Posts Tagged ‘Solar finance’

Sara Rafalson

South Carolina Solar is Rising

South Carolina solar

The South Carolina solar market may grow to 300 MW. Sol Systems is actively seeking to invest in commercial solar projects in the Palmetto State.

After two years of negotiations, the South Carolina House of Representatives voted unanimously on new legislation to promote solar inthe Palmetto State. As a result of the South Carolina Distributed Energy Resource Act (S.B. 1189), Sol Systems expects the South Carolina solar market to expand from a mere 8 MW to 300 MW or more by 2021. Here’s how.

South Carolina’s New Solar Program

Under S.B. 1189, larger utilities (those who serve 100,000+ customers – effectively SCE&G and Duke Power) must obtain 2% of their average 5-year peak power demand from solar energy sources. Of this 2%, 1% must be comprised of 1-10 MW solar projects; the other 1% must be comprised of solar projects under 1 MW, 25% of which must be 20 kW or smaller. Here’s the breakdown of that 2%. Read the rest of this entry »

Aaditya Saple

Massachusetts SREC-I Auction Throws a Curveball to the Markets: Here’s how this will impact SREC-II projects.

Massachusetts proposes new solar policy...again. The new proposal is a compromise to address net metering and the SREC market.

The Massachusetts SREC Clearinghouse did not clear. Here’s what comes next.

Round II of the Massachusetts SREC-I clearinghouse auction failed to clear yesterday, July 30. A third round will be held on Friday, August 1st, 2014. As we described earlier in an explanation of the Massachusetts SREC-I auction, This annual auction, which is based on the volume demanded, allows SREC sellers the opportunity to auction their SRECs at the end of each summer for a fixed price of $300/SREC, minus an auction fee (most customers will net $285)

Implications of the Massachusetts SREC-I Clearinghouse Round II

An Auction failing to clear Round II automatically increases the Renewable Portfolio Standard (RPS) obligation by 142,504 to 1,054,933 SRECs for compliance year (CY) 2015. An increase in demand generally pushes prices higher, which is what Sol Systems’ SREC trading team saw yesterday. Massachusetts SRECs with a 2015 vintage stamp increased $35 per SREC to $320 from $285. Since a partial clearance of the Auction is allowed in Round III, compliance entities and SREC investors are likely to bank some SRECs in expectance of this increase in CY 2015 RPS obligation. All unsold auction SRECs will be returned to the owners (with extended life of three years) in proportion to the clearance volume in Round III and will have to be sold on the spot market.

Read the rest of this entry »

Aaditya Saple

Massachusetts DOER SREC Clearinghouse Auction is Underway, Here’s What You Need to Know.

The Massachusetts solar renewable energy credit (SREC) market is undoubtedly the most complex incentive program among its peers. Among its complexities is the annual clearinghouse auction mechanism, which allows SREC sellers the opportunity to auction their SRECs at the end of each summer for a fixed price of $300/SREC, minus any auction and aggregation fees (most customers will net around $271). Sol Systems can provide you with fixed forward pricing. Having a fixed forward price eliminates the need to enter the auction and deal with reminted SRECs. Right now, our 4-year pricing for SREC-I is $270. We offer 3-year, 4-year, 5-year and 10-year pricing for SREC-I and SREC-II. Sol Systems takes care of customer accounts throughout this process, thus allowing our customers to pursue their core business. For more information, email us today at info@solsystemscompany.com.

The first round of the SREC clearinghouse auction took place today and did not clear; 141,504 SRECs were deposited. Anxious SREC sellers are hopeful all SRECs will be cleared by the end of round two, which is to be held tomorrow, 30th July, 2014. It makes sense for auctions to enter Round II as an increase in the shelf life of SRECs is beneficial for both, compliance entities and SREC owners.

MA SREC Auction Mechanism

MA SREC Auction Mechanism

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Thomas Kinrade

A Sixth YieldCo Goes Public as the Asset Class Has its First Anniversary

Today TerraForm Power Inc. (TERP), a spinoff from SunEdison (SUNE), had its IPO making it the sixth yield corporation or “yieldco” to go public since NRG Yield (NYLD) became the first yieldco one year ago.  High dividend yields and rising stock prices have encouraged a wealth of investment in these new companies. However, investors should be aware of the differences that exist between yieldcos and longer term risks associated with the application of this new corporate structure to the power generation industry.

Read the rest of this entry »

William Graves

Will the Eagle Point Solar Decision Open Up the Midwest Solar Market?

Eagle Point Solar’s victory is a big win for rooftop solar in Iowa and opens up the state to further solar investment.

On July 11, 2014, the Iowa Supreme Court ruled in favor of Eagle Point Solar (EPS), a Dubuque, IA based solar installer, affirming that the company was not acting as a utility when it arranged a third-party power purchase agreement (PPA) with the city of Dubuque. The ruling caps a two year battle between rooftop solar and the two leading utilities in the state, MidAmerican Energy and Alliant Energy. With this decision, the Iowa court system clarified the status of behind the meter solar installations, and opened up the state to further solar investment.

The history of the case goes back to 2012 when MidAmerican and Alliant challenged Eagle Point Solar, stating that the firm’s arrangement with the city violated the utilities’ exclusive right to sell electricity within a given area or region.  The Iowa Utilities Board (IUB) sided with the utilities, issuing a Declarative Ruling which defined EPS as a public utility, and therefore unable to sell electricity in Alliant’s state-granted exclusive monopoly territory. Eagle Point Solar appealed the decision and it was subsequently reversed in 2013 by the Polk County District Court. Read the rest of this entry »

Colin Murchie

Beyond the Meter: Remote Solar on the Horizon?

A Less-Than-Totally-Addressable Market

Commercial solar can be an extremely difficult, uphill sell. Not only must a salesperson overcome traditional customer barriers of ignorance, indifference, or fear, with a product that can seem formidably technical, but they have to do so in what is to date an inordinately small addressable market. Consider a Venn diagram, but one where you must intersect a highly creditworthy client, with a large-enough-to-bother roof, such roof being fairly new (but not covered with mechanical equipment), with some spare structural capacity; generally, commercial instead of industrial electricity rates, low shading, a PPA-friendly state, and one of the markets that makes sense for solar this quarter. In considering all of this, you’ve no longer got a Venn diagram; you’ve got something else entirely.

Remote solar could allow for greater utilization of ideal project sites and a larger set of potential customers reaping the benefits.

It’s part of the reason solar developers like to press their nose against the glass as their plane comes in over the big flat roofs on the warehouses next to the airport and dream of what might be.

Of course we should pursue such low hanging fruit where we can find it – and keep in mind that some finance providers are more innovative on host credit than others.

However, there are only so many big retailers and Fortune 500 distribution centers out there. Great credit often comes with truly challenging host sites and vice versa.  Further, we’ve seen other issues with over-concentration.  In certain substations serving Southern New Jersey office parks, we’ve seen interconnection study results that look like all Three Stooges trying to fit through a door at the same time.

Read the rest of this entry »

Erica Nangeroni

Sol Systems to Speak at Intersolar North America in San Francisco

intersolar picSeveral members of the Sol Systems team will attend the Intersolar North America conference in San Francisco next week from July 7-9. Sol Systems’ CFO, George Ashton will share Sol Systems’ experiences financing commercial solar projects on the panel entitled The DG Future – the ITC, Cost-cutting & Positioning Yourself for Ever Changing Incentive Regimes. To date, Sol Systems has facilitated financing for approximately 100 MW of solar projects throughout the United States and has another 84 MW at term sheet. Sol Systems finances DG solar projects through a combination of its tax structured investments, construction and term debt offerings, project purchases, and solar renewable energy credit (SREC) solutions.

Several members of the Sol Systems team will be in San Francisco to meet with developer clients to discuss their solar financing needs. To meet with Sol Systems in San Francisco, please contact our team at info@solsystemscompany.com.

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Erica Nangeroni

Sol Systems to Speak at PV America Conference in Boston

Sol Systems will speak at the PV America 2014 Conference in Boston.

Sol Systems will speak at the PV America 2014 Conference in Boston.

The Sol Systems team will attend the PV America 2014 Conference in Boston, MA next week from June 23-25. Sol Systems’ CEO, Yuri Horwitz is the conference’s finance chair this year and will speak on a panel entitled The Future of Solar Financing & Challenges Ahead at 1:30 PM in room 153. Sol Systems will also host a cocktail reception with Hannon Armstrong, our partner on a $100 million solar debt fund that addresses financing challenges in the commercial and industrial (C&I) solar sector.

Several members of the Sol Systems team will be in Boston meeting with developer and investor clients. To meet with Sol Systems in Boston, please contact our team at info@solsystemscompany.com. Read the rest of this entry »

Erica Nangeroni

Ohio Becomes the First State to Freeze its Renewable Portfolio Standard

The passage of Senate Bill 310 (SB310) has frozen Ohio’s Renewable Portfolio Standard until 2017, making Ohio the first state to roll back renewable energy and efficiency measures.

The passage of Senate Bill 310 (SB310) has frozen Ohio’s Renewable Portfolio Standard until 2017, making Ohio the first state to roll back renewable energy and efficiency measures.

With the signing of Senate Bill 310 (SB 310), Ohio has become the first state to “freeze” its Renewable Portfolio Standard (RPS). Ohio Governor John Kasich signed the bill into law on June 13th, effectively halting the state’s mandates for efficiency and renewables until 2017. Come 2017, these mandates will pick up where they left off when the freeze occurred, as opposed to the annual increases in renewable energy and efficiency measures that would have occurred with the RPS.

SB310 will significantly harm Ohio’s solar industry by driving SREC prices down in both the Buckeye state as well as the surrounding states such as Kentucky, Pennsylvania, West Virginia, Indiana, and Michigan that sell their SRECs into Ohio. The bill faced tremendous opposition from health and environmental coalitions, as well as a group of 70 businesses and organizations, including Honda and Whirlpool, who urged Governor Kasich not to sign the bill.

Read the rest of this entry »

Natacha Kiler

2014 U.S. Solar Projects Face Greatest Hardships in the Chinese Trade Case

Here's how new tariffs on Chinese module manufacturers will affect solar project finance deals in 2014.

Here’s how new tariffs on Chinese module manufacturers will affect solar project finance deals in 2014.

In the first week of June, the U.S. Department of Commerce (DoC) announced its decision to levy tariffs ranging from 18.5-35% against Chinese solar manufacturers such as ReneSola, Suntech, Trina Solar, and Yingli as countervailing measures against Chinese subsidies for solar products. The DoC enacted the duty after deeming that such subsidies give Chinese solar manufacturers an undue advantage over competing domestic firms (such as SolarWorld).

From our team’s perspective, the trade tariff is most taxing for U.S. developers and investors who are trying to finance solar projects in Q3 and Q4 of 2014. Earlier this year, solar panels could be procured at a cost of $0.60-0.70/Watt, but now, panel prices are more likely to be procured at a cost of $0.70-0.80/Watt. The tariff falls hardest on (1) those who have projects with thin profit margins, and (2) those who have previously negotiated prices for Chinese panels, but who have not actually purchased the equipment. In addition to the cost impact, many project developers and EPC’s are now without a secure supply of modules and must now actively shop for them. This can wreak potential havoc for delivery risk with respect to project schedules. Read the rest of this entry »

Sara Rafalson

Will the Panel Price Bump be a Q3 Solar Deal Breaker?

Solar panel prices are trending up.

Solar panel prices are trending up.

Panel prices are trending up. Depending on module make, model, and the order size, the increase looks to be somewhere to the tune of 6-8 cents per watt, or a cost of 70-75 cents per watt for projects that will be built in Q3 of 2014.

The price bump may be attributed to the U.S.-China trade dispute, which has yet to be resolved. The continued delay in the international trade tariff decision has created urgency for panel suppliers to move modules, leading to material price increases. The price bump may also be the result of some module suppliers using the dispute to raise prices. If module tariffs related to the trade dispute do indeed move forward, the solar panel price surge could kill many solar deals.  Although the module price bump is impacting near-term solar projects, we see it as a temporary spike. Read the rest of this entry »

Natacha Kiler

May 2014 Solar Project Finance Journal

Our monthly project finance journal contains solar finance statistics, trends, industry news, and SREC market information. Contact our team at finance@solsystemscompany.com or 888-235-1538 x2 for your solar project financing needs.

This month’s Solar Project Finance Journal includes info on the most competitive PPA prices, developments in Connecticut, Hawaii, Massachusetts, and New York, and information on the importance of inverter choice, an update on our construction and term debt offerings, EPA’s upcoming rulings on greenhouse gas emissions, and more.

Below, we have included excerpts from Sol Systems’ May 2014 Solar Project Finance Journal, which is a monthly email newsletter that our project finance team distributes to our network of clients and solar stakeholders. Our newsletter contains solar statistics from current real-life solar projects, trends and observations gained through monthly interviews with our solar project finance team, and it incorporates news from a variety of solar industry resources.

If you would like to receive our Solar Project Finance Journal via email every month, please email pr@solsystemscompany.com with a request to be added to our Project Finance Journal distribution list.

Project Finance Statistics

The following statistics represent some high-quality solar projects and portfolios that we are actively reviewing for investment.

Capacity: 200 kW – 37 MW
Average Capacity:  5.2 MW

Developer all-in (asking) prices*: 

  • <500 kW:  $2.60-3.00/Watt
  • 500 kW–2 MW:  $1.85 – 3.20/Watt
  • >2 MW:  $1.60-3.00/Watt

Read the rest of this entry »

Jessica Robbins

New York Launches New Incentive Round for Large Solar Projects

The New York State Energy Research and Development Authority (NYSERDA) unveiled a new funding program for solar systems over 200kW in size.

The New York State Energy Research and Development Authority (NYSERDA) unveiled a new funding program for solar systems over 200kW in size.

New York is in a solar state of mind. On the heels of the recent announcement to commit an additional $1B to New York solar incentives over the next decade, the New York State Energy Research and Development Authority (NYSERDA) unveiled the next anticipated funding program for large solar systems, over 200kW in size. This round of funding closely resembles previous offerings, and does not appear to be part of the “megawatt block” structure highlighted in the April announcement. PON 2956 (short for Program Opportunity Notice) went live this week, promising $60M in available incentives or more, to be awarded at NYSERDA’s discretion. Applications are due July 17th, 2014 and all systems must come online by April of 2016.

Changes from Previous NYSERDA Large Solar Incentives

Unlike past PONs for large projects, all New York Independent System Operator (NYISO) load zones are in play. Several favorable tweaks to this year’s program, compared to earlier New York solar incentive rounds like PON 2860 and 2589 in the past, indicate a willingness on NYSERDA’s part to see this program drive more project development this year than ever before. In previous PONs for large projects, awardees received the full incentive amount in five payments – 30% at project completion paid out in two upfront installments, and 70% paid out as a PBI split between the first three years of production. PON 2956 will see that 30% upfront payment occur in one installment instead of two, and the remaining 70% condensed to only two years’ worth of production, paid at year’s end. The incentive for any project cannot exceed 50% of project installed costs. Read the rest of this entry »

Victoria Ngare

How Third Party Financing Can Be a Growth Strategy for Commercial Solar Developers

Third party financing allows developers to do what they do best, develop projects and build relationships with hosts.

Third party financing allows developers to do what they do best: develop projects and build relationships with hosts.

The solar industry has experienced tremendous growth over the past few years. In the early 2000s, the industry was composed of a few specialized players. With the growth of federal and state level incentive programs as well as innovations in financing, more players entered the space. Programs like the 1603 Cash Grant allowed developers and those that did not have access to tax equity to enter the commercial solar space in a meaningful way by offering Power Purchase Agreements (PPAs). But as stocks of safe-harbored modules dwindle, more of these developers are pursuing PPA financing partners as well as external tax-equity.

With third-party financing developers originate, permit and build the project with the assurance that an investor will buy the project at COD. In some cases a developer will package the project and sell it once the project is “shovel ready” to an  investor to build and own. Under this structure, a developer sells the asset outright and receives payment at COD or through milestone payments during construction.  By spending more time developing project pipeline, developers can build up sales and therefore tax appetite. Eventually they can take advantage of the ITC and look to re-invest the capital in owning projects and actively investing in other projects as well.  Lastly, as the industry consolidates, developing more projects can be a strategy to demonstrate increased value.  The more project pipeline and development experience a developer has the more valuable he becomes to a potential investor or buyer.

Read the rest of this entry »

Thomas Larson

Cashing in on Solar’s Hidden Value

Solar and Battery

Batteries may first enter the solar space in demand charge reduction.

The solar value proposition remains very attractive to homeowners and facility managers across the United States. However, the industry sells itself with one arm tied behind its back…

From a consumer’s perspective, there are two key pieces of energy demand—capacity and cumulative usage. Many utility bills are comprised by 1) a demand charge, set by measuring the customer’s most energy intensive hour within a given billing period, and 2) marginal energy use, which is simply the per kWh rate with which the solar crowd is fairly familiar. While solar can predictably reduce overall energy drawn from the traditional utility over a given period, it remains more difficult to predict and quantify its reduction in peak demand for consumers. In short, solar has yet to add capacity to its appeal in predictable, scalable forms. However, capacity can be added to solar’s arsenal through a combination of technological and financial innovations.

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Julia Heckmann

Sol Systems Speaks at 2nd Annual Sunshine Backed Bonds Conference in New York

George Ashton and Daniel Yonkin will speak about financing alternatives and tax equity in the solar energy space.

George Ashton and Daniel Yonkin will speak about solar financing and tax equity in New York today.

Sol Systems’ CFO, George Ashton, and Director of Tax Equity, Daniel Yonkin, are speaking at the 2nd Annual Sunshine Backed Bonds conference in New York today.

Mr. Ashton will participate in a panel discussion on options and considerations for lowering the cost of capital for renewable energy. Panelists will focus on current financing alternatives available to solar developers and provide an outlook for the role of securitization in the solar space.

Mr. Yonkin will speak on a panel detailing tax equity and accounting considerations in the asset-backed security field. The panel will provide updates on tax equity structures, discuss the friction points between tax equity and securitization, and explore options for resolving these frictions.

Read the rest of this entry »

Jessica Robbins

New York Commits Another $1 Billion to Solar. Here’s What You Need to Know.

Will New York join Massachusetts and California as an enduring solar state?

Last Thursday, New York Governor Andrew Cuomo announced an additional $1 billion in funding for the NY-Sun initiative, making good on his promise to extend the program through 2023. The funding announcement includes an overhaul of New York State Energy Research and Development Authority’s (NYSERDA) current incentive program, previously doled out through Program Opportunity Notices (PONs) with varying availability for different solar project sizes and geographies. The new program will take effect June 1st.

With this new initiative, solar should remain a crucial part of the Empire State’s energy portfolio

New York Solar Incentives Explained

The NY-Sun initiative, founded in 2011, coordinates solar programs between the Long Island Power Authority (LIPA, now PSEG Long Island), the New York Power Authority (NYPA), and NYSERDA. The new program, called “Megawatt Block”, will break out MW capacity allocations to specific regions of the state, and then further break down target capacities in each block. Solar incentives in New York will be awarded on a per watt basis for residential PV (up to 25 kW), small PV (non-residential up to 200 kW), and large PV (over 200 kW). Similar to the popular California Solar Initiative rebates, prices will step down as capacity blocks in each region and sector are filled, allowing the market to grow at a steady pace and eventually stand on its own. If the geographic preference follows the earlier program, we can expect to see preference given to areas downstate near New York City.

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Jessica Robbins

Sol Systems Completes the Massachusetts Solar Market’s First SREC II Transaction

Sol Systems is the first to close a prepaid SREC contract in Massachusetts' nascent SREC II market.

Sol Systems is the first to close a prepaid SREC contract in Massachusetts’ nascent SREC II market.

Sol Systems is pleased to be the first to close a transaction in solar renewable energy credit (SREC) II, the newest iteration of the Massachusetts solar market. Under this agreement, Sol Systems will provide solar project financing via a prepaid SREC contract to EthoSolar, an Ontario-based solar power provider with over 600 systems installed in North America, for a 150 kilowatt (kW) solar energy project.

This landmark deal is the first prepaid SREC contract in the nascent Massachusetts SREC-II market, which will be promulgated on April 25. Sol Systems provided a Sol Upfront contract, issuing pre-payment to EthoSolar’s client for generation of SRECs in 2014 and 2015; this capital was key in pushing the project over the finish line in light of a tight deadline.

“Combining an upfront sale of a percentage of SRECS with other traditional and nontraditional solutions allowed us to negotiate an attractive financing solution from a local bank that has our client in the black from day one on this project. Sol Systems brought creativity and value that was outside the box,” said Ethan DeSota of EthoSolar.

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Daniel Watson

Sol Systems’ Debt Finance Director to Attend Greentech Media’s Solar Summit this week

Sol Systems’ Senior Director of Debt Financing Mike Midden will be in Phoenix this week to discuss debt financing at the GTM Solar Summit.

Sol Systems’ Senior Director, Mike Midden, will speak at Greentech Media’s Solar Summit this week in Phoenix. Mr. Midden presented today, April 14,  on how to drive down interest rates for solar project debt financing.

Mr. Midden has over 17 years of experience in the energy and financial sectors. Mr. Midden leads Sol Systems’ debt financing group, which oversees the $100 million solar debt fund that the Sol Systems launched in early 2014 to address financing challenges in the commercial and industrial (C&I) solar sector. Ideal projects range from (but are not limited to) 750 kW – 20 MW in size. Loans may be as small as $1 million and sometimes smaller, depending on the opportunity, with tenors as long as 18 years on term loans. Read the rest of this entry »

Daniel Watson

Rhode Island Solar Feed-in Tariff Now Accepting Applications for 2014

Contact us at finance@solsystemscompany.com for more information on the Rhode Island feed-in tariff.

