shines on Wall Street
The Sunshine Backed Bonds Conference will be held May 3rd, 2013
On May 3rd, the Information Management Network will be hosting its first annual Sunshine Backed Bonds conference in New York. The event, aimed at introducing investors to solar as a viable asset class, will be located at the Union League Club in lower Manhattan. Sol Systems’ co-founders, George Ashton and Yuri Horwitz, will both be in attendance. George will be participating in a panel discussion entitled “Exploring the Role of Securitization in Renewable Energy Finance.” The conference will largely focus on large-scale financing opportunities available through securities, allowing typical developers to network with ABS investors seeking alternative financing ventures.
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Sol Systems & Dow Solar Announce Strategic Alliance to Offer Financing Solutions to DOW POWERHOUSE™ Customers
Sol Systems and Dow Solar, a business unit within The Dow Chemical Company, today announced a strategic alliance to provide turnkey solar renewable energy credit (SREC) solutions for DOW POWERHOUSE™ Solar Shingles customers. Dow Solar’s customers can now monetize their SRECs through a streamlined process designed by Sol Systems to improve the financial return on their solar investment.
Sol Systems will provide Dow Solar customers with SREC financing solutions in Washington D.C., Maryland, and Massachusetts.
“We are pleased to offer this additional service for our POWERHOUSE customers,” said Yochai Gafni, Dow Solar’s Market Development Director. “POWERHOUSE is a smart home investment, but managing all of the available incentives can be cumbersome for homeowners. The alliance with Sol Systems will enable our POWERHOUSE Authorized Dealers to act as a one-stop shop for solar roofing and SREC management, which will differentiate them in their markets.”
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Vermont’s 2013 SPEED Program Proposal Deadline Quickly Approaches
The first round of the Vermont Sustainably Priced Energy Enterprise Development (SPEED) program in its new competitive form will close on May 1st of this year. In March, the Vermont Public Service Board altered the structure of the standard offer program in Vermont, reducing the avoided-cost ceiling rate for solar projects and changing the mechanism used to determine which projects receive the offers. The ceiling rate for solar PV systems dropped to $0.257/kWh down from $0.271/kWh. This new rate is based upon a renewed analysis of the costs of solar production. Some fear that this price is based too extensively on the expected decrease in solar costs, as efficiency in the industry grows; however, this rate remains strong in comparison to other states. All avoided-costs for other energy sources have not been altered.