November Solar Project Finance Statistics

Every month, Sol Systems distributes a newsletter, the SolMarket Project Finance Journal, to our community of solar developers and investors. The journal features solar finance statistics, trends, industry news, and information about SREC markets that we garner from our relationships and experience aggregating SRECs and financing commercial and utility scale solar projects via SolMarket.

We have included excerpts from our November SolMarket 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 for which you are seeking financing, please contact the SolMarket team at info@solmarket.com. We would love to hear from you.

Project Finance Statistics

Characteristics of “Hot Projects” on SolMarket

Capacity: 149 kW – 5,000 kW

Average capacity: 1,586 kW

Average (all-in) costs:  We’ve seen a continued fall in EPC costs.  Where costs used to be at $2.75-$3.00, we are now seeing costs of $2.25 to $2.50 – or even as low as $2.10. These decreases will be increasingly necessary as local incentive programs and SREC prices continue to fall.

Locations: DE, IN, MA, NC, NJ, NY, RI

PPA rates:

DE:  9.9 cents/ kWh (20 year term; 1.365% escalator)

MA: 8.9 cents/ kWh (20 year term; 1.375% escalator)

FIT rates:

FL: 29 cents/ kWh (20 year term; no escalator)

NY: Feed-in tariff 22 cents/ kWh (20-year term, no escalator)

RI: Feed-in tariff 32.4 cents/ kWh (15 year term; no escalator)

Characteristics of Recently Funded Projects

Capacity: 98 kW – 12,000 kW
Average capacity:  1149 kW
Locations:  AZ, CA, CO, DE, GA, MD, MA, NJ, NC, OH, PA, TN, TX

Trends and Observations

What Makes a Good Solar Portfolio?

Major advances in the U.S. solar industry came when early developers began aggregating projects into portfolios for investors. Specifically, some of the more successful developers identified big box retailers with multiple locations that would “go solar,” and they would group those projects together for investors. This made investing in solar more efficient because investors only needed to underwrite a single host. Because of due diligence expenses, many project investors have historically stated that they are only interested in individual projects over 1 MW, although with homogeneous project portfolios, gross profits are typically sufficient to justify the expenses – even if the individual projects within the portfolio are 500 kW or smaller.  Unfortunately, many multi-location, credit-worthy hosts, in strong solar markets (who want solar) have been identified; so, developers have been left to seek out smaller, independent hosts, which is more time consuming for the developer and less appealing for investors.

In response, we have seen some developers attempt to group heterogeneous projects together into portfolios. While these portfolios are generally larger than 1 MW, they are comprised of different hosts and locations, and they have very different cost structures and IRRs.  Because the projects are so unique, investors must perform due diligence on all of them independently, and thus they face the same large expenses as though the projects were independent – making the portfolio financially unattractive.

Here at Sol Systems, we are working on solutions to address this.  If you have portfolios of projects that are in need of financing, we encourage you to set up a call with our team to discuss further.  Our solutions aim to reduce diligence and transaction costs for all parties involved, thereby making access to capital more competitive.  Particularly, Sol Systems is currently seeking projects that have applied to or have been awarded LIPA FIT contracts.  If you have received an award or are on the waitlist, please let us know.  We would love to talk to you.

How long does it take to go from identifying an interested investor to financial close?

Even after achieving major project development milestones such as finding an investor and executing a term sheet with price and basic commercial terms, it generally takes longer than everyone expects to achieve financial close.  The fastest timelines can be as short as 2-4 weeks, but more often, it takes several months – or longer to officially close.  Long closing timelines can be attributed to a variety of reasons; the most significant is allowing the attorneys to review and amend all necessary documents.  However, we have also seen delays due to clauses in a lease or PPA agreement that must be amended or renegotiated, which can result in a new ask in terms of pricing or fee.

SREC Roundup

SREC Price Increases

Sol Systems did not increase pricing for any fixed price strips this month.

SREC Price Decreases

Sol Systems decreased pricing for 3 and 5-year strips in Maryland due to limited bids for spot market transactions and long term strips, as well as an expected oversupply for the remainder of 2012. Sol Systems also decreased pricing for long term strips in Pennsylvania, as well as our 10-year in Massachusetts, due to an oversupply of SRECs.

SREC Markets with flat prices

Thanks to relatively stable market conditions, SREC pricing remained unchanged in November in both Ohio and Washington DC.

About Sol Systems

Sol Systems is a solar finance firm and a leader in financial innovation in the renewable energy industry. Since its inception in 2008, Sol Systems has partnered with 350 solarinstallers and developers to bring over 3,000 solar projects from conception to completion by offering innovative financing solutions for residential, commercial, and utility-scale projects.

Sol Systems’ financing programs catalyze investments for a broad set of solar projects by simplifying their origination, diligence, and financing processes. Developers seeking financing for solar projects can access over $2.5 billion in capital through the Sol Systems investor network.

In addition to providing financing, Sol Systems also offers project due diligence, deal structuring, and asset management services – all designed to reduce overhead and transaction costs and quicken project development timelines.

For more information, please visit www.solsystemscompany.com.

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