National Grid, Rhode Island’s electric utility, recently announced a new round of enrollment in the state’s feed-in tariff program in the spring of 2014. The allocation is part of the Distributed Generation Standard Contracts program, which was created by legislation in June of 2011. The program originally called for a minimum of 40MW in new renewable energy procurement by December 30, 2014. The first open enrollment for the year targets 6 MW, 3.15MW of which is reserved for solar, with additional enrollments scheduled in July and October of this year.

The proposal period will run from April 21st until May 2nd. For solar systems above 250 kW, ceiling prices range from $0.2730/kWh to $0.2350/kWh, fixed, for 15 years, depending on system size and tax credits used for financing. Projects utilizing bonus depreciation and PTC/ITC will face lower ceiling rates across all sizes. Bonus depreciation is not currently available as an incentive. The Distributed Generation Standard Contract Board sets the ceiling prices and capacity targets for each enrollment period. Renewable energy projects including wind, solar, and anaerobic digestion are all eligible for the program, with certain distinctions based on technology and size. Following are the ceiling prices set by National Grid:
Read the rest of this entry »

Daniel Watson

Sol Systems to Travel to San Francisco, Las Vegas, and New York for Upcoming Solar Project Finance Conferences

The Sol Systems team will attend the 2014 SEIA Tax and Finance Seminar this week in San Francisco at the W San Francisco Hotel. George Ashton, Sol Systems’ CFO, will be participating in a panel discussion on securitization and its role in the solar space. The discussion will focus on how securitization has worked in the past, and its prospects moving forward.

Next week, several members of the Sol Systems team will travel to New York Bloomberg’s Future of Energy Summit 2014. Sol Systems’ CEO, Yuri Horwitz, will travel to Las Vegas for the 29th Annual Platts Global Power Markets Conference.

Read the rest of this entry »

Daniel Watson

Will Commence Construction Language Add More Certainty to the U.S. Solar Market?

Solar project development is a process with varying timetables and degrees of difficulty: from finding a host site, to entering into power purchase agreements, the process can take several years. Any bump along the road can lead to uncertainty in the completion date for an investor or developer, especially for larger utility scale projects.

This uncertain timetable makes the expiration of the 30% Federal Investment Tax Credit (ITC) in 2016 a potentially precarious scenario for parties involved in solar project development. Currently, a project must meet a December 31, 2016 deadline to receive the 30% ITC, and missing this date could lead them to receive only 10%, a significant decrease in returns.

Commence construction legislation should provide security to investors and developers aiming to break ground by 2016

On February 6th, Senators Michael Bennet (D-CO) and Dean Heller (R-NV) introduced the Commence Construction Legislation, which confirms that developers only have to start construction before the ITC expiration date for the full 30% ITC to be monetized. If this moves forward, many in the industry can breathe a sigh of relief knowing that they have some room to meet this deadline.

Critics have claimed that this language is still not strong enough, and that the industry should be advocating to extend the ITC. There is also concern that allowing projects that are only under construction to be eligible creates incentives for developers to “undertake construction” that may not be fully planned or is merely prospective. The language around the rules determining what qualifies as “under construction” will play an important role, as relaxed legislation will likely lead to a oversaturated market of new projects as the expiration date nears. These numerous “faux projects” not only lead to confusion for investors who rely on concrete information, but could lead to overcrowding and underfunding. Read the rest of this entry »

Thomas Larson

Sol Systems Continues to Hire! Currently Seeking Project Manager

Sol Systems continues to expand in order to facilitate the deployment of solar projects. Now, we’re looking for a talented project manager to work with our developer and EPC partners to deliver solar assets on behalf of our investor clients. Please see the posting below for more information on the position and how to apply.

Position:  Project Manager

Description: A Project Manager on the operations team will have the following responsibilities:

  • Work externally with EPC teams and developers to effectively manage and deliver upon major milestones during the construction phase for our investor clients, on time and on budget.
  • Compose communications and scheduled status reports for internal and external parties.
  • Lead and participate in project meetings with EPC partners, conduct on-site meetings/inspections, and generally keep an active involvement during the installation and acceptance testing.
  • Proactively attend to potential issues associated with typical solar PV construction.
  • Oversee multiple projects in parallel, successfully meeting target goals for completion milestones.
  • Monitor performance of projects, manage relationships with O&M providers to deliver services. Read the rest of this entry »
Anna Noucas

Formal Rulemaking Process Begins for Massachusetts SREC-II Program

On January 3, 2014, the Massachusetts Department of Energy Resources (DOER) announced that they filed revisions to the Renewable Portfolio Standard (RPS) Class I regulation, thus beginning the formal rulemaking process for establishing a framework for the SREC-II program.  The official version of the draft regulation will be published in the Massachusetts Register on January 17, 2014, but in the meantime, the DOER has provided an unofficial version on their website.

Timeline for the Formal Rulemaking Process

The formal rulemaking process begins with a public comment period which includes holding a public hearing.  Written public comments will be accepted from January 3 through 5:00pm on January 29, 2014 and the public hearing will be held on January 24, 2014 from 1:00 to 3:00 pm in the Gardner Auditorium of the Massachusetts State House in Boston.  Following the public comment period, the DOER will submit this proposed final regulation to the Joint Committee on Telecommunications, Utilities and Energy and will incorporate any changes deemed prudent from the public comments.  Within the following 30 days, the Joint Committee will review and submit comments on the regulation back to the DOER.  To conclude, the DOER must consider the Joint Committee’s comments for a period of not less than 30 days, and thereafter, the final regulation will be promulgated as soon as possible.  Based on the estimated outline in the table below, the SREC-II program should become effective in April 2014.

Read the rest of this entry »

Thomas Larson

Project Pitfalls: Four Red Flags that Kill Solar Deals

If you are a solar developer wondering why any of your projects has had difficulty securing third party financing, have no fear; our developer advisory services team has put together a list of four common project pitfalls that may kill your solar deal, as well as strategies to overcome them. By identifying fatal flaws early, developers can reduce soft costs and focus on opportunities that are the most attractive to prospective investors. While no single one of these issues is unequivocally lethal to a project, they can significantly narrow the gate to success if they go unmitigated.

Solar Red Flags

1.         Non-financeable Offtaker

Offtakers (the purchaser of a project’s electricity) with poor credit will have trouble attracting investment, so developers should understand an offtaker’s credit standing early in the development process. Some signs of poor offtaker credit include:

-The offtaker does not seem to be cash flow positive;

-The offtaker  has been around for fewer than 5 years;

-The solar project’s value would amount to a large portion of the offtaker’s assets.

If an offtaker does not pass these criteria, or has other credit concerns that would impair an investor’s confidence, an alternate strategy is to find a guarantor. A guarantor could be a parent company, a municipality, a school district, or really any credit-worthy entity that could serve as a backstop if the offtaker were to default on the Power Purchase Agreement (PPA). Additionally, if the offtaker is located in a desirable location, an investor may value the prospect of future hosts paying the PPA in the case that the original offtaker is unable to continue operations there. Read the rest of this entry »

Keith Glassbrook

Sol Systems’ Most Viewed Solar Project Finance Articles of 2013

Sol Systems’ Most Viewed Solar Project Finance Articles of 2013

We review our most viewed solar project finance articles of 2013.

As we reflect on the year, our team took a moment to examine the articles that sparked the most interest from our network. Topics range from new incentive programs in traditional solar states like California, emerging markets such as Rhode Island and New York, and the possible impacts of federal changes on the solar landscape.

In 2014, our team will continue to provide our network of solar energy system owners, developers, and investors with engaging, informative articles to help with their solar financing needs.

Read the rest of this entry »

Thomas Larson

Sol Systems Seeks Renewable Energy Intern

Position: Solar Analyst Intern (position beginning in January 2014) targeted towards undergraduates

Description: The Solar Analyst Intern will assist with registration processes, administrative duties, and research tasks, and will be expected to provide clearly defined deliverables. The position will require attention to detail, excellent record keeping, and efficient allocation of time and resources.

Through this position, the Solar Analyst Intern will gain familiarity with solar legislation, solar finance mechanisms, industry news, and industry vocabulary, as well as new product development in a fast paced, start-up environment. This position provides a fantastic launching pad for a career in renewable energy.  Read the rest of this entry »

Thomas Larson

Reaching Beyond the Roof: Three Strategies for Corporate Investments in Solar

The Compelling Solar Asset Class

There are many options available to corporations interested in investing in solar projects. The market for investing in solar projects is an expanding financial sector that provides corporate investors with an opportunity to diversify their investment portfolios and develop or expand tax credit platforms. In 2012, the volume of solar projects being installed in the United States grew 76 percent year over year, with 3,313 MW of projects built at an estimated value of $11.5 billion. These solar projects will provide enough electricity to power over 350,000 households in the United States. In 2013, it is projected that the asset class will grow by an additional 29 percent across residential, commercial and industrial, and utility scale solar projects.

Retailers and other corporations invest in solar through a variety of financing structures.

Retailers and other corporations invest in solar through a variety of financing structures.

Many corporations are joining retailers, tech companies, utilities, and major financial institutions in the solar space with investments both on and off their properties. In numerous locations, the rooftops of Staples, Best Buy, Wal-Mart, IKEA, Kohl’s, and others within the retail industry feature solar arrays. These retailers, as well as many other solar investors, secure reduced energy costs, tax benefits, and clean electricity for their stores, which further company-wide sustainability efforts and appeal to consumers.

Strategies for Solar Investments

There are three primary strategies for corporations to invest directly in the solar asset class and realize the benefits of solar energy: (1) purchasing electricity from an on-site or nearby solar project through a Power Purchase Agreement (PPA), (2) directly purchasing a solar project to provide free renewable energy to a company’s buildings or property, and (3) strategically investing in solar projects to secure long-term cash flows and significant tax benefits. Each is explored below. Read the rest of this entry »

Sara Rafalson

Sol Systems Closes 1.2 MW Transaction for Maryland Nonprofit, Leveraging Solar Financing & SREC Expertise

Financing for the construction of the 1.2 MW project was handled between Sol Systems and Building Energy.

Sol Systems recently financed a 1.2 MW solar project in Maryland.

Sol Systems has successfully financed a 1.2 MW solar project in partnership with its investor client, Washington Gas Energy Systems, a subsidiary of WGL Holdings (NYSE: WGL), which will own and operate the system. Located at Presbyterian Senior Living Services, a non-profit located in Glen Arm, Maryland, the system will provide electricity under a long-term Power Purchase agreement. Financing for the construction of the project was handled between Sol Systems and Building Energy. Washington Gas Energy Systems will own and operate the system.

To fast-track the financing for the commercial-scale project, Sol Systems engaged its network of institutional investors, structured the transaction, and secured a multi-year solar renewable energy credit (SREC) contract, critical to financing the deal.  Maryland SREC compliance buyers do not typically execute SREC contracts prior to a project’s operation date. However, Sol Systems was able to leverage its reputation as the oldest and largest SREC aggregator in the nation to secure a four-year fixed price contract.

“Early before entering into the U.S. market, we recognized the value of having a solid and reliable financing partner to help us navigate the complexities of U.S. solar market. An experienced partner like Sol Systems has provided us with the support we needed to finance our first deal in the United States,” said Andrea Braccialarghe, Managing Director America at Building Energy.

Since 2008, Sol Systems has facilitated financing for 69 MW of solar projects throughout the country, 8 MW of which are located in Maryland. In addition to commercial project financing and SREC aggregation, Sol Systems is tackling tax equity, one of the solar industry’s biggest financing limitations.

“Sol Systems is proud to have helped Building Energy succeed with their first U.S. solar project,” said George Ashton, CFO of Sol Systems. “This effort is an example of how our commercial financing solutions and SREC services can work in tandem to increase deal velocity, accelerate the tempo of project development, and bring solar to non-profits like Presbyterian Senior Living Services.”

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Alejandro Neira

Fall 2013 Incentives Roundup

Long Island and Rhode Island will open their enrollment periods in October 7th and 23rd, respectively

Long Island and Rhode Island will open their enrollment periods in October 7th and 23rd, respectively

The Long Island Power Authority announced that the Clean Solar Initiative  would start its second round of applications on October 7th. This program seeks to bring an additional 100 megawatts (MW) of solar energy to the island, and it is expected to have the same success as CSI-I. Projects to enter this round should be 100kW to 2MW in capacity. Similarly to Rhode Island’s program, the rate will be set through a bidding process. The final price per kWh will be fixed for 20 years. CSI will be accepting applications until January 31st, 2014.

On October 28th National Grid starts its third open enrollment period and will be accepting applications to enter into standard contracts for the supply of energy and RECs in Rhode Island. For this year, the ceiling price (the maximum bid-in price for projects) for 50-100 kW systems will be $0.2995/kWh, $0.2880/kWh for 101-250 kW systems, and $0.2840/kWh for 251-500 kW systems. This is the first round where all applicants will have to include competitive bids with their applications. National Grid will be accepting applications until November 8th.

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Alejandro Neira

Employee Spotlight: Andrew Gilligan

At Sol Systems, we realize that our work is a reflection of who we are as individuals, and our success is a direct result of all the different personalities, passions, and talents that your employees bring to the table. Our team has expanded significantly in the last few years, and we are proud to employ some of the brightest talent in the renewable energy industry. On this employee highlight we have Andrew Gilligan, Senior Associate at Sol Systems:

This month’s employee spotlight features Andrew Gilligan from our investor advisory services team.

This month’s employee spotlight features Andrew Gilligan from our investor advisory services team.

What is your current position at Sol Systems?

I am a Senior Associate and help to lead our Investor Advisory Group. As part of this team, I assist renewable energy investors across the United States to successfully deploy capital into solar projects.

How has Sol Systems changed since you first started at the firm?

Since I started with Sol Systems in early 2011, the firm has undergone a lot of changes. Back then, we were a small start-up company only offering SREC solutions. Today, we have evolved to become a financial services firm that can help with any part of the capital stock for projects in all relevant US solar markets.

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Keith Glassbrook

Sol Systems’ Financing Partnership with Washington Gas Featured in Washington Business Journal

Sol Systems’ partnership with Washington Gas was featured in the Washington Business Journal.

Sol Systems’ partnership with Washington Gas was featured in the Washington Business Journal.

The Washington Business Journal recently featured our financing partnership with Washington Gas Energy Systems, Inc. on three new solar projects in Hawaii, Maryland, and Sol Systems’ hometown, Washington, D.C.  Sol Systems served as an investment advisor to Washington Gas Energy Systems for these projects, assisting in project origination, due diligence, negotiation, and deal structuring before ultimately guiding these projects to financial close.

Washington Gas Energy Systems will build, own and operate three more new solar projects, at the KIPP School in the District, Presbyterian Senior Living Services in Glen Arm, Md. and the Turtle Bay Resort in Oahu, Hawaii.

The projects will come online under 20-year power purchase agreements. Sol Systems is Washington Gas Energy Systems’ investment advisor, lining up third party financing.

The cost of the projects was not disclosed.

KIPP School will get a 227-kilowatt roof array. Presbyterian Senior Living Services will have a 1,320- kilowatt ground-mounted system, and Turtle Bay Resort will have a 402-kilowatt roof mounted system.

Read the full article from the Washington Business Journal here.

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.

Natacha Kiler

Washington Gas Energy Systems to Build, Own and Operate Three New Solar Projects Across the Nation through Financing Partnership with Sol Systems

Solar Arrays Will Power Turtle Bay Resort in Hawaii, the KIPP School in Washington, D.C., and Presbyterian Senior Living Services in Maryland.

Washington Gas Solar Project Financed with Sol Systems

Sol Systems is proud to announce the successful financing of mid-sized commercial solar projects in Hawaii, Maryland, and D.C. These projects were financed through a partnership with our investor client, Washington Gas Energy Systems.

McLean, Va. – Washington Gas Energy Systems, Inc. has announced that it has contracted to build, own and operate three new solar arrays through a financing partnership with Sol Systems. The photovoltaic systems will power the Turtle Bay Resort in Oahu, Hawaii, the KIPP School in Washington, D.C., and Presbyterian Senior Living Services in Glen Arm, Md. Washington Gas Energy Systems will own and operate the solar systems under 20-year power purchase agreements. Sol Systems acted as an investment advisor to Washington Gas Energy Systems for these projects, which bring the organizations access to clean, solar electricity through third-party financing.

“We commend the KIPP School, Turtle Bay Resort and Presbyterian Senior Living Services for their environmental stewardship and we are pleased to be partnering with Sol Systems,” said Sanjiv Mahan, Vice President of Business Development at Washington Gas Energy Systems. “This strategic project portfolio strengthens our existing footprint in key regions throughout Maryland and Washington, D.C., while expanding our portfolio into strong solar states like Hawaii, giving us a true nationwide presence.” Read the rest of this entry »

Natacha Kiler

September 2013 Project Finance Statistics

Every month, Sol Systems distributes a newsletter, the Sol Systems Project Finance Journal, to our community of solar developers and 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.

Our monthly project finance journal contains solar finance statistics, trends, industry news, and SREC market information. Contact our team at finance@solsystemscompany.com or 888-235-1538 x2 for your solar project financing needs.

Our monthly project finance journal contains solar finance statistics, trends, industry news, and SREC market information. Contact our team at finance@solsystemscompany.com or 888-235-1538 x2 for your solar project financing needs.

We have included excerpts from our September 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” **

Below you will find statistics on some of the high-quality solar projects and portfolios that are not yet contracted.

Capacity: 250 kW – 11.77 MW
Average Capacity: 1,555 kW

**Does not include projects in the Caribbean or Hawaii where asking prices currently range from $3.75-4.20/Watt. Also, does not include a California portfolio with carport projects, North Carolina projects, or 3 operational portfolios.

Read the rest of this entry »

William Graves

California Solar Incentive Alert: Re-MAT Feed-in Tariff Program

On October 1, 2013 California IOUs will begin accepting Re-MAT applications for qualifying facilities.

On October 1, 2013 California IOUs will begin accepting Re-MAT applications for qualifying facilities.

Pursuant to Senate Bill 32 of 2009, the California Public Utilities Commission (CPUC) implemented the Renewable Market Adjusting Tariff (Re-MAT) program on July 24, 2013. The Re-MAT program is a Feed-in Tariff (FiT) through which customers can sell electricity produced by qualifying facilities* directly to the utility at a set rate for a term of 10, 15, or 20 years. The bill also raises state renewable energy targets from 500 MW to 750 MW, and increases the size cap on qualifying energy facilities from 1.5 MW AC to 3 MW AC. All investor owned utilities (IOUs) in California with more than 75,000 customers must participate in the program. Although all qualifying facilities are eligible to participate in the program, it is clear that solar will play a large role given the amount of attention the program has already gained with developers in the state.

The first round of solicitations for the Re-MAT program will begin on October 1, 2013, and will continue every two months thereafter until it is fully subscribed. The amount of time it takes for the program to become fully subscribed will depend on the ability for projects to be financed at the set energy price, which is one of the more unique aspects of the program. The base price is currently set at $89.23/MWh, pre-Time of Delivery (TOD) adjustments. This price is subject to adjustment after every solicitation depending on program participation. Read the rest of this entry »

Sara Rafalson

Sol Systems Expands Solar Project Financing Efforts, Welcomes New Additions

Sol Systems is expanding rapidly to accommodate business growth and to maintain its excellent level of customer service. This summer, the company has brought on five new team members.

Sol Systems is expanding rapidly to accommodate business growth. This summer, the company has brought on five new team members.

Sol Systems is expanding rapidly to accommodate business growth. This summer, the company has brought on five new team members.

Sol Systems is proud to announce the addition of Ben Margolis as Director of Project Finance.  Mr. Margolis helps to lead Sol Systems’ Developer Advisory Services, which provides transaction structuring, project due diligence, SREC monetization, and capital placement for solar developers. He also supports the Asset Management group, handling project development, execution, and operations for Sol Systems’ investors. Mr. Margolis joins Sol Systems with seven years of experience in the solar industry. Prior to joining Sol Systems, Mr. Margolis worked at SunEdison, where he managed the development of solar projects from construction to commercial operation in markets ranging from California to Abu Dhabi. Mr. Margolis also worked in business development at SunEdison, where his efforts led to $70 million of pipeline opportunities. He holds an MBA from University of Virginia’s Darden School of Business and a Bachelor of Science in Civil Engineering from the University of Maryland. Read the rest of this entry »

Natacha Kiler

July 2013 Project Finance Statistics

Massachusetts and the abundance of solar activity occurring there is the highlight of this month’s solar finance journal.

Every month, Sol Systems distributes a newsletter, the Sol Systems Project Finance Journal, to our community of solar developers and 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 July 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”

Sol Systems finds that projects with the following characteristics are most likely to succeed. The overall quality of a project depends on the qualitative aggregate of the following characteristics.

Read the rest of this entry »

Eric Scheier

New Jersey’s PSE&G Announces Solar Loan Program III

PSE&G, the largest utility in New Jersey, has announced a third iteration of its solar loan program.

PSE&G, the largest utility in New Jersey, has announced a third iteration of its solar loan program.

After finishing two rounds of its successful solar loan program, New Jersey’s Public Service Electric and Gas Company (PSE&G) has received approval to offer a third round of loans to 97.5 MW worth of residential and non-residential solar projects and is expected to announce a start date shortly. Solar Loan III is similar to the previous two programs in that recipients have the option of paying off the loan with the Solar Renewable Energy Certificates (SRECs) that the system produces over time. The value of these SRECs will be determined by the higher of the market price or the pre-agreed-upon floor price for each system. However, unlike previous programs, the floor price for each system’s SRECs will be determined by a bid process instead of a preset schedule.

Applications will consist of a description of the system, typical loan application information, and a proposed SREC floor price “bid.” The applications will be sorted by bid, lowest to highest, and then approved in this order until the capacity for the solicitation has been filled. Loan awards will be calculated based on the net present value of the SRECs that the system is estimated to be able to produce over the course of the loan term (10 years) at the bid SREC floor price. According to draft documents, the interest rate will be 11.179% per year for all non-residential loans (down from 11.3092% in Solar Loan II). PSE&G has yet to announce the interest rate for residential loans (which stood at 6.5% in Solar Loan II), but there is some indication that the interest rate may be in the neighborhood of 11% as well. Previously, floor prices for SRECs in the 58.83MW Solar Loan II program ranged between $330-450 per SREC according to the program’s predetermined schedule. Right now, New Jersey SRECs are clearing at around $120, meaning that competitive bids for this program will likely come in much lower than the preset floor prices in Solar Loan II.

Read the rest of this entry »

Eric Scheier

New York Legislature Misses Opportunity to Sign NY Solar Bill into Law

The 32 MW Long Island Solar Farm was one of the largest projects implemented as a result of the NY-Sun Initiative.

The 32 MW Long Island Solar Farm was one of the largest projects implemented as a result of the NY-Sun Initiative.

The New York legislative session ended last week without the much anticipated enactment of the NY Sun Act of 2013. Governor Cuomo was unable to sign the NY Sun Act of 2013 (A.5060b/S.2522) into law following this year’s legislative session, as the House and Senate did not follow through with a reconciliation of the two bills prior to the end of proceedings.

The hope for major clean energy legislation in New York began on Earth Day as the Senate unanimously passed its version of the bill.  On June 20, 2013, the Assembly then followed with a promising vote of 76-16; however, this vote favored a different version of the bill.  With two versions of the bill lying on the table, reconciliation would need to occur in order to send the bill to the Governor’s desk for a signature. Time got the best of the House and Senate as they were unable to produce a compromised version of the long-term solar policy, leaving New York’s solar industry without the clean energy legislation it was hoping for.

Read the rest of this entry »

Sara Rafalson

Sol Systems to Host Project Finance Workshop Thursday, June 20

MDV-SEIA represents the interests of photovoltaic and solar thermal equipment manufacturers, installers, distributors and component suppliers.

MDV-SEIA represents the interests of photovoltaic and solar thermal equipment manufacturers, installers, distributors and component suppliers.

Sol Systems will host and sponsor an interactive solar project finance workshop and networking event on Thursday, June 20 in partnership with the Maryland D.C. Virginia Solar Energy Industry Association (MDV-SEIA). During the hands-on workshop, Sol Systems’ CEO, Yuri Horwitz, and Senior Vice President of Finance, Rafael Alfonzo, will share strategies for successfully financing commercial solar projects, while also providing opportunities for active participation and questions. The workshop will take place in the 2nd floor board room of the Sol Systems’ offices in Washington, D.C.  from 5-8 PM. Refreshments will be provided, and there is no cost to attend. Current and prospective MDV-SEIA members should contact pr@solsystemscompany.com to be added to the guest list.

As an industry leader in renewable energy project finance, Sol Systems offers a number of resources such as workshops and solar finance solar financing webinars in order to share the knowledge and tools that drive project development. Please contact us at finance@solsystemscompany.com for more information on our project financing services for developers, or how we help investors deploy capital in the renewable energy asset class.

Read the rest of this entry »

Daniel Watson

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

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.
Read the rest of this entry »

Daniel Watson

Sol Systems to Speak at Novogradac’s Financing Renewable Energy Conference in San Francisco

SanFran

The Financing Renewable Energy Conference will be held in San Francisco, California.

Sol Systems CEO Yuri Horwitz and Dan Yonkin, Director of Tax Equity, will be attending the upcoming Novogradac Financing Renewable Energy Conference in San Francisco. The event will be held April 24-25th and will include dozens of expert speakers and hundreds of renewable finance professionals. Yuri, our CEO and co-founder, will be featured on Wednesday the 24th in a panel titled “Searching for the Lowest Cost of Capital,” sharing his expertise on securing investment in the growing and complex green energy industry. Yuri will join executives from Deutsche Bank, Clean Power Finance, and other financing institutions to discuss the potential and viability of debt financing through asset-backed securities, master limited partnerships and even a federal production tax credit for solar energy.

Sol Systems offers investors a diverse range of opportunities to deploy capital in the renewable energy asset class. Our team originates project opportunities from our national network, conducts thorough due diligence of each projects, structures and negotiates complex tax transactions, and manages the asset post-closing to maximize each project’s cash and tax benefits.

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Daniel Watson

Sol Systems Speaks at the American Solar Energy Society Conference in Baltimore

ASESheader

Sol Systems CFO and co-founder, George Ashton, will be attending SOLAR 2013, an annual conference held by the American Solar Energy Society. This is the 42nd installment of the event, and will be held April 16-20 at the Baltimore Convention Center. George will be participating in a 90-minute panel discussion titled “Financing DG Projects,” where he will speak alongside Rich Deutschmann of Ameresco, Chris Lord of Capiron, and Steve Remen of GroSolar.  The panel will be held on Wednesday, April 17th, from 1 PM until 2:30 PM and will focus on funding distributed generation installations.

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Daniel Watson

Potential Changes to Hawaii’s 35% State Tax Credit

New temporary rules will place restrictions on the ability of developers in Hawaii to claim the 35% state tax credit. The new rules, issued by the Department of Taxation in November of 2012, will be in effect for no longer than 18 months, starting for systems installed on January 1st, 2013 and after. The Hawaiian House of Representatives also recently moved HB 497 to the Senate, a proposal to permanently decrease the tax credit level given to renewable energy developers.

The new structure, under the temporary rules, places a minimum on kilowatt output of PV systems, referred to in the legislation as “other solar systems” or those projects neither for solar thermal nor from wind energy. Single-family residential properties have a minimum of 5 KW per system, multi-family residential properties have a minimum of .360 KW per unit per system, and commercial properties’ systems must have a capacity of 1MW in order to receive the current 35% of costs income tax credit. There is also a cap of $5,000 of credit for residences and $500,000 for commercial enterprises.

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Anna Noucas

Community Solar Bill Reintroduced to the DC Council

The DC Council has reintroduced the Community Solar Bill which would allow for anyone to reap the energy benefits associated with owning a solar installation.

The DC Council has reintroduced the Community Solar Bill which would allow for anyone to reap the energy benefits associated with owning a solar installation.

In January, Councilmembers Alexander, Cheh, Bonds, Grosso, Barry and Wells co-introduced the Community Renewables Energy Act of 2013 (B20-0057).

The Community Renewables Energy Act of 2012 (B19-0715), the 2012 version of B20-0057, was originally circulated in early 2012.  A hearing followed in the middle of June 2012, where Sol Systems Chief Business Officer, Sudha Gollapudi, testified in support of the legislation.  The hearing resulted in a working group dedicated to finding an effective way to implement the community solar bill.  The working group was unable to complete its work during last year’s legislative session, and thus the bill was reintroduced in 2013.

The Community Renewables Energy Act of 2013 is almost identical to the 2012 version.  Many DC residents are unable to use solar energy because they are renters, or they own a property that is not ideal for a solar installation.  With these restrictions, a large portion of DC residents do not have the ability to participate in the solar industry.  The legislation would allow for any and all DC residents to purchase a share in a community solar system located anywhere in DC and receive credit for solar electricity from that system to offset their own utility bill in the form of virtual net metering.  This form of virtual net metering would allow for anyone to reap the energy benefits associated with owning a solar installation.

The re-introduction of this bill to the DC Council for the 2013 legislative session illustrates the Council’s commitment to expanding access to solar for all DC residents.  Furthermore, the passage of the Community Solar Act would help the District to achieve its aggressive solar carve-out requirements by installing a great capacity of solar.

Developers or investors interested in commercial scale project finance within the District should contact our project finance team at info@solmarket.com.  In addition to project financing services, Sol Systems currently offers three SREC solutions for photovoltaic and solar thermal systems located in the District: Sol Annuity, Sol Brokerage, and Sol Upfront.  Please email info@solsystemscompany.com for more information.

Sol Systems will continue to track the progress of this bill.  Please check out our blog for further updates.

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.

Top Names in Solar Industry Tackle Tax Equity Investing, Distributed Generation, and Mainstreaming Solar Power

By Josh Garrett for Sol Systems

Ahead of MDV SEIA’s conference “Solar Energy Focus 2012: Developing and Financing Solar on the East Coast,” Sol Systems asked a sampling of conference speakers for previews of their thoughts and remarks. Among other topics, speakers discussed tax equity investment and the challenges it presents, the advantages of distributed generation, and solar energy moving out of the “alternative” category and into the mainstream energy mix. Below are highlights from conversations with two conference speakers.

The U.S. solar industry has made important advancements in recent years, entering new regional markets and vastly improving its competitiveness with conventional power. Richard Moore, the Head of Strategy and Business Development at Washington Gas, believes it’s time to make those advancements part of the industry’s public image. “The solar industry needs to avoid painting itself into a ‘green’ corner,” he explains. “Solar needs to be just ‘another’ energy source, not an ‘alternative’ energy source,” he says. The challenge, Moore states, is showing the public that solar can compete with other energy sources on production levels, durability, and maintenance costs. Moore believes that, in the end, it all comes down to price. In his view, a potential solar customer is simply “a person who wants reliable energy at a reasonable price.” Which is great news for the industry because, as Moore points out, “that describes most of the population.”

To help shift solar into the mainstream energy conversation, Moore thinks the industry needs to more quickly eliminate its reliance on government subsidies. In his view, there is no way to predict or hedge against the constantly changing political trends that could lead to sudden changes in policies that support the industry. That said, solar needs to be proactive in shaping energy legislation, says Moore. He speculates progress can be made on this front by stepping up direct lobbying efforts, but believes that grassroots endeavors would be the most effective. “In our world of electronic communication and social media,” he says, “there are so many ways for citizens to directly influence policy.”

When it comes to the nuts and bolts of expanding the solar industry in the U.S., Moore is a believer in distributed generation in the residential sector. He sees the location of energy generation close to points of consumption as ideal. “Residential distributed generation offers predictable, often lower pricing; enhanced reliability; more control over generation units; and environmental benefits,” he explains. “By bringing all of these benefits together, distributed generation meets the requirements of our consumers,” he continues. “And those requirements need to be met, first and foremost, in order to meet the needs of investors, installers or other participants in the market.”

Turning to the subject of financing for solar projects, Moore offers his take on tax equity investing, which has taken on enhanced significance in the solar industry following the expiration of the federal 1603 grant program. He suggests making it easier for investors outside the renewable energy space to put their tax equity into solar projects by allowing them to invest without learning all of the financial and technical details associated with solar deals. More importantly, Moore believes that the industry should be devoting resources to making tax equity investing a part of the equation rather than the driving force. “If you need to choose between spending time and effort on achieving grid parity and spending time on developing new ways to structure tax equity and incentive funding, it makes a lot of sense to focus on grid parity,” he argues. “Ultimately, this is where the future of the industry resides.”

In the estimation of Zach Axelrod, CEO of solar thermal company Skyline Innovations, tax equity investing is shaping the future of the industry. “There are only 15 to 20 tax equity players,” he says, “not nearly enough to match the number of solar developers in the U.S. Because of this supply/demand imbalance, the investors hold the power. I think this will lead to consolidation in the industry—the number of developers will shrink to get closer to the number of tax equity investors,” he predicts.

Like Mr. Moore, Axelrod sees promise for expansion of solar in the residential sector, though for different reasons. Axelrod enjoys the accessibility to decision-makers afforded by residential projects. “In commercial and utility projects, the decision-maker is known, but often difficult to reach, and competition for his or her time and interest tends to be stiff,” he explains. But Axelrod sees pros and cons of solar projects in all three sectors: residential, commercial, and utility, calling none of them the “perfect target” for solar developers.

Overall, Alexrod takes an optimistic view of today’s U.S. solar industry. He acknowledges that the industry must still overcome significant obstacles, most importantly achieving and/or maintaining profitability while it grows. In his view, solar is here to stay. “You couldn’t say that five or ten years ago,” he elaborates. “Right now, even if all solar incentives were to disappear tomorrow, projects would continue to be planned and built. Market participants will come and go, but solar will not disappear. This is a relatively new development, and one that’s good for the world.”

About the Solar Energy Focus 2012 Conference

Sol Systems is proud to be sponsoring the Solar Energy Focus 2012 conference which will host 50+ speakers, 12 breakout sessions, 350+ business leaders, investors, legal experts, developers and policy-makers. The conference will take place on November 28, 2012 at the Marriott at Metro Center in Washington, DC.  To register for the conference, please visit www.solarenergyfocusconference.com.

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 solar installers 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 or www.solmarket.com

S-REITs – The Closest Option to Public Solar Financing?

Solar finance is not a new concept, but it’s predominately controlled through private and business to business transactions. The limited availability of capital, combined with the risks associated with a still maturing solar market, leave developers with a higher transaction costs in the search of  financing for solar projects. Platforms such as SolMarket attempt to mitigate the challenges of solar finance by matching projects with an appropriate network of pre-qualified investors.

In the search for new sources of capital, topics of “real property” and REITs (Real Estate Investment Trusts) have arisen within the solar community. A REIT, as defined by the Securities and Exchange Commission, “is a company that owns – and typically operates – income-producing real estate or real estate-related assets.” REITs act similar to exchange traded funds where public investors can participate in a diversified pool of real estate investments without owning or purchasing property. Investors would earn a share of the income produced through the commercial site through dividend payments. Currently, there are two tests for REITs. First, the income test requires that 95% of income must come from approved sources (usually rent). Second, the asset test requires that 75% of its assets must be real property.

If the property definition for solar PV systems is changed through tax code reform, investors could begin to explore the potential world of S-REITs (Solar Real Estate Investment Trusts). S-REIT’s would allow for a more transparent, secure, and competitive method of financing solar projects. The pool of investors would expand beyond private investment funds, to retail investors and even pension funds. One of the most attractive features of a REIT is its exemption from corporate taxation, as long as it distributes 90% of income to investors. In the case of solar, the main challenge arises with the income test. Unfortunately, the qualifications of a power purchase agreement as a form of rent are, at best, questionable.

Of course, even if solar fulfills the requirements of a REIT system through PPA installments, PV systems are still considered personal property. A change in the property tax code has to occur in order for S-REITs to exist. One important definition by the Internal Revenue Service regarding real property includes “land or improvements thereon, such as buildings or other inherently permanent structures thereon,” (Section 1.856-3(d) of the Income Tax Regulations) while personal property is essentially everything else that you own.

While solar energy systems can be physically moved, they are often fixed for periods up to, and beyond, 25 years. The main inhibitor to establishing solar as real property is the concept that solar panels operate in a system.  That is, if the inverter or mounting is removed from a solar installation, the array’s functionality is reduced or completely eliminated.

The National Renewable Energy Laboratory recently wrote a detailed report on S-REITs.

S-REITs are yet another innovation of the solar finance community. However, like other facets of the solar market, S-REITS face the challenges of complex state regulations and tax codes. While the concept may never come to fruition, the idea signals a greater demand for a more transparent, liquid, and stable solar market.

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 installers 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 the origination, diligence, and financing processes. Developers seeking financing for 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.

Sara Rafalson

Sol Systems to Host Webinar on Investor Preferences for Solar Projects

This Thursday, May 3, 2012, at 12:00 EST, Sol Systems will be hosting a webinar, “Investor Preferences: Key Solar Project Traits that Lead to Successful Financing.”

In this presentation, Yuri Horwitz and Jigar Shah will discuss the benchmarks for successful solar development of commercial and utility-scale solar projects in the United States.  Drawing significant experience in the commercial solar space, as well as data-driven aggregate statistics from SolMarket projects and investor partners, the webinar will highlight key characteristics of both successful and unsuccessful solar projects while providing specific examples.  The presentation will also examine the different types of investors in the solar space currently and what they are looking for when projects come across their desk, as well as what may ultimately doom or save a project.

Yuri Horwitz is the CEO of Sol Systems and developed, and now manages, the $2 billion SolMarket investor network, composed of independent power producers, family offices, tax equity, private equity, and others.  Jigar Shah founded SunEdison, one of the world’s leading solar services company and currently serves as the CEO of the Carbon War Room.  Mr. Shah has also developed and run distributed solar funds and now sits on the board of a number of solar development and financing companies.

Space for this webinar is limited, so we encourage you to register early.  This should be a great event.

Please Click Here to Register

About Sol Systems

Sol Systems is a Washington D.C. based solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution.  To date, Sol Systems has helped over 3,000 customers finance projects ranging in size from 1 kW to multi-megawatts in size.  Sol Systems currently operates throughout the United States and has partnerships in place with hundreds of solar installers and developers.  For more information, please visit www.solsystemscompany.com.

About SolMarket

SolMarket is a transaction-driven ecosystem for the solar industry that catalyzes investment in solar energy by transforming how solar projects are financed.  SolMarket provides investors and developers with the tools they need to efficiently originate, evaluate, finance, and construct renewable energy projects.  SolMarket has over $1.9 billion in committed partnership funds seeking qualified solar projects and hundreds of users from the solar community.  SolMarketis a wholly owned subsidiary of Sol Systems, the country’s oldest and largest SREC aggregator.  For more information, please visit www.solmarket.com.

Anna Noucas

1603 Grant Fails to Pass in the Senate

The 1603 Treasury Program expired at the end of 2011 sparking much debate over the critical role it plays in growth for the solar industry.  Without the 1603 Treasury Program, providing payments for solar facilities in lieu of tax credits, accessibility to financing for these systems will be much more limited and the solar industry is expected to take a slight hit in installations in the near future. The US Partnership for Renewable Energy (USPREF) expects a 50% decline in tax equity for solar projects- from peak equity levels of $7.5 billion in 2011 to $3.5 billion.  However, growth is expected to continue in the industry due to declining production costs, existing tax equity programs, and general momentum in the market.

From the President to Senate, action has been taken to bring this program back to the forefront of discussion.  In President Obama’s most recent budget proposal, he expressed his support for the clean energy industry by including language on a “Clean Energy Standard,” which would look to produce 85 percent of the country’s electrical power from clean energy sources by 2035 (including solar, wind, nuclear, and natural gas).  Keeping this “Clean Energy Standard” in mind, President Obama also included increased funding and opportunities for the above mentioned energy industries – highlighting the extension of the 1603 Treasury Program for the solar industry.

President Obama’s support for the clean energy industry sparked movement in Congress to bring the President’s suggestions to life.  Senator Jeff Bingaman (D-NM) answered the President’s call for improvements and greater support for the clean energy industry by proposing legislation that would establish a Clean Energy Standard for America.  Moreover, Senator Debbie Stabenow (D-MI) took similar action by introducing an amendment to the Highway and Transportation Bill (S. 1813) that would extend the 1603 Treasury Program, as well as many other renewable energy-related programs (S. Amdt. 1812).

Sen. Stabenow introduced the amendment on Wednesday, March 7, 2012 and was joined by many of her colleagues on either side of the aisle who introduced their own partisan energy-related amendments.  Senator Jim DeMint (R-S.C.) introduced an amendment that would put an end to energy subsidies, while leaving oil and gas incentives untouched (Senate Amendment 1589).  Less than a week later, the Senate passed the transportation bill without the presence of Sen. Stabenow’s amendment, which failed to receive bipartisan support with a 49-49 final vote.  In a small victory for the industry, DeMint’s amendment failed to pass during the March 13 vote.  Other amendments supporting the advancement of the renewable energy industry and the energy independence of our country failed to reach approval as well.  With a lack of full support from the Democrats and immense opposition on the Republican side, the partisanship of Congress created a harsh environment to ensure the passage of this amendment.

The benefits of the 1603 extended well beyond large-scale solar projects. The majority of the 5,000 solar firms in the US are small businesses, many of which have benefitted on some level from this program to acquire capital for their projects.  These companies, otherwise unable to monetize the various tax equity incentives because of a lack of immediate capital, have been able to create successful businesses through the section 1603 grant. In 2011, the 1603 grant filled a $3.5 billion void in demand for financing that totaled $7.5 billion.  The program created a low-risk cash transfer for projects, aiding the industry to grow at astronomical rates during its lifecycle, as well as lower capital costs to the producer and subsequently lowering consumer costs.  It enabled the solar industry to reach grid parity in Hawaii and California, and placed it on the same track for several other states.  The USPREF estimated that the 1603 grant created about 155,000 direct industry jobs, with the potential to create an additional 37,000 if renewed.

However, the opposition points to the failure of large-scale, capital-intensive projects as wasted expenses, funded by taxpayer money.  The program did not limit eligibility based on the size of the system. Therefore, all levels of the commercial sized system can qualify.  Perhaps future attempts to extend the 1603 grant should contain language that would target smaller commercial systems from larger commercial systems, which can qualify for tax equity incentives. Limiting the size of qualifying systems would shrink the magnitude of the funds supplied by the grant, thus reducing the size of the losses when they occur.  This will not only continue to benefit businesses that have thrived under the availability of cheap and reliable capital, but could also placate the Congressional opposition that highlights the loss of revenue from costly failed projects.

Sol Systems will continue to track any progress of this grant and any other initiatives supporting the solar industry on the federal level.  Please also check out our blog for updates on state legislation as well.

About Sol Systems
Sol Systems is a solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution. With thousands of customers and hundreds of partners throughout the United States, Sol Systems is the largest and oldest SREC aggregator. We provide homeowners, businesses, solar installers, and developers with sophisticated financing solutions that help make solar energy more affordable. Sol Systems also helps energy suppliers and utilitiesmanage and meet their solar RPS requirements efficiently by providing them with access to diverse portfolios of SRECs. For more information, please visit http://www.solsystemscompany.com.

Anna Noucas

Maryland General Assembly on Track to Pass Legislation to Accelerate the State’s Solar RPS Requirement

Due to sun-setting Federal incentive programs for solar energy and the current structure of Maryland’s Renewable Portfolio Standard (RPS), Del. Sally Jameson (D-28) and Sen. Rob Garagiola (D-15) proposed legislation that attempts to address this concern. House Bill 1187 will accelerate the solar carve-out expecting utilities in Maryland to achieve the 2% solar energy generation requirement by 2020, instead of the current requirement of 2% by 2022.  The belief is that the current standard will create a glut, or oversupply, of SRECs due to a higher annual increase in solar energy after 2016. This could distort supply and demand of SRECs, thus making the market volatile and less predictable.  HB 1187 aims to provide stability to a potentially volatile market by “smoothing” out the growth of solar in Maryland.

HB 1187 does not increase the overall solar requirement for Maryland; rather it accelerates the achievement of 2% solar by two years (see chart below for comparison). Moreover, although from 2013-2020 there will be yearly increases in demand, as compared to the current requirements, the end goal and requirements for solar will not be affected.

Energy Year Current Requirements Proposed Requirements
2012 0.10% 0.10%
2013 0.20% 0.25%
2014 0.30% 0.35%
2015 0.40% 0.50%
2016 0.50% 0.70%
2017 0.55% 0.95%
2018 0.90% 1.40%
2019 1.20% 1.75%
2020 1.50% 2.00%
2021 1.85% 2.00%
2022 2.00% 2.00%

The estimated benefits of this acceleration could not only create a more stable market with a steadier roadmap of SREC prices, but will also extend into the Maryland economy as a whole. Based upon industry information, HB 1187 could create over 10,000 jobs across the Maryland economy by 2018. Industry predictions state that the legislation could incentivize over $3 billion in investment and $144 million in revenue for the State as a result of job creation.

What does this mean for the ratepayer? The legislation was designed with a 1% price impact on the customer. HB 1187 anticipates a residential compliance cost of $0.19 per month and an average commercial electrical bill increase of 0.11%.  However, the proposed RPS will actually create savings for the ratepayer when compared to the costs incurred from the current RPS schedule.

HB 1187 passed the House with unanimous support on March 21, 2012 and is currently proceeding through the Senate. After having initially failed the Senate Finance committee, SB 791 managed to pass through the committee 8-2 upon reconsideration during a vote late March 29, 2012. After a final lobbying effort by stakeholders and advocacy groups, SB 791 passed upon second reading in the Senate on April 2nd and will undergo its third reading tonight, April 4th, when it is likely to become law. Sol Systems will post an update as soon as more information is released on the status of the bill.

Sol Systems currently offers three types of SREC agreements for Maryland solar systems (both photovoltaic and solar thermal): Sol Brokerage, Sol Upfront, and Sol Annuity. Please email info@solsystemscompany.com or contact your solar installer for more specific pricing.

About Sol Systems
Sol Systems is a solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution. With thousands of customers and hundreds of partners throughout the United States, Sol Systems is the largest and oldest SREC aggregator. We provide homeowners, businesses, solar installers, and developers with sophisticated financing solutions that help make solar energy more affordable. Sol Systems also helps energy suppliers and utilities manage and meet their solar RPS requirements efficiently by providing them with access to diverse portfolios of SRECs. For more information, please visit http://www.solsystemscompany.com.

Sara Rafalson

Sol Systems and Cooley Announce Webinar Series on Bankable Solar Contracts

Sol Systems, LLC and Cooley LLP are pleased to announce a webinar series on bankable solar contracts for solar installers, developers and investors.  Each webinar in the series will lead participants through key terms and issues of a different contract and will provide an opportunity for Q&A.  The webinars will be hosted by Sol Systems’ CEO Yuri Horwitz, Cooley Clean Energy and Technologies group attorneys, and guest panelists.

The webinar series is a complement to the strategic collaboration announced by Sol Systems and Cooley last fall.  Through this collaboration, Cooley developed a suite of legal e-documents and tailored consulting services for Sol Systems’ SolMarket users.  SolMarket is a transaction-driven community that facilitates solar project origination and investment and currently has more than $1.7 billion in aggregate partnership funds.  Members of the SolMarket community have access to this network of funding as well as transaction and financial resources.  SolMarket members can view and utilize Cooley’s form legal templates as well as request direct consultations with Cooley attorneys.

“The Cooley collaboration and our suite of legal templates are critical to our overarching goal of driving efficiencies and uniformity into the solar space,” said Horwitz.  “Cooley and Sol Systems are focused on connecting a fragmented solar industry and helping solar companies operate more efficiently.”

“This collaboration with Sol Systems is part of Cooley’s deep commitment to the innovative delivery of legal services and business insight in the clean energy and technology space,” said Cooley Partner Tom Amis, co-chair of the firm’s Clean Energy and Technologies practice. “SolMarket is rapidly becoming a go-to resource for some of the most exciting and ambitious players in the solar and clean energy space, from across the United States and further afield.”

Webinar Series Schedule

  • Wednesday, February 15, 2012 at 12:30 pm EDT: Engineering, Procurement and Construction (EPC) Agreements Register
  • Wednesday, February 29 at 12:30 pm EDT: Power Purchase Agreements (PPAs) Register
  • Wednesday, March 14 at 12:30 pm EDT: Securing Site Control Register
  • Wednesday, March 28 at 12:30 pm EDT: Developing a Solar Lease Register

Questions regarding the webinars should be directed to info@solmarket.com and interested participants can sign up by visiting https://www.solmarket.com/events.

About Cooley LLP

Cooley’s 650 attorneys located throughout the U.S. and in China have an entrepreneurial spirit and deep, substantive experience, and are committed to solving clients’ most challenging legal matters. From small companies with big ideas to international enterprises with diverse legal needs, Cooley has the breadth of legal resources to enable companies of all sizes to seize opportunities in today’s global marketplace. The firm represents clients across a broad array of dynamic industry sectors, including technology, life sciences, venture capital, clean energy, real estate and retail.

Cooley Clean Energy and Technologies group attorneys have been singularly focused on the renewable energy sector for over a decade. Cooley’s comprehensive strength throughout the clean energy value chain, from emerging cleantech startups to utility and refinery scale deployment, is unique among law firms and provides a compelling value proposition for our clients.

About SolMarket

SolMarket is a transaction-driven ecosystem for the solar industry that catalyzes investment in solar energy by transforming how solar projects are financed. SolMarket provides investors and developers with the tools they need to efficiently originate, evaluate, finance, and construct renewable energy projects. SolMarket has over $1.7 billion in committed partnership funds seeking qualified solar projects and hundreds of users from the solar community. SolMarket is a wholly owned subsidiary of Sol Systems.

About Sol Systems

Sol Systems is a Washington D.C. based solar finance firm, and the largest solar renewable energy credit (SREC) aggregator in the nation. Through its SREC offerings, it has promoted the development of the solar market by providing long-term financing options for SRECs, facilitating over $100 million in solar development.

Contact

Sara Rafalson, Associate, Sol Systems
sara@solsystemscompany.com
(202) 588-5459

Thomas Freeman, VP Communications, Cooley LLP
tfreeman@cooley.com
(212) 479-6514

Life After the 1603 Grant: the Road Ahead

The following is a mutli-part series on the Cash Grant and the Road Ahead. It is part of Sol Systems‘ continuing efforts to provide the industry with the information and ideas (where we can) that we believe it needs to continue to succeed. For additional resources on project development, we recommend you join the SolMarket community, which provides a number of informational resources and the SolSmart suite of legal documents.

In February of 2009, the federal government passed ARRA, and the 1603 Investment Tax Credit (ITC) Cash Grant program with it. The Program effectively transformed what was traditionally an investment tax credit into a cash grant, awarded by the treasury, within 60 days of commercial operation. It was perhaps the single most important piece of legislation for solar in recent history, spurring huge growth in the sector, recently estimated to be 69% year over year. In January of 2012 the 1603 ITC Cash Grant will expire, and with it the ability for developers and investors to secure the cash grant in lieu of a tax credit.

So what’s next?  Well, let’s take a look.

Part I: Looking Back

Under the Emergency Economic Stabilization Act of 2008, a 30% tax investment credit for qualifying renewable energy projects was extended through 2016, allowing owners of solar projects to offset 30% of a solar system’s cost through tax credits.  So long as a system owner had enough tax liability over the course of 5 years, he or she would be able to deduct 30% of the system’s gross cost from their federal taxes.

Because most solar project companies or developers working on commercial and utility-size PV projects do not generate enough taxable profit on their balance sheets to utilize the 30% tax investment credit (ITC), they had to seek a financial intermediary with the necessary tax liability to buy a stake in the project company and monetize these tax credits, what is commonly referred to as “tax equity investors”.  Tax equity investors are effectively companies with large balance sheets, traditionally banks and more recently larger corporations, which purchase tax credits to shelter otherwise taxable income, while also providing an essential financing tool for large renewable projects.

In 2007, the Solar Energy Industries Association (SEIA) estimated there were up to 28 tax equity investors, primarily financial institutions led Morgan Stanley, JP Morgan and others.  However, the collapse of Lehman Brothers and the financial crisis of 2008 effectively ended most of these companies participation in the tax equity market for renewables.   Several companies, such as AIG and Prudential, departed the tax equity market entirely because of bankruptcy or uncertainty about whether they would have sufficient taxable income.

II. The 1603 Program

In response, President Obama approved the Section 1603 Cash Grant Program (as part of the American Recovery and Reinvestment Act of 2009), to effectively stabilize renewable energy market by providing $1.9 billion of cash grants in lieu of tax credits.  Under the 1603 Program, owners of a renewable energy system could simply apply for a cash grant to cover 30% of the system’s cost, regardless of their tax liability.

The 1603 Program catalyzed the solar market, with approximately 80% of solar projects opting for the cash grant, driving growth of 104% between 2009 and 2010 in the United States. As of mid-August 2011, 87% (2,095) of the 2,410 cash grants awarded under the 1603 program were provided to solar energy projects (although only 27% of the nominal value if these grants). Since October of 2010, the federal government has invested over a billion dollars in solar projects through the 1603 Grant Program.

Unfortunately for the solar industry, the Section 1603 Program is set to expire at the end of this year, and it appears highly unlikely that it will be renewed again.   With the expiration, interested parties without the necessary tax liability will again have to rely on tax equity investors to fully monetize the ITC.   The problem is twofold: (i) the tax equity market has not yet fully recovered and there are only an estimated 10 to 15 investors looking for tax equity deals and (ii) integrating tax equity into deal structures will significantly increase transaction costs, raise the costs of development, and potentially limit smaller deal sizes.

The result will be a bottleneck in 2012-13, where a substantial number of solar developers and other interested parties look to construct or own commercial-sized solar system, but only a select few can secure the requisite tax equity financing. This will mean a number of projects will not be developed, and those projects that do secure tax equity will see increased yields. Some projects are likely to seek safe harbor under the 1603 Program by securing 5% of the total costs of the system, but this strategy brings with it its own challenges.

So now, as we look towards the horizon, what’s next? What will happen to this 80% of the industry opting for the cash grant? Companies like Sungevity, Sanyo and Vivent are quickly lining up tax equity for the upcoming year, and some believe market growth will slow by up to 50% in the second half of 2012. Might these challenges be mitigated by solar modules priced below $1.10/watt? What creative solutions will our industry implement to meet these financing challenges?

Please join us(and others) next week for Part II of this Series: “Life After the 1603 Grant: Looking Ahead”

After Solyndra: Renewable Energy Financing 3.0

Sol Systems CEO Yuri Horwitz and Associate Andrew Gilligan were featured in yet another article on AOL Energy!

Innovations in renewable energy finance have begun to address an additional obstacle to project development — linking project developers to potential investors.

Solar finance firm Sol Systems launched an online platform, SolMarket, on 31 August. SolMarket is designed to add a level of transparency to the solar financing market by easing communication between project developers and potential investors.

“The communication channels, the financing channels, the due diligence channels were all disrupted and fragmented,” Sol Systems CEO Yuri Horowitz told AOL Energy.

Participation in the platform appears to be growing. In the first two weeks of operations, SolMarket’s partnership funds — those that have agreed to use the platform for due diligence purposes — rose to $400 million from $350 million.

Much like a social networking site, each company and project has a searchable profile that it can make available to potential investors. This allows both sides to more efficiently identify partners or projects of interest.

“They’re not picking up the phone to call 50 developers or 50 investors,” Horowitz said. “That in and of itself is going to save the industry huge amounts of money.”

Resources for solar firms include standardized documents which, when developed by independent firms, can be costly and may not include the information that investors consider vital, as well as standardized analysis tools to evaluate a project’s performance under different financing scenarios or off-take prices.

The site also offers member discounts on solar modules, which may prove particularly valuable to “mid-tier” developers of projects in the 50kW-1MW size range.

“Group purchases are really focused on those small systems, providing them with pricing that they otherwise could not get,” Horowitz said. And they seek to offer the advantage of volume to SolMarket‘s partners on the manufacturing side.

“There’s a lot of room there to grow, but what’s really holding that market back are the transaction costs,” he said.

Read more about SolMarket and renewable energy financing.

Sol Systems Issues Call for Solar Projects – New Project Finance Platform Now Has $400 Million in Available Funding

Sol Systems Issues Call for Solar Projects – New Project Finance Platform Now Has $400 Million in Available Funding

Washington, DC: September 14, 2011 – Less than two weeks after launch, Sol Systems is proud to announce that its new solar finance platform, SolMarket, has increased from $350 million in available investment dollars to $400 million.  In addition, reception by solar installers and developers across the country has been overwhelmingly positive.  SolMarket’s network now includes over 180 companies and 300 users.

SolMarket is a financing platform that will catalyze investment in solar energy projects nationwide by transforming how solar projects are financed.  SolMarket provides investors and developers with the tools they need to efficiently originate, evaluate, finance, and construct renewable energy projects.  It provides a standardized origination platform, a document library, modeling software, and a standardized document suite.  SolMarket will also offer developers group purchase discounts for solar modules and other equipment.  There are no costs for developers to participate in SolMarket.

“We talk to hundreds of solar developers about prospective commercial and utility-scale projects, and unfortunately, many of these solar projects are never built due to an inability to efficiently locate financing,” said Yuri Horwitz, CEO of Sol Systems.  “We have created SolMarket to help drive efficiencies into the solar market and connect investors and developers effectively.  SolMarket will reduce the cost of financing transactions and enhance the tempo of solar project development.”

SolMarket is currently seeking projects ranging from 50 kW to multi-megawatts in size.  Solar developers are encouraged to submit their projects prior to September 30th, when investors will get their first look at projects.  Projects entered prior to this date increase their visibility and the likelihood of getting included in the investors’ 2011 portfolios.

Sol Systems invites interested solar developers to attend a SolMarket webinar, hosted every Tuesday, Wednesday, and Thursday during the month of September at 2 pm EST.  For more information, please email info@solmarket.com or visit www.solmarket.com.

About Sol Systems

SolMarket is a wholly owned subsidiary of Sol SystemsSol Systems is a Washington D.C. based solar finance firm, and the largest solar renewable energy credit (SREC) aggregator in the nation, with over 2,300 customers and over 20 MW of solar capacity under management.  Through its SREC offerings, it has promoted the development of the solar market by providing long-term financing options for SRECs, facilitating over $100 million in solar development.

Contact:

Ms. Sudha Gollapudi, Director of Strategic Partnerships

info@solmarket.com

888-765-1115 x1

Sol Systems Issues Call for Solar Projects – Launches Project Finance Platform with $350 Million in Available Funding

Washington, DC: August 31, 2011 - Sol Systems today announced the launch of SolMarket, a new financing platform that will catalyze investment in solar energy projects nationwide by transforming how solar projects are financed.  SolMarket launches with over $350 million of committed partner funds, actively seeking solar projects in need of financing.

SolMarket provides investors and developers with the tools they need to efficiently originate, evaluate, finance, and construct renewable energy projects.  It provides a standardized origination platform, a document library, modeling software, and a standardized document suite.  SolMarket will also offer developers group purchase discounts for solar modules and other equipment.  There are no costs for developers to participate in SolMarket.

“We talk to hundreds of solar developers about prospective commercial and utility-scale projects, and unfortunately, many of these solar projects are never built due to an inability to efficiently locate financing,” said Yuri Horwitz, CEO of Sol Systems.  “We have created SolMarket to help drive efficiencies into the solar market and connect investors and developers effectively.  SolMarket will reduce the cost of financing transactions and enhance the tempo of solar project development.”

SolMarket has already attracted funding from a number of investors and is seeking projects ranging from 50 kW to multi-megawatts in size.  Solar developers are encouraged to submit their projects prior to September 30th because investors are quickly building out their portfolios for 2011.

Sol Systems invites interested solar developers to attend a SolMarket webinar on Thursday, September 1st, Friday, September 2nd, or Tuesday, September 6th at 11 am EST.  For more information, please email info@solmarket.com or visit www.solmarket.com.

About Sol Systems

SolMarket is a wholly owned subsidiary of Sol Systems.  Sol Systems is a Washington D.C. based solar finance firm, and the largest solar renewable energy credit (SREC) aggregator in the nation, with over 2,300 customers and over 20 MW of solar capacity under management.  Through its SREC offerings, it has promoted the development of the solar market by providing long-term financing options for SRECs, facilitating over $100 million in solar development.

Contact:

Ms. Sudha Gollapudi, Director of Strategic Partnerships

info@solmarket.com

888-765-1115 x1

Magic and Sunrays in the Air

In a neighborhood where painting your door a different color requires approval from a presidentially appointed commission, Georgetown Energy is aiming to permanently change the view of dozens of houses – from the sky.

Georgetown Energy, a student consultancy devoted to helping residents convert to solar electricity, is heading a monumental solar project that involves turning 43 quintessential student townhouse residences to solar electricity in the midst of Washington DC’s historic Georgetown district. Although it is a long-term project to be enjoyed by the generations after many of the current members of the group have graduated, Georgetown Energy students believe that the rewards of such an innovative project are well worth the effort.

What magic surrounding solar coaxed students to become involved so profoundly?  First, there is a substantial payback for the investment. In a solar lease contract signed between Georgetown University, which owns the student townhouses, and Solar City, a leading national solar installation company, adding 96.6 kW of solar capacity to 43 townhouses will require an initial investment of about $164,000, much less than if the University were to purchase the solar panels. Although Georgetown Energy has partnered with SolarCity for this project and used its solar lease scheme as a model, the project will be offered to various installers at its final stages. In the innovative solar lease scheme, the University will “lease” the roof of each townhouse to the installer, which will design, own, and operate a solar photovoltaic system on each townhouse.  The installer will then sell the electricity produced from each solar project to the residents of the townhouse at a lower price than the traditional competing utility. Savings increase every year and over the 20 years duration of the solar lease contract, students would save a total of $458,856 in their electricity cost. After the contract is over, the student body can decide whether to buy the panels at a low price.

Indeed, another charming aspect of the proposal is that everything is student-owned. Originating from the need to allocate a 3.4 million dollar defunct student endowment, the solar investment will take up only a portion of the available fund and coexist with other student proposals as well as generate profit. Ideally, Georgetown Energy sees the proceeds creating a fund for related projects to further environmental awareness and energy studies on campus.

Is there anything else in it for the university, the students, and the DC area? Sol Systems, a strong force in the fight for better solar incentives in DC, believes so. Not only is being involved in such a movement ideal preparation for a career in renewable energy (two recent graduates and former members of Georgetown Energy actually work at Sol Systems), but there is much potential for the greater DC area too. Of course, cleaner air for the district tops the list. It may even attract more students interested in environmental and energy issues and demonstrate the feasibility of clean energy investments, creating a virtuous cycle of environmental awareness and action in the university community. Perhaps the project may even set an example of a successful clean energy investment that some students may follow individually in the future. Lastly, it is a modern display of service to the community, the crux of the founding Jesuit ideals of Georgetown University.

What stage is the project at right now? In April 2011, a student commission voted in support of the proposal. Now Georgetown Energy students are working with University officials on the details. These include contractual issues, billing mechanisms, pricing, and structural and electrical issues with the houses. The Georgetown Energy students are learning some concrete skills needed for evaluating any type of construction investment. The work done from June-August 2011 will culminate in a final recommendation to be handed to the University on September 1st after which Georgetown Energy students will have to persuade the rest of the student body off their feet for a concluding student referendum and choose from final proposals from competing vendors and permitting.  If all goes well, the battle will be won one year from today. The panels will be constructed in Fall 2012 and convert ordinary sunrays to a unique opportunity for revenue and intellectual growth – truly magic!

SRECs: Key Drivers in Solar Growth

Recent reports about both the domestic and global solar market have all pointed towards another year of remarkable growth. In fact, Bloomberg Finance identified Apple’s growth following the release of the iPad last year as the best analogy for the projected growth of the solar industry. Just a few days ago, the CEO of the Solar Energy Industries Association announced that the “solar is the fastest growing industry in America”.

With this incredible growth, it is useful to examine the key drivers behind the acceleration of the solar market. One key driver is the continuous reduction in PV cost, as prices for solar panels have declined by around 75% in the past 10 years. Solar panel prices in the U.S. specifically are set to drop by U.S. $0.20 per watt in 2011, bringing the average panel price to U.S, $1.40 per watt.

The second key driver is government policy and incentives. German and Japanese governments have been two of the leaders in the solar industry because they have legislated high incentives for solar deployment at the federal level. In the United States, however, state policies and utilities have played a larger role in growth, which has been impressive. In fact, the U.S. solar industry experienced a year-over-year growth of 67 percent. Furthermore, this growth is no longer simply due to California; over 16 states installed more than 10 MW in 2010. Solar Energy Industries Association (SEIA) CEO, Rhone Resch said, “the Mid-Atlantic region is beating California as the largest market in the U.S. for PV installations”.

Solar growth in the Mid-Atlantic and Northeastern region is due primarily to policies at the state level, which include both incentive programs and Renewable Portfolio Standards (RPS). These state programs award money to owners of solar systems to help offset the initial cost of the system. Renewable Portfolio Standards that include specific requirements for solar (i.e. solar carve-outs) mandate energy suppliers and utilities to generate or procure a certain percentage of electricity from solar or risk paying a steep Alternative Compliance Penalty (ACP).

Both measures have been effective, but solar carve-outs in the RPS represent a sustainable, market-based approach to solar financing. These solar carve-outs make Solar Renewable Energy Credits, or SRECs valuable, allowing solar system owners to realize the financial benefits associated with clean energy production. The percentage of solar electricity that energy suppliers must obtain increases each year until 2025 for most states with an RPS, guaranteeing that there will be a market for SRECs. Furthermore, an RPS is budget-neutral, and thus state governments do not have to worry about running out of funds prematurely, which has happened to several state solar rebate programs.

The Mid-Atlantic and Northeastern U.S. will have need for more than 3 gigawatts (GW) of new photovoltaic capacity by 2015, which is due in large part to these state solar carve-outs. The new capacity will be a mix of residential and business systems as well as utility-scale projects. Furthermore, with continued reductions in PV cost, there may actually be more solar deployment than is needed to satisfy the RPS. This makes the value of SRECs hard to predict in the short and long term; however, it does not change the fact that SRECs will remain an important piece of the solar financing puzzle for the next decade.

Looking forward, consistent and stable policies coupled with technical improvements will allow the solar industry to continue its remarkable growth.

Financing Residential Solar

Michael Leibreich, chairman of Bloomberg Finance’s Research Group on Energy Finance, recently stated that he believes the cost of developing a solar power project will be cut in half in the next decade. These cost reductions will pave the way for utility scale solar and they will also help make solar a viable option for residential solar.

Residential solar installations will remain a key part of the solar industry’s remarkable growth, and the distributed nature of these systems represents some of the most unique and most advantageous aspects of solar technology; however, reductions in technology costs are not enough to make solar affordable for everyone. Luckily, today, a homeowner has more options than ever to help finance the installation of a solar energy system.

The most basic way is to pay for the system out of pocket. This approach leads to the highest rate of return — assuming the homeowner can take full advantage of the federal investment tax credit/grant, state incentives, and the value of Solar Renewable Energy Credits or SRECs. However, solar PV systems still pose a high initial cost, and many residents do not have the ability to pay for the system completely out of pocket.

A subset of this option is taking out a loan to pay for the system. Residents can take out home equity loans from their banks or secure low-interest loans to cover the system cost from their installers. (In D.C., homeowners have received access to zero-interest loans for the first year through their solar installer.) This approach also allows the homeowner access to all the economic incentives for going solar, which along with energy savings, can be used to repay the loan in a very reasonable period of time.

Two other options that do not require the homeowner to fund the entire cost of the installation would be to (1) lease the system or (2) enter into a Power Purchase Agreement (PPA). Although these structures are now common among commercial solar installations, these financing structures are becoming more popular with homeowners in the past two years.

While the nuances of leasing structures often differ, the customer is basically leasing the solar energy system just like someone leases a car. This approach allows the customer to reduce energy bills without the high initial cost of going solar. However, in leasing a system, the homeowner would not own the system; therefore, they would not receive the federal tax incentives or state rebates – and in most cases they would not be able to take advantage of the economic incentives like selling SRECs.

Finally, a Power Purchase Agreement allows a homeowner to purchase electricity from a system located on their roof at a reduced rate. This means the homeowner will experience savings on their energy bills without large upfront costs. However, just like in leasing the system, the customer will not own the system, be able to take advantage of SRECs, or the federal and state incentives. In effect, they have not “invested” in a solar energy system, but they will still reap financial benefits because they’ve created a hedge against rising utility costs.

It can be a difficult decision for homeowners when selecting which financing option to use. A lot will depend on how the homeowner feels about the high upfront cost associated with owning a PV system. However, if the customer can afford the initial capital, then purchasing the system will provide them with a return on investment over the lifetime of the system.

By owning a solar energy system, the homeowner will be able to monetize all available incentives and also reap the value of producing clean electricity through the selling of SRECs. SRECs are valuable because several states have solar-carve outs in their Renewable Portfolio Standard (RPS) that require energy suppliers to procure a certain percentage of their electricity from solar or pay a steep Alternative Compliance Fee (ACP).

At Sol Systems, we offer 1, 3, 5, and even 10-year agreements for monetizing the SRECs of a system depending on the state. Fixed cost agreements such as Sol Annuity allow customers to confidently know their cash flow due to SRECs and subsequently calculate their payback period more accurately.

It is important for these financing options to remain economical choices as residential solar continues to grow. Furthermore, it is important homeowners take their time and fully understand the advantages and disadvantages before choosing how to finance their solar system.

Sol Systems to speak at PV America Conference on 4/5/11

Sol Systems, a solar finance company and the largest and oldest SREC aggregator in the U.S. will present at the PV America Conference in Philadelphia, PA on Tuesday, April 5th, 2011 at 10:30 AM.

Yuri Horwitz, CEO of Sol Systems, will be speaking with George Ashton, CFO, and Natacha Kiler, Director of Sales & Marketing. The presentation “Financing your solar project with SRECs” will address SREC market fundamentals, various types of SREC transactions, and the benefits of each type of transaction. Specifically, the speakers will address spot market transactions, multi-year aggregator contracts, contracts with compliance entities, upfront SREC payments, and the bankability of SREC contracts.

There will be a question and answer forum after the presentation. The Sol Systems management team will also be available to meet with existing and prospective partners on Monday, April 4th in advance of the presentation. For more information on the PV America conference, please visit www.pvamericaexpo.com. For more information on Sol Systems, please visit www.solsystemscompany.com.

Clean Energy Trends 2011 – Clean Edge: Solar is an Economic Powerhouse

Ten years ago, Clean Edge, a research and advisory company, published their first report on the clean energy industry. Recently they released their 10th annual Clean Energy Trends report, which highlighted strong growth in several renewable energy fields such as solar, and also predicted trends for the next decade. This report represents an opportunity to reflect on the progress and future of the solar market.

Clean Edge leads off the report by highlighting that global solar and wind markets have displayed growth rates similar to other technology revolutions like computers or telephony. For example, the global solar photovoltaic (PV) market has expanded from just $2.5 billion in 2000 to $71.2 billion in 2010, which corresponds to a compound annual growth rate of 39.8 percent. Clean Edge’s projections in 2000 for the growth of the solar market turned out to be 300 percent short, underscoring the fact that this booming decade in the solar market has surpassed predictions considerably.

In 2010 alone, new solar photovoltaic installations reached more than 15.6 GW worldwide, which is more than double the amount of new installations from 2009. Looking to the future, Clean Edge projects that the global solar market will increase to $113.6 billion by 2021.

Clean Edge also selects five key trends that will shape the clean-energy markets over the next decade, two of which directly include the solar market. Clean Energy projects the increase of partnerships between natural gas and solar, such as solar-gas hybrid systems. These plants would produce the environmental benefits associated with solar but with the integration of natural gas they can also address solar intermittency issues and use already existing infrastructure. Another trend that Clean Energy predicts for the coming decade is the increase of green buildings across the world, many of which will install solar panels in an attempt to drastically reduce the amount of grid-electricity they require. These trends are part of the reason Clean Energy is predicting continued growth by the solar industry and a 63% overall increase in industry size in the next decade.

These numbers and trends are all positive for the developing solar market. However, it is important to understand why the solar market is becoming more robust. The primary reason is the continual improvement in solar PV technology. Photovoltaic prices dropped by approximately 30 percent in 2009, and an additional 10 percent in 2010. Due to increased research and development in solar technology, the average cost to install a solar PV system decreased from $9 (per peak watt) in 2000 to $4.82 (per peak watt) in 2010. Government funding and legislation aimed at strengthening the solar industry during its infancy have also been vital to the sector’s growth.

Leading countries in the solar market, such as China, Germany, and the U.S., all established programs that helped fund solar R&D and deployment or guarantee a buyer for solar electricity. In Germany, a solar feed-in-tariff allows anyone generating electricity from solar PV to receive a guaranteed payment higher than the market rate, which guarantees that solar projects will be a profitable investment. China, who is projected to surpass Germany in 2013 as the world’s solar largest market, identified the solar sector as having the most potential in the energy industry and projected 5 million kWh of solar capacity by 2015.

The U.S. has a Federal Tax Investment Credit or Grant program that will cover 30% of a solar system’s initial cost, and this has been an invaluable financing tool. However, without a federal Renewable Portfolio Standard (RPS), solar system owners and developers have turned to states with solar carve-outs in their RPS as an ideal location to deploy solar. These solar carve-outs mandate that energy suppliers procure a certain percentage of solar-generated electricity or pay an alternative compliance penalty (ACP), which makes Solar Renewable Energy Credits, or SRECs, valuable. An SREC is a tradable credit that represents all the clean energy benefits associated with 1 megawatt-hour of solar energy. Selling these SRECs to energy suppliers allows solar system owners to decrease the payback period. These carve-outs, many in place until 2025, will help foster the continued growth of the solar market as the price per watt continues to come down due to further R&D.

While technical improvements in PV technology have been and continue to be a primary driving force in solar growth, supportive government policies and SREC markets are essential in terms of incentivizing the industry and creating ripe conditions for solar investment. With effective government incentives, the solar industry will continue to be an economic powerhouse in the next decade.

About Sol Systems
Sol Systems is a solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution. With thousands of customers and hundreds of partners throughout the United States, Sol Systems is the largest and oldest SREC aggregator. We provide homeowners, businesses, solar installers, and developers with sophisticated financing solutions that help make solar energy more affordable. Sol Systems also helps energy suppliers and utilities manage and meet their solar RPS requirements efficiently by providing them with access to diverse portfolios of SRECs. For more information, please visit www.solsystemscompany.com.

Counterintuitive Energy Subsidies

One of the most common arguments against renewable energy resources such as wind and solar is that they are not cost-competitive compared to traditional fossil fuels. Accordingly, government officials, business leaders, and taxpayers are concerned about the billions of dollars that would have to be spent in government funding and subsidies to make renewable energy more cost competitive today. However, when one examines the subsidies that fossil fuels receive annually, as well as their negative externalities, it is harder to argue that renewable energy is “too expensive”.

The majority of industries require support and legislative stability during their infancy, and this is especially true of the energy industry. It should come as no surprise that government funding and subsidies were used to help the coal and oil industries when they were first developing. However, it is unclear why fossil fuels, now a mature industry, received $72.5 billion in U.S. federal subsidies between 2002-2008. To put this in comparison, the solar industry received less than $1 billion in federal subsidies during that same time period, and all renewable energy fields together received $29 billion. If fossil fuels are so much cheaper, why should they receive more than double the amount of federal funding?

Federal subsidies include incentives, tax breaks, loan guarantees and other credits. President Barack Obama made a commitment to support clean energy, and solar subsidies have significantly increased since he took office, highlighted by a 30% Federal Tax Credit or Grant program for solar. Furthermore, Obama has proposed reducing subsidies and tax breaks for oil, natural gas and coal producers in his budget proposal each year. The G20 echoed this rhetoric, proposing in 2009 to begin phasing out fossil fuel subsidies, which was applauded by economists and environmentalists.

Yet nothing has changed. Congress successfully opposed these cuts and reductions, thanks in large part to heavy lobbying from oil, gas, and coal companies. Furthermore, none of the G20 countries have enacted a subsidy-cutting policy.

Even though 80% of Americans agree that Congress should consider reallocating federal subsidies from fossil fuels to solar, and 92% of Americans support pollution-free technology, it appears inevitable that renewable energy will lose out in subsidy fights because of the power of the entrenched fossil fuel industries. Supporters of fossil fuel subsidies point to the fact that oil prices often depend on situations in foreign countries, making the market more volatile and thus they need insulation, but this seems to be a critical disadvantage of the oil industry, not something that should be supported.

At this point, fossil fuel industries have a price advantage over alternative fuel sources because of industry maturity and federal subsidies. If a free market without subsidies existed though, fossil fuels would still be priced inaccurately due to their negative externalities.

An externality is a cost or benefit to a party that did not directly participate in the transaction. For example, fossil fuels’ most significant negative externality is pollution. Fossil fuel energy production is the primary contributor to greenhouse gas emissions that are associated with climate change. In basic economics, when a product or service has negative externalities that are not reflected in the cost, it makes sense for governments to levy a tax or charge that reflects the true cost of that action to society. However, under the status quo, levelized cost does not exist for energy sources – and the fossil fuel industry receives billions of dollars in annual subsidies to help reduce their cost.

Federal incentives for the fossil fuel industry are likely to continue, meaning renewable energies must be able to take advantage of other opportunities in order to compete. Several states have recognized a need for state-based intervention and they have helped create a better market for solar deployment through solar “carve-outs” in their Renewable Portfolio Standard (RPS). These carve-outs mandate that electricity suppliers procure a certain percentage of their electricity from solar sources. In effect, this legislation leads to a valuable market for Solar Renewable Energy Credits, or SRECS.

The ability to sell the benefits of clean solar electricity at reliable prices has prompted an increase in solar deployment in states like Pennsylvania, New Jersey, Ohio, and the District of Columbia among others, and this market-based solution does not have to rely on federal or state funding.

Looking forward, states should make good use of solar carve-outs in an attempt to level the playing field with the fossil fuel industry. State-created solar requirements and SREC values can help the solar industry get stable funding in its developing years – and eventually solar will stand on its own in the market.

SREC Price Determinants in 2011

What Will Drive SREC Prices in 2011?

Most market participants are familiar with the three basic drivers of solar renewable energy credit (SREC) prices – SREC supply, SREC demand, and state solar compliance penalties. Most of this information can be found on RTO and state commission websites and analyzing this data yields an adequate view of the current state of the SREC market. However, to fully understand the 2011 SREC markets, a better understanding of the drivers of supply and demand is required.

SREC Supply Forecast:

The price of panels and installation will be an important input in determining the future supply of SRECs. Panel prices and installation margins have decreased considerably over the last year, especially on the East Coast. Cheaper panels and installation margins mean more development and increased SREC supply. However, 2011 will also see the disappearance of many state solar rebate programs. States like Ohio, Pennsylvania, New Jersey, and the District of Columbia are finding their coffers running low for state money to support solar projects. This means that new projects in 2011 will have to rely more heavily on the value of SRECs, which should slow development and SREC supply considerably. We have also seen new interest from traditional banks, particularly in large scale solar projects, which should bring down the cost of financing for large scale developers. Private high yield investors have now moved into the commercial and light commercial space, which means more money for these projects but at a pricey cost. Together these market effects will work to determine SREC supply in 2011. For example, will panel prices and installation costs fall enough to compensate for the termination of many state solar rebate programs? These questions will be important to answer before estimating additional SREC supply in 2011.

SREC Demand Forecast:

SREC demand is legislated by the renewable portfolio standards in each state. Consequently, demand would appear to be easy to determine. However, an increasing number of long term SREC contracts and energy suppliers with their own projects will mean that the demand that appears to be in a market could already be “spoken for”. Furthermore, with compliance entities in some states filing for force majeure, demand that should be in the market may in fact be pardoned. Even with all of these moving parts, demand is remains far easier to predict than supply.

Comparing Supply and Demand:

The standard interstate analysis of supply and demand will become more complicated in 2011 as SREC sellers in states with crumbling SREC markets look to cross state lines to sell their SRECs into other states. Determining the pace of those cross-registrations and the flexibility of the market to move those SRECs from one state to another, keeping in mind that some portion of those SRECs are locked into long term contract, will be important to determining the supply and demand balances in each state. Brokers have also added some complication to the market, as offers and bids are multiplied across the market and often give the appearance of significance amounts of demand or supply. Neither of which is healthy for a developing market.

Legislative Changes:

Increased reliance by projects on SREC prices and increased scrutiny brought upon compliance entities to meet the RPS standards will both cause market participants to look more closely at RPS statutes to determine exactly what will and will not qualify in-state. Additionally, where SREC markets can no longer support solar development, the solar community will apply pressure to politicians to increase demand to support job growth in one of today’s few industries reporting job growth: solar.

In the end, the three primary market drivers will remain the same. But what is more important than today’s supply and demand are tomorrow’s. To get a clearer picture of those dynamics, one will have to combine a historic view of growth with the changing landscape ahead to arrive at any number of varied outcomes. After all, that is what makes a market.

FERC Rulings on Solar Feed in-Tariffs

Solar feed-in tariffs (FIT) have served as one of the primary policy tools for increasing the deployment of solar energy in several countries. Yet a recent ruling by the Federal Energy Regulatory Commission (FERC) makes the future of solar FITs in the U.S. uncertain.

A feed in tariff is basically a subscription program where the owner of a solar system can sell their electricity at a fixed rate to utilities. The utilities are required to purchase the solar electricity at this determined rate, which is higher than the normal wholesale electricity price. Feed-in tariffs, highlighted in places such as Canada and Germany, have the potential to be great for solar deployment because they guarantee a certain cash flow, thus minimizing the risk for those financing solar.

However, there also drawbacks to FITs. In the U.S., the success or failure of such a policy would depend on the ability of the state legislature to determine the correct fixed rate for solar electricity that incentivizes solar without oversubsidizing it. This fixed rate contract for purchasing electricity is more dependent on government funding and consistent political will than market forces.

Regardless of whether you agree more strongly with the advantages or the disadvantages of a solar FIT, it is important to note the FERC ruling on FITs this past year and its likely consequences. On July 15th of last year, the interstate electricity regulators at FERC affirmed the fact that they had exclusive authority over wholesale electricity sales.

The ruling was necessary because the California Legislature in 2007 established a feed-in tariff program for small combined heat and power systems in the state. Some utilities protested this program under the language of the Federal Power Act. FERC’s ruling was originally confusing, although seemed to support the belief that state legislatures are severely limited in their ability to mandate premium, fixed-price requirements.

This ruling was controversial and eventually led to a clarification by FERC in October 2010 that states do have the authority for certain feed-in tariffs when they set their rates through the Public Utilities Regulatory Act (PURPA). A spokesperson explained that since utilities may be mandated to buy power from different sources of electricity, a multi-tiered approach is admissible where states can calculate the utilities’ avoided cost for each separate electricity source.

Moving forward, it is unclear whether these FERC rulings will encourage or discourage more state FITs. Renewable policy experts have noted that the FIT structure allowed under these FERC rulings does not really resemble European FITs and has limited ability to dramatically increase renewable energy generation.

One of the options for FITs that FERC explicitly allows is for a state to establish a targeted range (for example for PV systems between 10 kW and 50 kW only), and let the market set the price. This is significant because it highlights FERC’s preference towards market solutions because they have the potential to be self-correcting and continually incentivize solar cost reductions.

A market solution for solar deployment that already exists is a solar “carve out “in a state’s RPS, which creates Solar Renewable Energy Credits or SRECs. Trading SRECs allows the market to dictate an appropriate price based on a state’s alternative compliance penalty and supply and demand factors.

Many U.S. states already have solar carve outs and healthy SREC markets. In fact, a FERC spokesperson indicated that Renewable Energy Credits (RECs) may be needed in addition a FIT to get to sufficient levels of renewable energy deployment. States previously considering FITs can look towards SRECs as a favored policy tool for enabling solar deployment and adopt legislation accordingly.

Why Installers Need to be Careful about the Future Value of SRECs

Solar Renewable Energy Credits, or SRECs, are a key part of financing solar PV systems, typically covering 20 to 40% of installation costs. Therefore, it is critical that solar installers, homeowners, and businesses be prudent when projecting future values of SRECs.

An SREC is a tradable credit that represents the clean energy benefits of electricity generated from a solar electric system. Each time the electric system generates 1000 kWh, a SREC is issued that can be sold or traded separately from the power. SRECs are financially valuable because many states have Renewable Portfolio Standards (an RPS) with specific solar carve-outs that require energy suppliers to incorporate a certain percentage of solar generated electricity into their portfolio. Most energy suppliers do not have enough solar capacity to satisfy the RPS requirements with their own power and subsequently must purchase SRECs to meet the state requirement. This allows owners of solar systems to trade their SRECs as commodities and receive payments for them.

SRECs have functioned as an important tool for making solar systems more affordable, and therefore SRECs are typically a significant part of the sales pitch that installers use when explaining the economic benefits of going solar. Furthermore, as state grant and rebate programs diminish, SRECs represent a bigger piece of the way to finance solar. For example, in Ohio and D.C., state funds for solar rebate programs are currently depleted, and homeowners must now rely solely on the federal tax investment credit, SREC payments, and energy bill savings to offset the cost of their system.

In many states, the RPS requirements (that make SRECs valuable) increase annually until 2025. This leads some people to assume that SREC values will also increase annually as energy suppliers will need to purchase more SRECs to meet the solar carve our requirement. However, this is not necessarily the case. The amount of solar capacity is increasing along with RPS requirements, which means that in most states, the SREC values are actually coming down. For this reason, installers need to be honest and careful when describing the future value of SRECs, so that customers do not have false expectations about the ROI of their solar energy system.

In addition to the RPS requirement, the two key factors in determining SREC values are the Solar Alternative Compliance Penalty (SACP) and SREC supply.

The SACP is a fee that a regulated entity must surrender in the event they do not procure a sufficient amount of solar electricity. This fee acts as a price cap because a rational energy supplier would not be willing to purchase SRECs for greater than this value. The SACP is defined on a state-by-state basis, and virtually every state has a declining SACP schedule. For example, in Ohio the SACP declines by $50.00 every two years. The SACP alone will not determine the value of an SREC, but a declining SACP schedule will push the maximum value of SRECs down over time.

The supply of SRECs in the market is another essential factor to consider when predicting future values. Naturally, if there is a surplus of SRECs, then SREC prices will come down. This dynamic has already happened in states such as Pennsylvania and D.C., and solar system owners that locked into a long-term fixed contract are receiving higher values than those trying to trade on the spot market.

Since there is a lot of uncertainty about the future of SREC values, installers should make it clear that SRECs are a commodity and that their pricing can be quite volatile. They should also help their customers make an informed choice about how to sell their SRECs that accommodates their tolerance for SREC market risk. Installers will find that customers who have a good understanding of the SREC market volatility may be willing to accept a lot of risk and enter shorter contracts because they are bullish on the future of SREC markets. However, others may be risk adverse, and would prefer to lock in a fixed price for their SRECs for 3, 5, or even 10 year periods.

As long as installers adopt a cautious approach when discussing SRECs with clients, customers will sort themselves along the lines of risk preference.

Sol Bridge Allows Business Owners to Go Solar with Low Out-of-Pocket Costs

Sol Systems, the oldest and largest solar renewable energy credit (SREC) aggregator in the U.S., recently announced a new financing solution for commercial-size solar energy systems called Sol Bridge. The bridge financing solves a problem that many prospective solar owners face: commercial-sized solar energy systems have high capital costs (typically more than $100,000), and system owners must pay for the system costs several months before they receive their federal and state solar incentives or solar renewable energy credit (SREC) payments. Because most businesses have limited cash and must reserve their capital for business-related expenses and investments, owning a solar energy system is a distant possibility.

Sol Bridge addresses this problem by providing a 90 day cash advance to system owners for the 30% federal tax grant and any applicable state incentives. This option allows business owners to go solar without tying up capital, while still retaining ownership of their system and all the benefits including SREC payments and electricity bill savings.

The cash advance is provided upon system completion and can be assigned to the solar installer, so that the installer reduces the customer’s payment amounts accordingly. Sol Bridge and the corresponding loan fees are due after 90 days, however, the loan fees can be wrapped into the total installation costs and therefore included in the amount that will be refunded upon receipt of the federal grant and state rebates.

In addition, Sol Bridge can be paired with the Sol Upfront SREC payment option which allows system owners to pre-sell the future SRECs to Sol Systems in exchange for a one-time lump-sum payment. When the Sol Bridge and Sol Upfront options are combined, the system owner is responsible for merely 10-30% of the remaining system costs; moreover, the business owner reaps the full benefits of their electricity savings because there is no ongoing solar lease fee or PPA payments.

Please visit the Sol Systems website for more information about Sol Bridge.

About Sol Systems:
Sol Systems is a solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution. With thousands of customers and hundreds of partners throughout the United States, Sol Systems is the largest and oldest SREC aggregator. We provide homeowners, businesses, solar installers, and developers with sophisticated financing solutions that help make solar energy more affordable. Sol Systems also helps energy suppliers and utilities manage and meet their solar RPS requirements efficiently by providing them with access to diverse portfolios of SRECs. For more information, please visit www.solsystemscompany.com.

Why Big Solar is not Better Solar

As solar energy systems become a more popular and profitable investment, many small and large scale projects are being developed. The idea of large solar projects may be attractive because of cost advantages due to scale, yet while the technology behind big and small solar projects is similar, some of the characteristics of big solar cancel out the advantages that are unique to solar energy.

Let’s define “big solar” as a photovoltaic (PV) system or a concentrated solar power (CSP) system that feeds energy into the grid as opposed to “small solar” which feeds the direct energy load of a given facility (most commercial facilities require less than 1 MW of power).

First, big solar is inefficient in terms of its land use. Instead of using the millions of acres of rooftop space and small vacant lots across the country, big solar is often built in deserts or remote areas, which could be potential agricultural or construction space, or even wildlife habitat.

Second, big solar requires significant transmission upgrades. Since large solar projects are far away from where electricity is used, long and costly transmission lines must be constructed to connect big solar projects with the grid. It costs approximately $1.5 million per mile for new transmission lines, a substantial cost that removes a lot of the economic advantages associated with large scale projects. Big solar projects will require the U.S. to engage in even more costly infrastructure upgrades over the next few decades; whereas small solar projects actually reduce the need for costly infrastructure upgrades.

Third, big solar does not alleviate grid-congestion. Even if new transmission lines can be financed, the electricity will only add to an already congested transmission and distribution system. Whereas, if small scale solar power is added near the power demand (such as the rooftop of a house or building), then it would not add at all to the congestion of the electrical system (one of the main causes of the 2003 blackout in the Northeast). Grid congestion is becoming even more important as U.S. electrical demand is increasing at a much higher rate than U.S. transmission capacity.

Fourth, big solar wastes a significant amount of energy during transmission. Transmission from a centralized power plant to a user wastes electricity: according to the EIA, line losses accounted for 6.5% of total electricity generation in 2007. Small solar, typically constructed on the roof or within a ¼ mile of the building it powers, has virtually no energy loss due to transmission.

Fifth, big solar has the same security disadvantages of large centralized power plants. In other words, large scale solar is just as susceptible as other power plants to national security threats from hackers or terrorist groups.

Now that solar technology is becoming more affordable on a residential and commercial scale, there is the potential to dramatically increase the prevalence of distributed generation power systems. Achieving this would insulate the U.S. against its current dependence on large scale power plants and an outdated electrical grid’s transmission ability. Yet, despite the relative disadvantages of large solar power plants, big solar and small solar often compete for solar incentives such as SRECs (Solar Renewable Energy Credits).

An SREC is a tradable credit that represents the clean energy benefits of electricity generated from a solar electric system. Each time the electric system generates 1000 kWh, a SREC is issued that can be sold or traded separately from the power. SRECs have value because utilities and energy suppliers can purchase them from system owners in order to meet the requirements determined in a state’s Renewable Portfolio Standard. Residential and commercial solar system owners can harness this value to offset the costs of their solar energy systems. In some states, big solar threatens to reduce the value of these incentives by flooding the SREC market and decreasing the price of SRECs.

When creating and adjusting renewable energy policies, legislators and policy makers should recognize the unique benefits of small solar and distributed generation. It is important to understand that even though “big solar” may have some cost advantages, it is not the “best solar”.

Hedging SREC Price Volatility for Commercial PV Projects

Solar Renewable Energy Credit (SREC) markets can be volatile, which can create significant concerns for a financier interested in investing in a commercial solar photovoltaic project. Exposure to price volatility can undermine the economics of solar projects, or simply prevent a project from ever taking off. As state rebate programs are depleted, and SREC values become even more critical to the financing of commercial-scale solar plants, minimizing SREC price volatility will be essential to success. For these reasons, more sophisticated SREC financing solutions will be required for commercial projects to address and mitigate price risk.

When discussing commercial scale solar projects, generally we are referring to projects that are larger than residential solar systems, but that are not large enough to negotiate an SREC contract directly with a regulated energy supplier or utility. Using this definition of commercial project, a commercial project can range anywhere between 20 KW to 2 MW, and produce approximately 24 to 2,400 SRECs annually.

In robust SREC markets, particularly the ones where state rebates and incentives are draining quickly (i.e. Ohio, New Jersey, DC), the value derived from SRECs may constitute 30 to 40% of the project’s returns over the first five years of operation. So, for example, a project in Pennsylvania may be a good investment if SREC values are stable during the first five years of the system’s production, but may be a very poor investment if SREC values drop by 20%, reducing the total yield on the investment of roughly 8%. In short, SREC price volatility can turn a relatively profitable investment into a wash for the investors backing the project.

The addition of new solar capacity, legislative changes to state Renewable Portfolio Standards (RPS), and other SREC market developments can all affect SREC values. This uncertainty poses a risk to the security of a solar investment, and addressing this risk will be essential for project developers.

Sol Systems makes it possible for project developers and system owners to address this risk by providing various SREC payment structures. For commercial projects, Sol Systems can partition portions of the SREC stream into forward contracts and/or brokerage arrangements. The forward contracts are available in 3 and 5 year terms. Sol Systems can also offer an upfront payment that pre-pays for the future rights to SREC generation. The upfront payment securitizes the SREC stream, providing the greatest insulation against SREC price volatility and regulatory risk. These options allow solar investors to hedge their exposure to SREC price volatility. Depending on the investor’s risk appetite, Sol Systems can provide SREC services that provide the right level of risk and reward to ensure that a project gets off the ground and pays investors the returns they expect.

Why Businesses are Taking Advantage of Solar Power Purchase Agreements

A Solar Power Purchase Agreement (PPA) is a legal contract where a solar project developer installs and operates a system for a business owner, homeowner, or tenant (the “host”) who in turn agrees to buy the solar generated electricity for a fixed period, usually 10 to 20 years. The host typically purchases the solar power at a fixed rate equal to or less than their normal utility rate and does not pay the upfront capital costs of the installation, making PPAs a very attractive economic option.

Developers like the model because the PPA contract ensures that the developer will be able to sell the solar electricity for a fixed period of time at a pre-determined rate. The PPA contract also removes negotiation and transmission costs that could be associated with solar projects that do not have a guaranteed energy buyer.

Businesses benefit from the federal and state incentives in place for owning a solar system. Specifically, Solar PPAs in the United States rely on the federal solar investment tax credit, which was extended for eight years under the Emergency Economic Stabilization act of 2008 and then amended with the passage of the American Recovery and Reinvestment Act of 2009 so that the solar investment tax credit can now be combined with tax exempt financing. This investment tax credit covers 30% of the expenditures on a solar system. Several state rebate programs also reduce the capital necessary for PPAs by providing grants corresponding to the size of the solar system.

The host business that is buying the solar generated electricity does not receive any of these tax credits or rebates directly, rather, the developer or company that finances and subsequently owns the system receives these benefits. However, the developer passes these benefits on to the host in the form of lower fixed rates for their electricity.

Because the developer fully maximizes all the incentives associated with a solar energy system, in some situations a PPA can be a better deal than ownership of a system. For example, non-profits cannot receive tax credits, implying that a PPA would be the better financial decision since the developer could access the tax credits and consequently provide solar electricity at a reduced rate to the non-profit. Furthermore, a solar developer can raise funds for a project (or portfolio of projects) through tax equity investors.

Similarly, businesses and developers engaging in a Solar PPA can take advantage of Solar Renewable Energy Credits (SRECs). An SREC is a tradable credit that represents the clean energy benefits of electricity generated from a solar electric system. Each time the electric system generates 1000 kWh, a SREC is issued that can be sold or traded separately from the power. Therefore, the legal owner of the system can sell their rights to SRECs to utility companies that need SRECs to comply with state Renewable Portfolio Standards. This represents another substantial method to offset the cost of the system and allow businesses to reduce their net costs and ultimately the PPA rate. As state rebate programs diminish, SREC values will become more important for financing solar.

As PPAs and new solar financing tools become more prevalent, it is important to understand the difference between a PPA and a lease. A solar lease is another common financing tool where a solar company builds a solar energy system on a host’s property and then the host pays a lease payment for the benefits of the system’s electricity production. This is different from a PPA where the host pays directly for the solar power. Many companies that began exclusively in solar leasing are now offering the PPA model to customers as well. Typically, nuances in state laws or consumer preference determine whether a developer will offer a PPA or lease. Solar developers who offer solar PPAs have encountered a large number of interested customers. For example, Wal-Mart, Safeway, and Macy’s all use solar PPAs, and some estimates say that in 2008 PPAs represented over 60% of California’s non-residential solar market.

In short, PPAs allow businesses to take advantage of all sorts of solar incentives like SREC values, federal, and state incentives – all without any upfront capital. As large facility owners and tenants continue to demand solar without high upfront costs, PPAs will become more and more popular.

An Outlook On Solar in 2011

Competition is stiff in the solar manufacturing industry, with companies like Evergreen announcing their departure from the United States to China in order to reduce costs. Enormous global module supply has come online in the last two years to help fuel the rapid build-out in Europe, China and elsewhere, resulting in dramatic declines in solar module pricing. Some, like Gleacher and Company, are modeling module prices at around $1.30/watt right now. Others are actually predicting wholesale module costs at $1.10 in the next few weeks.

The result is a strange dichotomy of a manufacturing industry undergoing rapid growth and simultaneously undergoing a stressful reallocation of resources and a fairly pessimistic outlook on Wall Street. The WilderHill Clean Energy Index, which includes solar and other alternative-energy stocks, fell 5.3 percent last year, compared with a 12.8 percent rise in the Standard & Poor’s 500 index. Companies like SunPower, Yingli, JA Solar, Trina, Canadian Solar, MEMC, Suntech and others all produced significant negative returns, some upward of negative 20 percent.

This fall in module prices, and the corresponding difficulties for module manufacturers, will likely continue through 2011 as the world’s top solar market, Germany, further cuts its solar subsidies and a growing supply of photovoltaic modules outstrips demand, putting pressure on prices and producers’ profits. As others have noted, a weak euro will compound the problem for Chinese and U.S. manufacturers. Last year, Germany, Spain, France, Italy and Czech Republic all cut back their solar subsidies. Further cuts are expected in Germany and France in the first half of 2011 and in Italy in the second half. Those three markets account for around 70 percent of the global market, according to Bank of America Merrill Lynch. Next year may be the first year in which more solar is built in the United States than in Germany.

For the solar installer and developer community this is presumably welcome news (ignoring the risks, of course, that similar reductions in incentives may take place here). As solar module costs decline, so are total system costs since modules compose a significant portion of the overall costs of a solar system.

However, cost reductions do not uniformly impact the solar community. Because of economies of scale, module costs account for a much larger portion of commercial-sized solar system’s costs than residential. The impact is still more powerful with regard to utility sized projects. As a result, falling module costs disproportionately benefit larger systems, as illustrated the figure below (care of SEIA).

Not only are commercial and utility costs already significantly lower than residential costs, they are also falling more rapidly. Indeed, utility projects are falling in price at three times the rate that residential projects are. This is an interesting window into the solar industry in the United States, which is that solar systems will undoubtedly get BIGGER.

To compound this trend, as states drastically reduce or altogether cut their rebate and grant programs for residential and small commercial systems, the economics that once favored smaller projects are starting to disappear. States like New Jersey, California, Maryland, Pennsylvania, Ohio and many others have all gutted their tax-funded rebate or grant programs. American Recovery and Reinvestment monies that flowed through the states in much of 2009 and 2010 are nearing their ends. Although module costs are falling significantly, they are not falling (nor could they) by two to three dollars a watt , which was often the size of grant and rebate monies. The result is a further shift upward in size. In Massachusetts, for example, given the emphasis on a solar renewable energy credit (SREC) market, many developers are starting to focus exclusively on commercial and utility scale projects.

For residential focused installers and developers, this may be an opportunity or a challenge. Presumably, those firms that can secure large economies of scale in purchasing power will better weather these changes than those that cannot. Additionally, because size matters, the industry may see consolidation. Hopefully, it will also see aggregation or collaborative models, where residential and small commercial installers work together to secure better financing opportunities and engineer more sophisticated acquisition models. This, of course, is a primary focus of financing firms like Sol Systems. Additionally, power purchase agreements and lease agreements may gain prominence if effective costs rise for residential customers in the absence of rebates.

For commercial and utility developers, a move upward in size means a necessary move towards more complex financing instruments. It becomes a bit more difficult to make a pure equity play on a multimegawatt project – a blended debt/tax equity/first loss equity product is typically required to reduce risks and bring down the costs of capital. To see this approach succeed, the capital markets will have to open further to solar projects. A lack of access to debt markets and tax equity was a big part of what has slowed the growth in wind and large-scale solar in the last few years. So this may be a challenge. On the other hand, Chinese banks continue to push into the US market to debt finance multi-megawatt portfolios, so it may not only be Chinese modules the US industry is using, it may also be Chinese money.

In sum, as the industry grows, there will be a continued movement towards larger projects. To succeed, players will have to become more sophisticated. This will favor players in the residential space who are able to collaboratively or individually leverage economies of scale and acquisition models and players in the commercial and utility space who are able to better secure complex financing instruments.

Sol Systems Reduces Costs of Going Solar in Massachusetts with Upfront SREC Financing and 0% Brokerage for SRECs

Washington, DC: January 12, 2011

Sol Systems, the nation’s largest solar renewable energy credit (SREC) aggregator, is offering a new SREC option, “Sol Upfront,” for solar energy system owners in Massachusetts, and will waive commercial project brokerage fees for its spot market option “Sol Brokerage.

The upfront payment option allows homeowners and businesses who install solar energy systems to pre-sell 10 years of SRECs in exchange for a lump-sum payment, while the brokerage option allows commercial-sized system owners to seek the highest spot prices for their SRECs with no fees. Both options will improve the economics of going solar for Massachusetts solar project owners.

“Because the Massachusetts’ SREC market is new, and there is an element of risk compared to some other well-established SREC markets, we have created ways for our customers to address this risk in the way that best fits their financial profile,” said Sol Systems CEO, Yuri Horwitz. “Our Sol Brokerage option allows customers to take advantage of the risk with the highest spot prices available, while our Sol Upfront option removes SREC market risk and regulatory risk entirely.”

Sol Systems also offers 3 and 5 year fixed price “Sol Annuity” contracts to Massachusetts customers. Under the annuity arrangement, customers receive a fixed price for each SREC generated over the agreement term and are paid quarterly. The 5 year term pays $275/SREC and the 3 year term pays a guaranteed rate of $400/SREC. Both are backed by long-term utility contracts.

Sol Annuity, Sol Upfront, and Sol Brokerage are available to residential and commercial system owners. However, the Sol Brokerage fees will only be waived for systems that are larger than 20 kilowatts in size.

About Sol Systems

Sol Systems is a solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution. With thousands of customers and hundreds of partners across 13 states, Sol Systems is the largest and oldest SREC aggregator. We provide homeowners, businesses, solar installers, and developers with sophisticated financing solutions that help make solar energy more affordable. Sol Systems also helps energy suppliers and utilities manage and meet their solar RPS requirements efficiently by providing them with access to diverse portfolios of SRECs. For more information, please visit www.solsystemscompany.com.

Contact

Sudha Gollapudi
Director of Strategic Partnerships
888-235-1538 x2
info@solsystemscompany.com

Governor O’Malley Appoints Leading Educator, Solar Innovator to Board of Maryland Clean Energy Center

January 6, 2011 – ANNAPOLIS, MD

Gov. Martin O’Malley has appointed a prominent academic researcher and a solar industry finance expert to fill two vacancies on the Board of Directors of the Maryland Clean Energy Center.

“We are privileged to have two such high-caliber and forceful clean energy advocates join us as we move into our second year of operation”

Eric Wachsman, PhD, Director of the University of Maryland’s Energy Research Center, will serve through June 2015. George Ashton, co-Founder and Chief Financial Officer of Sol Systems, LLC, a national leader in aggregating solar renewable energy credits, is fulfilling a term that runs through September 2012.

Wachsman and Ashton join existing members of the Center’s Board of Directors who oversee its mission of helping consumers, supporting businesses and advising lawmakers in Maryland as the state scales up its clean energy industries and energy efficiency initiatives. Other Board members include Jeremy Butz, Carol Collins, Ken Connolly, Jeff Eckel – who serves as the current Board Chairman – and Malcolm Woolf, Director of the Maryland Energy Administration.

“I am so proud to announce the appointment of two very talented individuals to the Board of the Maryland Clean Energy Center,” said Governor O’Malley. “As Maryland continues to emerge as a national leader in clean energy, their leadership will help us move toward a better and more sustainable future for our children. I’d like to thank them for their willingness to step up and serve the people of our State as we work to find innovative ways to reach our clean energy goals in the toughest of times.”

“We are privileged to have two such high-caliber and forceful clean energy advocates join us as we move into our second year of operation,” said I. Katherine Magruder, Executive Director of the Maryland Clean Energy Center. “They will help facilitate the adoption and generation of clean energy along with the new jobs, consumer savings and reduction of greenhouse gas emissions that come with it.”

In addition to his leadership of UM Energy Research Center, Wachsman holds the William L. Crentz Centennial Chair in Energy Research at the University of Maryland, College Park. Previously, Wachsman was Director of the Florida Institute for Sustainable Energy and a professor of materials science and engineer at the University of Florida in Gainesville. He has authored dozens of research papers since beginning his career as an engineer for chip-maker Intel. He earned his PhD and Masters of Science from Stanford University. Wachsman is filling out the remainder of the Board term served by Dan Goodman.

Ashton has been instrumental in growing Sol Systems into one of the country’s leading aggregators of solar renewable energy credits, or SRECs. Solar system owners earn 1 SREC for every 1,000 kilowatt hours of electricity their systems generate each year. Before Sol Systems, Ashton was a Senior Account Executive at Fannie Mae, a government-sponsored enterprise chartered by Congress chartered to provide liquidity and stability to the U.S. housing and mortgage markets. Ashton earned his MBA from the Robert H. Smith School of Business at the University Maryland in College Park.

About Sol Systems:
Sol Systems is a solar energy finance firm. With thousands of customers and hundreds of partners throughout the United States, Sol Systems is the largest and oldest SREC aggregator. We provide homeowners, businesses, solar installers, and developers with sophisticated financing solutions that help make solar energy more affordable. Sol Systems also helps energy suppliers and utilities manage and meet their solar RPS requirements by providing access to diverse SREC portfolios. For more information, please visit www.solsystemscompany.com.

Sol Systems Unveils Utility-Backed Solar SREC Financing Option in MA

Sol Systems, the nation’s largest solar renewable energy credit (SREC) aggregator, today announced a new three year fixed-rate SREC financing option that will help make solar a more attractive investment for Massachusetts residents and businesses.

“We are very optimistic about the solar market in Massachusetts and we are proud that we can offer solar supporters an affordable, secure way to invest in solar,” said Sol Systems CEO, Yuri Horwitz. “Our three year utility-backed SREC contract will help give prospective solar owners the financial security they need to go solar.”

Massachusetts’ solar REC (SREC) market is relatively new, but several states along the East Coast have established solar credit markets which provide cash flow that make solar energy an affordable option for homeowners and businesses. Sol Systems has been a key player in these markets. In Massachusetts, system owners can cover approximately 25% of system costs through an SREC agreement with Sol Systems.

Sol Systems gives homeowners and businesses a variety of ways to harness the value of SRECs. In Massachusetts, the company offers spot market brokerage services (Sol Brokerage) and multi-year guaranteed rate SREC contracts (Sol Annuity). The Sol Annuity product is available for three and five year contract terms.

Sol Systems also operates in 12 other states where it offers brokerage services and multi-year contracts, in addition to “Sol Upfront”, a pre-paid lump sum for the future value of solar credits.

While multi-year contracts are sometimes available through independent SREC brokers, to its knowledge, Sol Systems is the only company that is providing a 3 year offer that is backed by a contract with an energy supplier. Unlike speculators who bet on SREC futures, Sol Systems’ model provides additional security to homeowners and businesses that are concerned about the volatility of the SREC commodities market.

About Sol Systems
Sol Systems is a Washington D.C. based solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution. Sol Systems enables solar developers, homeowners, and businesses to fully realize the value of their solar energy systems by providing them with a range of options for selling their SRECs. To date, Sol Systems has helped over 1,300 customers with projects ranging from 1 kW to over 1 MW realize the value of their SRECs. Sol Systems currently operates in Delaware, Indiana, Kentucky, Maryland, Massachusetts, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Virginia, Washington, D.C., and West Virginia. For more information, please visit www.solsystemscompany.com.

Sol Systems Partners with Standard Solar

Standard Solar, Inc., a leader in the full-service development, installation and financing of solar electric systems for commercial, government and residential customers, today announced a partnership with Sol Systems, the nation’s largest solar renewable energy credit (SREC) aggregator. The partnership will help make alternative energy solutions more affordable for Standard Solar customers.

“This partnership will go a long way for our current and future customers,” said Standard Solar President Scott Wiater. “Not only will it help businesses and homeowners significantly cut costs of their solar energy systems, but it will help those considering solar energy to realize that alternative energy is an affordable solution.”

Solar renewable energy credits are a critical component to making solar energy an affordable option for homeowners and businesses, and can compose up to 30 percent of a solar energy system’s payback. Through Standard Solar’s partnership with Sol Systems, customers will have access to competitive SREC pricing and the resources to secure the maximum benefit from their SRECs.

Through one SREC program, Sol Upfront, customers can receive immediate financing for their systems. Sol Systems will purchase all estimated SREC production for a 10-year period, providing customers with a one-time, lump-sum payment that can be used to pay off installation costs. The Sol Annuity SREC option allows customers to lock in the current SREC rate and receive payments for each full SREC produced. This gives customers reliable, quarterly payments as solar energy is generated.

“We are excited to work with Standard Solar, an installer with one of the best reputations in the Mid-Atlantic region,” said Sol Systems CEO Yuri Horwitz. “The partnership will extend our solar financing services to hundreds of homeowners and businesses and give them easy, economical ways to invest in solar.”

Standard Solar is also participating in Sol Lease, which allows Washington DC homeowners, schools, churches, businesses and non-profits to secure solar energy with no up-front costs. By paying a fixed, monthly payment, these groups can enjoy the savings and benefits of solar energy produced from a solar energy system for a 10-year contract term.

About Standard Solar

Standard Solar, Inc. is a leader in the full-service development, construction, integration, financing and installation of solar electric systems. Dedicated to making solar solutions more accessible to consumers, businesses, institutions and governments, the company is leading the way to energy independence. Committed to offering responsible and energy cost-saving solar solutions that conform to the highest standards, Standard Solar is one of the most trusted and respected solar companies. Since 2004, Standard Solar has been the partner of choice to make solar energy financially accessible, helping customers through financing options, including Power Purchase Agreements (PPAs) and navigating expanded federal and state and local tax credits. The company’s Standard Energy Solutions (SES) division provides energy auditing and retrofitting services for energy improvement projects. Ranked the 73rd Fastest Growing Private Company in America in 2010 by Inc. magazine, and the highest-ranking renewable energy company on the list, Standard Solar is headquartered in Rockville, MD. For more information, please visit www.standardsolar.com.

About Sol Systems

Sol Systems is a Washington D.C. based solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution. Sol Systems enables solar developers, homeowners, and businesses to fully realize the value of their solar energy systems by providing them with a range of options for selling their SRECs. To date, Sol Systems has helped over 1,300 customers with projects ranging from 1 kW to over 1 MW realize the value of their SRECs. Sol Systems currently operates in Delaware, Indiana, Kentucky, Maryland, Massachusetts, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Virginia, Washington, D.C., and West Virginia. For more information, please visit www.solsystemscompany.com.

Which is more efficient – RPS or Feed-in-Tariffs?

Two of the most popular policy models administered to stimulate the deployment of solar energy are Renewable Portfolio Standards (RPS) and Feed-in-Tariffs (FITs).

RPS programs with a solar carve-out define a set percentage of electricity that each utility or energy supplier must procure from solar energy generators. To comply, an energy supplier can develop its own solar projects, or procure Solar Renewable Energy Credits (SRECs) from SREC aggregators or individual solar energy system owners.

In contrast, a FIT is a solar energy subscription program in which a solar energy owner can sell their electricity at a premium to the government or regulated energy suppliers. The solar electricity premiums, like the one in Ontario, Canada can be very lucrative. The stable cash flow from a state body minimizes the risk for the financier. The returns are defined for a 20-year period, the O&M costs of the facility are typically very low, and the project developer can seek financing with the FIT contract in hand.

These two policy models share similar objectives; they accelerate the deployment of solar energy technologies, build economies of scale that reduce technology costs, and carve out a space for solar within the electricity market. Both models also have unique strengths and proven track records of creating exponential growth in solar energy markets.

In some circles, FITs are held as the gold standard in stimulating solar development, while RPS programs are held in a lesser regard. Advocates of FITs can point to solar success stories like Germany and Ontario, Canada and like to discuss how a FIT could be effectively administered in America. Yet, these discussions are premised on the assumption that FITs are better for solar than an RPS. In an attempt to reframe these discussions, we would challenge this assumption and suggest that, in the mid-term and long-term, an RPS program is a more sophisticated policy instrument which is capable of creating a healthier and sustainable solar market.

The fundamental difference between the two models is that an RPS is a self-correcting model based on incentivizing individuals through secondary markets, while a FIT is a subscription program that sustains a solar market to the extent that governments continually allocate sufficient funds or political will. FITs allow solar developers to secure long term financing for solar development, but they do not create an incentive structure which encourages developers to continually reduce costs. An RPS program, as compared to a FIT, does not provide such security. In states with an RPS and an SREC market, system owners recoup their investment through the Investment Tax Credit (ITC), local rebates or incentives, and through the sale of SRECs.

While the ITC and state rebates tend to be reliable, the value of SRECs on the spot market can fluctuate dramatically over short periods of time. This spot market variability thus creates risk for the system owner and financier. And, if we were to stop the analysis here, it might seem clear that FITs are better for solar energy than an RPS. However, this conclusion would overlook the mid-term and long-term growth of solar markets in favor of robust short-term growth (and it would also ignore the fact that system owners can lock into multi-year guaranteed rate SREC contracts).

In fact, one should recognize that the price fluctuations in SREC markets are a result of supply and demand, and are part of the way that RPS markets adjust themselves. The supply is set by the amount of solar energy installed, and the demand is defined by the compliance requirements as established in the RPS. In the event a solar market witnesses exponential growth in solar development and SREC supply outpaces growth in demand, prices will be pushed down for SRECs.

And, to be clear, this is the goal of both an RPS program and a FIT: drive economies of scale and create a competitive market for solar technologies. If prices are pushed downwards in SREC markets, system developers will be incentivized to reduce the costs of the development in order to maintain margins. In the event prices are too low, the supply of SRECs will be short, energy suppliers will be required to pay higher prices for SRECs, and the market will receive the stimulus needed to push development forward again.

In a state with an RPS program and a robust SREC market, the winners will be those that can stay ahead of the curve in developing systems at lower and lower costs compared to other developers. The losers will be those that continually lag in developing systems at lower costs compared to other developers in the market. In so doing, an RPS program creates competition in the market that will ultimately drive down the costs of solar energy and make it more affordable for more people.

FITs, on the other hand, do not create the same sort of competition between developers to reduce costs. Depending on the FIT premium and the payment schedule, developers can maintain strong margins whilst making no investments in efficiency. The result is FITs can become oversubscribed, burn through allocated funds, and then come to a halt because the market never weans itself off of the crutches of government support. Because of the amount of capital required to fund these programs, FITS are also subject to political scrutiny, and if political change occurs, it can wipe a market out almost overnight (i.e. Spain).

For all these reasons, we would conclude that short-term FITs can create spectacular growth in solar markets, but are less sustainable compared to an RPS program which can adjust to the basic laws of supply and demand.

About Sol Systems:
Sol Systems is a Washington D.C. based solar finance and development firm that is committed to making solar energy more affordable. We enable homeowners, businesses, and solar developers to finance their solar energy systems by providing a conduit for solar renewable energy credit (SREC) monetization and long-term price stability. With more than 1,200 customers across 13 states, Sol Systems has become a critical player in developing SREC markets and financing solar energy systems. We are proud to be the oldest, most sophisticated, and largest SREC aggregator in the country.

Mid Size Commercial Solar Projects Require Guaranteed Long Term SREC Contracts

The mid-Atlantic region has witnessed a rapid growth in solar installations over the past few years. While the large multi-megawatt commercial projects make front-page news, it is interesting to note that there is also vibrant growth in mid-size commercial projects, ranging from 50kW-500 kW. Today, the total capacity of solar installed in the PJM region (solar projects in the mid-Atlantic region) is 262 MW, of which 83 MW comes from systems in the 50 kW-500 kW range. Moreover, the mid-size commercial project segment has shown steady growth, adding approximately 26 MW each year since 2009.

Large solar projects face significant financing hurdles because millions of dollars of capital are required, but these projects also fetch the attention of large banks, energy suppliers and tax equity investors. Mid-size commercial projects face the daunting challenge of financing their projects with less visibility, but they can be successful if they make use of all the available incentives and financing tools.

Many mid-size commercial developers and installers can help the customer through the process for applying to federal and state grants; however, monetizing the Solar Renewable Energy Credits (SRECs) is often more difficult. SREC markets are complex for two main reasons. First, SREC markets differ across various states depending on the State’s Renewable Energy Portfolio Standard (RPS) and Solar Alternative Compliance Payment (SACP), the fee paid by energy suppliers for non-compliance of RPS requirements. Second, SREC markets have been known to be fairly volatile due to legislation changes and variations in supply and demand. These challenges can be mitigated by finding a stable partner with long-term SREC contracts who can help system owners navigate the legislation, and provide security of cash flow payments which allow system owners to accurately determine their payback period.

Investing in a mid-size commercial solar project is a sizeable investment for a small business owner or homeowner, thereby making it imperative to ask some difficult questions to the SREC aggregator or financier. The most important question to ask the SREC aggregator is: “Are your customer contracts backed up with energy supplier contracts?” If an SREC aggregator has long term contracts with energy suppliers, then the SREC firm has foresight into future SREC prices and can offer a fair, guaranteed rate. On the contrary, if an SREC aggregator is speculating on price and hoping to sell the SRECs in the spot market at a future date without any security of a long term agreement, their customer is exposed to a lot more SREC market risk. System owners should also be aware of the other factors that shape the SREC markets, like regulatory changes, rapid adoption of solar, and market shifts due to large-scale solar projects.

Being the oldest and largest SREC aggregator in the country, Sol Systems has matched a majority of its long-term SREC contracts with its energy supplier contracts, thereby providing the market stability and flexibility that mid-size commercial customers seek. Today, Sol Systems works with over 200 developers and installers in financing mid-size commercial solar projects. More information can be found at www.solsystemscompany.com.

Sol Systems is Hiring: Solar Analyst

Sol Systems is hiring (2) part-time Solar Analysts / Interns.

The ideal candidate will be a current student or a recent graduate that is: resourceful, detail oriented, and passionate about the development of renewable energy. A successful Solar Analyst will possess the following skills and attributes:
1. Intermediate to advanced understanding of Microsoft Excel
2. Excellent research and persuasive writing skills
3. The ability to understand a complex and evolving market
4. A demonstrable interest in: energy, renewable energy, energy finance, project finance, entrepreneurship, and/or renewable energy legislation and regulations
5. Enthusiasm and a great attitude

The Solar Analyst will be critical to the success of a dynamic company in a nascent industry. The Solar Analyst will assist with registration processes, administrative duties, and discrete research projects. The Analyst will be expected to respond to customer queries, research industry news, write timely blogs, and provide clearly defined deliverables. The position will require attention to detail, excellent record keeping, and efficient allocation of time and resources.

Through this position, the Solar Analyst will gain familiarity with solar renewable energy credit (SREC) legislation, solar finance mechanisms, solar industry news, solar industry language, as well as new product development in a fast paced, start-up environment. The position will provide a fantastic launching pad for a career in renewable energy.

Commitment & Compensation: The internship will last for a term of at least 3 months (with the understanding that students will take time off for the holidays). Applicants will be expected to work 10 or more hours each week. Solar Analysts will be paid a stipend of $2,000, or an amount commensurate with the length of the commitment and prior experience. Successful candidates will be eligible for a full time position.

To Apply: Please submit a resume and cover letter (no more than one page each) to intern@solsystemscompany.com. Qualified candidates will be subsequently asked for a writing sample and three professional or academic references.

Applications for this position will be accepted immediately and reviewed on a rolling basis. Preference will be given to applicants that can work out of our downtown DC office two days a week.

About the Company: Sol Systems is a solar energy finance firm primarily involved in the purchase, aggregation, and sale of solar renewable energy credits (SRECs) in the Northeast, Southeast and Midwest. Sol Systems was founded with the intention of facilitating the development of the solar energy market. The company is based in downtown Washington DC.

Sol Systems Launches Sol Lease in Washington DC

Sol Systems is proud to announce Sol Lease, D.C.’s first solar lease option. Sol Lease is designed to help homeowners, businesses, non-profits, schools, and churches put solar on their roofs and enjoy immediate energy savings. Customers that take advantage of Sol Lease will receive a solar energy system to host on their roof with no upfront costs. They will then simply pay a small monthly payment (much like a car lease payment) and enjoy access to reduced utility bills for the contract term. Sol Lease customers will save an average of 15% on their current utility bills, and are likely to save more as electricity prices increase.

“We are proud to be able to offer Sol Lease, and we see this as a turning point. We are a DC-based company, and we live in the neighborhoods we’re investing in. Success for the solar community means innovation in technology, but it also means innovation in finance. Sol Lease helps our installer partners change the equation and provide solar energy to many that otherwise couldn’t secure it,” noted Sol Systems CEO, Yuri Horwitz.

Sol Systems is currently offering Sol Lease on a pilot basis in D.C. Upon completion of the pilot phase, Sol Systems plans to offer Sol Lease at a larger scale and potentially in other markets.

For more information about the program, please visit www.solsystemscompany.com/solar-lease or email lease@solsystemscompany.com.

About Sol Systems
Sol Systems is a Washington D.C. based solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution. Sol Systems has helped over 1,200 customers finance their solar projects, ranging from 1 kW to over 1 MW. Sol Systems currently operates in Delaware, Indiana, Kentucky, Maryland, Massachusetts, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Virginia, Washington, D.C., and West Virginia and has partnerships in place with over 100 solar installers and developers. For more information, please visit www.solsystemscompany.com.

Sol Systems Supports the Rebuild Sudan Foundation

Sol Systems sponsored a fundraiser in Washington DC this evening for the Rebuild Sudan Foundation, a small non-profit dedicated to developing and constructing schools for children in southern Sudan as well as other critical infrastructure. Rebuild‘s founder, Michael Kuany spoke to a group of young professional’s about his vision for the future of Sudan, and the journey that has helped shape and drive his passion.

As Michael noted this evening, “Education is family for so many. With education people do not need to fight wars.”

Rebuild Sudan is currently working on a multipurpose school in Jalle Payam. Construction is slated to begin in November 2010. “We had many motivations and principles in mind during the development of this project. First and foremost was to build a safe place for the children of Jalle, especially girls and orphans, to receive a primary education,” said Michael. The school will include a public library, a computer center and meeting/performance space and the building is designed to be environmentally friendly, with walls constructed of stabilized earthen plaster using soil excavated for the latrines.

Michael Kuany is one of the Lost Boys of Sudan, more than 27,000 boys of the Dinka ethnic group who were displaced and/or orphaned during the Second Sudanese Civil War (1983-2005). Approximately 2 million people were killed during this war; 4 million people lost their homes and became refugees. Most of the boys were orphaned or separated from their families when government troops from the north systematically attacked villages in southern Sudan, killing many of the inhabitants, most of whom were civilians.

“Michael has walked a long path and his journey has not been easy. It is clear that his life is guided by his principals and his passion to bring good back to his country and build a future for children through education. This is exactly the type of organization that Sol Systems is proud to sponsor,” noted Yuri Horwitz, CEO and President of Sol Systems.

About Sol Systems
Sol Systems is a Washington D.C. based solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution. Sol Systems enables solar developers, homeowners, and businesses to fully realize the value of their solar energy systems by providing them with a range of options for selling their SRECs. To date, Sol Systems has helped over 1,100 customers with projects ranging from 1 kW to over 1 MW realize the value of their SRECs. Sol Systems currently operates in Delaware, Indiana, Kentucky, Maryland, Massachusetts, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Virginia, Washington, D.C., and West Virginia and has partnerships in place with over 100 solar installers and developers. For more information, please visit www.solsystemscompany.com.

Leasing Solar: It’s Like Leasing a Prius

In the last 5 years, solar has grown exponentially in the U.S. There have been several reasons for this, but one of the reasons has been the creation of solar financing options that never existed in the past. One of these options is the solar lease.

A solar lease is a lot like an automobile lease – or more accurately, it’s like a lease for a Toyota Prius.

If you lease a Prius, you get the benefits of driving the car, you save on gas mileage, and you get some bragging rights. You won’t get the car title or the tax write-off for owning a hybrid, but you also don’t have to pay $30,000. You just pay a monthly fee, and at the end of your lease, you have the option to buy the Prius.

Similarly, with a solar lease, you get the electricity generated from the photovoltaic (PV) energy system, which can cut your utility bills in half (or more), and you promote clean, renewable solar energy – instead of using dirty fossil fuels. You don’t have to pay $30,000* for the PV System, you just pay a monthly fee, and at the end of your lease, you have the option to buy the PV system at fair market value. Your PV system maintenance is typically covered under the lease too.

The solar lease model, and its cousin the Solar Power Purchase Agreement, first become popular in California and have spread across the country to East Coast states where local rebates and tax incentives make this financing scenario possible.

When deciding whether to own or lease a solar energy system, you should ask yourself some of the same questions as if you were determining whether to buy or lease a car, and a few more.
• Do I have the cash to buy the system outright?
• Do I have access to cheap capital?
• Do I view this system as a long-term investment?
• What are my investment goals?
• What are my environmental goals?

Only solar energy system ownership allows you to claim: the federal tax credit (which accounts for 30% of system costs), state rebates (which can account for up to 40% of system costs), and income from selling your solar renewable energy credits “SRECS” (which can pay back more than 30% of system costs over 5 years). So, if you are looking for a clean energy investment that gives you tax benefits and provides returns in the long-run, solar ownership will be a great option for you.

On the other hand, if you want to “go solar” and get the benefits of reduced energy bills, but you don’t have the required capital and tax appetite to make use of the solar tax incentives, then a solar lease could be the perfect solution for you.

About Sol Systems
Sol Systems is a Washington D.C. based solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution. Sol Systems enables solar developers, homeowners, and businesses to fully realize the value of their solar energy systems by providing them with a range of options for selling their SRECs. To date, Sol Systems has helped over 1,100 customers with projects ranging from 1 kW to over 1 MW realize the value of their SRECs.

Sol Systems currently operates in Delaware, Indiana, Kentucky, Maryland, Massachusetts, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Virginia, Washington, D.C., and West Virginia and has partnerships in place with over 100 solar installers and developers. For more information, please visit www.solsystemscompany.com.

California’s HomeBuyer Solar Option Sets Example for Growth of Distributed Solar Generation

California continues to prove its leadership in advancing the solar industry by instituting a new HomeBuyer Solar Option and Solar Offset Program to promote distributed solar development. The HomeBuyer Solar Option requires residential real estate developers to offer a solar photovoltaic energy system option to all new home buyers. Developers who do not participate in the HomeBuyer Solar option will be required to set up a solar offset system in which they generate an equivalent amount of solar electricity on another project.

This program is revolutionary because it specifically incentivizes the development of “distributed generation” electricity. Distributed generation, unlike centralized generation from large fossil-fuel power plants and renewable energy farms, reduces the amount of energy lost during electricity transmission and helps Independent System Operators (ISOs) mitigate congestion in the transmission lines.

States such as New Jersey, District of Columbia, Pennsylvania, Ohio, Maryland and Delaware have set up aggressive Renewable Portfolio Standards (RPS), which promote the development of solar energy and create markets for Solar Renewable Energy Credits (SRECs). However, if these states wish to incentivize the promotion of distributed solar generation, it is important that they follow California’s lead in creating specific incentives for residential solar development.

If the 375,000 new homes sold across the U.S.* were equipped with a 5kW solar photovoltaic system, an additional 2,250 MWh would be generated each year. This would be sufficient to meet their energy demand for approximately six months.

*2009 Census- new home sales in U.S.
**Energy Information Administration- Table 5 Average Monthly Bill by Census Division, and State

As the Federal RES Evolves, What Does it Mean for Solar?

This last September, the U.S. Senate introduced the Renewable Electricity Promotion Act of 2010, Senate Bill 3813, a stand-alone Renewable Electricity Standard (RES) that will require sellers of electricity to retail customers to obtain certain percentages of their electric supply from renewable energy resources. If S. 3813 looks familiar, it should. The legislation is what remains of comprehensive climate change legislation that was introduced in the American Clean Energy Leadership Act of 2009 S.1462. This is therefore perhaps the last chance for any comprehensive federal approach to climate change or renewable energy prior to the next election.

So what does it mean for solar energy? In sum, it doesn’t hurt solar, but its immediate effects may not help much either. The proposed alternative compliance payment (ACP), which is the penalty energy suppliers must pay if they do not comply with their requirements is set low, especially when compared to current state RES programs such as New Jersey or D.C that have developed a foundation for a strong solar market. In addition, the portfolio of qualifying technologies may be too inclusive (by including numerous technologies the impact on any one technology is limited.

However, the legislation provides the framework, a seed of sorts, for the continued implementation and development of RES legislation nationwide. As RES markets develop nationwide, the solar industry can begin the task of adjusting to a more sustainable regulatory mechanism that is likely to help accelerate the implementation of solar technology (and others) well into the next decade. Our analysis is below.

BACKGROUND

What Does a Federal RES Do?

The federal Renewable Electricity Standard requires that a certain percentage of the electricity purchased in the country come from renewable energy resources. The purpose of an RES is to set up a competitive market in which utilities either (1) directly produce a specific amount of renewable energy based on their total load or (2) effectively purchase this renewable energy from others producing it or (3) pay a penalty. Most utilities will choose some combination of all three. In some state markets, an RES is called a renewable portfolio standard (RPS) or alternative energy portfolio standard (AEPS).

If utilities opt to go with the second strategy listed above, they usually do not purchase the energy from renewable energy resources, they simply purchase title to the “credit” associated with the renewable energy, termed a renewable energy credit (REC). Since energy can be measured in megawatt-hours (MWh), one REC represents the green attributes associated with one MWh of production from a renewable energy resource. Each time a homeowner or business produces one MWh from its solar system, it can sell the REC associated with this MWh in a competitive market. Technologies compete to produce RECs and sell them, and as these technologies scale, the supply of RECs increases, and the costs of these RECs decreases. The market is designed to drive down the costs of compliance and catalyze alternative energy technologies to scale.

CURRENT RES OVERVIEW

Volumes

The RES targets are less than the twenty to twenty-five percent recommended by most industry groups and President Obama himself this last year. The current RES requirements are below:

2012-13: 3%
2014-16: 6%
2017-18: 9%
2019-20: 12%
2021-39: 15%

The Alternative Compliance Payment

The Alternative Compliance Payment, which is the fee that electric utilities must pay in lieu of actually purchasing or producing the renewable energy credits required by the RES, is $21, adjusted for inflation. This means that for every MWH of electricity that the utility fails to supply from renewable energy, it must pay a fine of $21. The ACP effectively sets the ceiling on the value of renewable energy credits, with the caveat that there are multipliers (described below) that make some RECs more valuable than others.

Qualifying Technologies

Under the current RES, those resources include solar, wind, geothermal, biomass, landfill gas, qualified hydropower, marine and hydrokinetic renewable energy, incremental geothermal, coal-mined methane, qualified waste-to-energy, and potentially other technologies.

Multipliers

In order to incentivize certain technologies, states (and in this case the federal government) often provide multipliers for RECs from specific technologies or locations. Under the federal RES, utilities will receive double credit for RECs produced by renewable energy systems located on Indian land (to incentivize the development of renewable energy on Indian land) and triple credit for small renewable distributed generation less than 1 MW. Although not stated, it is likely that the maximum ceiling on energy efficiency credits will conversely reduce the value of RECs produced from energy efficiency upgrades.

No Preemption

The national RES will not preempt current state RES or RPS standards. Instead, the RES is meant to set a floor for states without current RES or RPS legislation to set up trading regimes and complement preexisting state legislation. The RES is a bit like the federal Clean Air Act or Clean Water Act in this respect, both of which provide states with a blueprint which they can either accept in whole, or mimic with state-specific standards that are as strict or less strict. This is incredibly important for those states that have more favorable solar requirements than the federal RES.

National Market

It is unclear at this point whether a national market will develop because of the legislation. Currently, the legislation provides for the delegation of responsibilities to either a national trading mechanism or a more regional mechanism. States will have to figure out whether they want their REC markets to be regional, like the Regional Greenhouse Gas Initiative (RGGI), or isolated, like Delaware, New Jersey, Massachusetts and others.

SREC Values

The value of solar renewable energy credits (SRECs) is typically a function of supply and demand . It is therefore unclear what the values of SRECs will be since this supply and demand will differ from state to state. Taken by itself, the legislation will not push SREC prices very high since the ACP is $21, with a potential multiplier of three ($63). However, current RPS states will likely retain their markets, and states without an RPS may develop more aggressive RPS legislation in light of the national RES.

ANALYSIS

Potential Negatives

1. The effective solar alternative compliance payment (SACP) is $63 per MWH for distributed solar energy systems (those below 1 MW in nameplate capacity). This is low enough that it is not likely to create a significant market for solar renewable energy credits (since the ACP provides a ceiling on the value of SRECs). This legislation is therefore unlikely to single-handedly develop robust markets for solar. However, as discussed below, the RES may provide the necessary legislative framework for the creation of such a market.

2. The list of qualifying “renewable energy resources” includes technologies that will be much less expensive to implement initially, and will likely flood REC markets. Solar energy, for example, is not likely to be able to compete with biomass or methane from mining.

3. Utilities can purchase energy efficiency credits. These credits are also likely to be much less valuable than SRECs, and may also flood the market – although they are limited to 26.67 percent of their overall required needs.

Potential Positives

Setting up a national RES begins to set minimum requirements, build the framework for the introduction of renewable energy legislation that many states currently do not have in an organized fashion, and develop a sustainable means by which to incentivize renewable energy. RES legislation is especially important for new technologies that may have higher up-front costs (like solar) because requirements can be structured around these costs. Although the standards may not be perfectly structured to assist solar energy at this time, most RES legislation is tweaked over time to better suite solar energy.

OUR CONCLUSION

The proposed federal RES is a good beginning, and provides a decent foundation for future legislation. Although it may not be perfect for solar initially, it forces legislators to address the important issue of alternative energy development, and provides them with a blueprint with which to do so. Our guess is that the requirements, and the ACP, will likely increase on a state-by-state basis. In the meantime, renewable energy is able to put itself on the map, and we’ve taken the first step of many in diversifying our energy infrastructure and moving towards a more sustainable future.

The Difference Between SREC and Carbon Markets

People outside the solar energy industry often refer to Renewable Energy Credit compliance markets as “carbon markets”, and solar renewable energy credits (SRECs) as “carbon credits”. This is a common misconception, so we wanted to flesh out the underlying similarities between SREC and carbon markets and then clarify the differences.

Carbon markets and SREC markets both utilize tradable permits, and market incentives, to achieve policy objectives. However, whereas carbon markets are established to reduce a pollutant and correct a market failure, SREC markets are established to incentivize the production of solar energy and create value for individuals investing in solar.

The underlying similarity between SREC and carbon markets is that both markets are based on the use of tradable permits. In markets with tradable permits, a new commodity is created through the passage of a law. The law requires regulated entities to obtain compliance permits, and in so doing creates a price signal which affects behavior and markets. In the case of mandatory carbon markets, like the Regional Greenhouse Gas Initiative in the Northeastern US, a regulating agency is given the authority by a law to regulate emissions of greenhouse gasses.

Hypothetically, the regulating agency tells a utility it can only emit 10 tons of pollution in 2011, and then gives the utility 10 carbon credits (each credit equal to 1 ton). The utility can either (1) emit 10 tons of pollution and surrender back the 10 credits to the regulatory agency, (2) emit less than 10 tons pollution and sell the excess credits to another utility or market actor, or (3) emit more than 10 tons of pollution and purchase credits from another utility or market actor. The decision the hypothetical utility ultimately takes is based on its own marginal costs of abatement (i.e. the cost of not emitting greenhouse gas) versus the market value of the carbon credit.

SREC markets share this market structure with carbon markets, and this is why I think people new to the SREC market often inadvertently confuse SREC markets with carbon markets.

However, SREC markets are entirely different than carbon markets in both intention and function. Whereas carbon markets utilize market forces to identify the most economical manner to reduce greenhouse gas emissions, SREC markets incentivize the creation of a new market and a new source of renewable energy. SRECs can be created by individual homeowners that have invested in solar energy, and these SRECs (paired with tax credits, rebates, and energy savings) can make the solar energy system affordable. Companies like Sol Systems can work with solar energy system owners to monetize the SRECs, and achieve the best value for the sale of their SRECs through long-term contracts. By aggregating customer’s SRECs into a large portfolio, Sol Systems can sell SRECs directly to energy suppliers and utilities through long-term agreements that bring security and value to both the utility, and the customer that has invested in solar.

Maryland Clean Energy Summit 2010

Maryland’s Clean Energy Summit – October 4th, 2010 – Hilton Inner Harbor

George Ashton, Vice President and CFO of Sol Systems, the largest SREC aggregator and a leader in solar finance, will be speaking at this year’s Clean Energy Summit in Baltimore, MD. The summit will bring federal and state policy leaders together in a public forum to discuss the future of renewable energy in Maryland and the effects local policies will have on the proliferation of residential and commercial renewable energy systems.

Mr. Ashton will speak as a member of a panel discussing the future of renewable generation. One of the most critical components to solar energy projects are the monetization and sale of solar renewable energy credits (SRECs). In fact, the income secured by solar system owners from the sale of SRECs is usually greater than the actual electricity savings. Mr. Ashton will discuss the future of regional SREC markets and their ability to support growth within the state of Maryland and in the region as a whole.

Other panels include: “Discovery Drives Change”, “Forecasting the Climate for Finance”, “Transportation”, “Renewable Generation”, “Alternative Fuels & Biomass”, and “Energy Management & Built Environment”.

Invited Guests include: Congressmen John Sarbanes, Governor Martin O’Malley, and Cathy Zoi, US Department of Energy Asst. Secretary for Energy Efficiency & Renewable Energy

For more information on the conference, please go to: http://www.mdcleanenergysummit.org/

Long-term SREC Contracts to Secure Financing for Solar Power Projects

An article recently posted in the Novogradac and Company Journal of Tax Credits discusses the implications of securing financing for solar energy developments utilizing long-term SREC contracts (as opposed to state rebate and grant money). We recommend reading the full article, but we wanted to provide a quick analysis of its central points, and follow up on the central strength of long-term SREC financing that this article misses.

The article observes that regional and state solar grant and rebate programs are being cut back as cash strapped governments find ways to reduce costs. In replacement of the grant and rebate programs, states (like Massachusetts) are instituting performance-based incentive structures, also known as Solar Renewable Energy Credit (SREC) markets. The subsidy for solar development is tied to performance, the value of the subsidy is determined by market and regulatory forces, and the costs of funding the subsidy are distributed to regulated energy suppliers and their customers.

The article concludes that securing long-term contracts for the sale of SRECs provides a solar energy developer with better leverage to secure financing for his or her project because the SREC contract provides a stable revenue stream for the financier. We agree in full. The article also notes, “prices offered in contracts could likely be either the floor price or something perceived as substantially below market”. While this point may appeal to those bullish on the future of SREC markets; we think this article misses a fundamental purpose of SREC markets.

The intended goal of SREC markets and Renewable Portfolio Standards is it to stimulate economies of scale for solar development, driving down manufacturing and installation costs thereby pushing solar energy markets towards grid parity (i.e. making solar electricity competitive with fossil fuel generated electricity). As solar development costs continue to decrease and the number of solar energy projects increases, the supply of SRECs on the market can quickly outpace the demand created by SREC Alternative Compliance Payments which would cause the floor price of SRECs to fall. For example, in Massachusetts the floor price is currently determined by the Clearinghouse Auction price of $285.00. In the event an energy supplier could broker with project owners to secure SRECs at a value below $285.00, the Clearinghouse Auction would freeze up and the market would find a new bottom.

We think one of the reasons investors often favor long-term SREC contracts instead of spot market transactions is precisely because there is certainty about the SREC floor price. Aggregators like Sol Systems, who manage a portfolio of SRECs through long-term contracts with energy suppliers, provide both a stable cash flow for the project developer as well as security against the intended consequence of a successful SREC market and Renewable Portfolio Standard. And, herein lies the paradox: a successful and vibrant SREC market creates exponential solar development, which drives down SREC values and leads to a mature solar market that does not require an SREC market.

Sol Systems Announces a 3 Year, Fixed-Price SREC Offer for Ohio and Pennsylvania Customers

Sol Systems, the largest solar renewable energy credit (SREC) aggregator in the nation, is pleased to announce Sol SREC 3, a new product for Ohio and Pennsylvania solar photovoltaic (PV) system owners. The Sol SREC 3 offer provides a price of $303 per SREC guaranteed for 3 years for any PV system located in either state. “Sol Systems is continuously identifying new ways we can help residential and commercial customers recoup the costs of their solar PV projects,” said Yuri Horwitz, Sol Systems’ CEO. “We are excited about this new product which offers a guaranteed SREC price that is as high, and in some cases higher, than current SREC spot market prices. Customers that lock in our Sol SREC 3 offer will not have to worry about fluctuating or volatile SREC spot market prices.”

Sol Systems’ SREC 3 offer will only be available for a limited time. Interested parties should contact Sol Systems within the next 30 days to sign up. In addition to this offer, Sol Systems will continue to offer its standard 5 year fixed price option as well.

Key components of SREC 3 Offer

• SREC price of $303 is guaranteed for 3 years.
• Systems as small as 1 kW are eligible. Systems larger than 500 kW should contact Sol Systems directly.
• Systems must either be installed currently or installed by November 1, 2010.
• Offer is not valid for customers that have already signed long-term contracts with aggregators.

About Sol Systems

Sol Systems is a Washington D.C. based solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution. Sol Systems enables solar developers, homeowners, and businesses to fully realize the value of their solar energy systems by providing them with a range of options for selling their SRECs. To date, Sol Systems has helped over 1,000 customers with projects ranging from 1 kW to over 1 MW realize the value of their SRECs.

Sol Systems currently operates in Delaware, Indiana, Kentucky, Maryland, Massachusetts, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Virginia, Washington, D.C., and West Virginia and has partnerships in place with over 100 solar installers and developers. For more information, please visit www.solsystemscompany.com.

Contact

Sudha Gollapudi
Director of Strategic Partnerships
Sol Systems, LLC
888-235-1538 x2
srec3@solsystemscompany.com

An Installer’s Guide to SREC Sale Strategies

by George Ashton

As a residential solar installer, you have without question been challenged by prospective customers regarding the high price tag of solar; a typical residential system (3kW in size) can cost between $18,000 and $24,000. Luckily, there are a number of incentives available at the federal, state, and local levels that you can present to your customers to help them realize that solar can be more affordable than often perceived. Federal and state incentives are relatively easy and straightforward to explain. The concept of selling SRECs, however, is more allusive and harder for customers to grasp.

Because SREC income can significantly improve a project’s economics (reducing costs by 20-40% depending on location) and can increase a customer’s return on investment, ensuring that customers understand their SREC options and take advantage of the sale options available will assist your business with closing more sales. This article provides an overview of SRECs and explains the pros and cons of different SREC sale options.

What Are SRECs?
An SREC is a tradable credit that represents the clean energy benefits of electricity generated from a solar energy system. Each time a solar system generates 1000 kWh (1 MWh) of electricity, an SREC is issued which can be sold or traded separately from the power. SRECs have high value in some states where there is legislation called a Renewable Portfolio Standard (RPS). An RPS requires energy suppliers to either produce solar energy from their own projects or purchase credits from individuals or businesses that own solar energy systems.

How Are SREC Prices Determined?
RPS Compliance fee schedules dictate how much energy suppliers must pay for each SREC they fail to produce or acquire. As a result, SREC prices usually trade at or below the dollar amount of these compliance fees. In some states, the fee remains the same dollar amount year over year while in other states, like New Jersey and Ohio, the fee decreases over time which will result in a decrease of the price for SRECs over time.

SREC Supply
SREC supply will increase in the coming years. As solar panel prices fall, solar will become more affordable and more popular. As more solar systems are installed, more SRECs will be available on the market. Additionally, as credit markets continue to improve, more large projects will become financeable and built, resulting in more SRECs. Both of these trends will put downward pressure on SREC prices.

SREC Demand
SREC demand will also increase in the coming years. The demand for SRECs in a given state is set by RPS legislation that determines the overall number of SRECs energy suppliers are required to acquire each year, and this number quickly increases year over year in every state with an RPS. Because SRECs are a compliance commodity, if there are more SRECs supplied than demanded in a given state market, the pricing for excess SRECs will likely be equivalent to pricing seen on voluntary SREC markets, which today trade at $15-$30 per credit.

What are the Options for Selling SRECs and the Risks of Each Option?
Selling SRECs on the open market is analogous to day trading in the stock market. Your customers may make good money, but there is no certainty with regards to their long-term profitability. If SREC prices fall for any of the reasons mentioned above, they will receive a lot less for their SRECs. This option is best recommended for SREC sellers who do not rely on SREC proceeds to pay for the cost of a solar energy system and have a little extra time on their hands to monitor the market.

Selling SRECs into a long-term contract can be a strategy that provides adequate returns, but with less risk than selling on the open market. A typical long-term contract offers a fixed price per SREC for a 3-5 year term. By choosing this option, your customers will know exactly how much income they will receive over the contract term. However, the true value of a long-term SREC offer depends heavily on what supports that offer.

The most secure offers come directly from energy suppliers as they are the ultimate purchasers of all compliance eligible SRECs. However, very few energy suppliers offer contracts directly to non-commercial system owners. The next best offer is a contract from a select few SREC companies that back up their promises to purchase SRECs with their own long-term contracts to sell those SRECs to energy suppliers. These SREC companies have negotiated to sell your SRECs to energy suppliers at a specific price for 3-10 years at a time and can pass that guarantee on to you. Beware of SREC companies offering long-term contracts that have not negotiated fixed price long-term contracts to sell SRECs. If they have nothing to support their promises, and the market price falls, it will be difficult for them to honor your customer’s contracts.

Selling your SRECs for an upfront, lump sum payment is the SREC market’s version of a risk free investment; the return is a noticeably lower than the other options, but there is absolutely no risk. With this option, you will sell the rights to your future SRECs in exchange for a discounted one-time payment received close to the date of installation. You keep that money regardless of what happens to SREC markets. This option is recommended for solar energy system owners that are risk averse or having trouble with accessing financing through banks.

Educating your customers on all three SREC sale options and helping them evaluate their risk tolerance and financial needs will be a key strategy to selling more solar energy systems. The metrics presented in this article should help you identify the best route for your customers. Regardless of which option a customer chooses, monetizing their SRECs will play a critical role in financing their solar energy system.

George Ashton is Vice President and CFO of Sol Systems, a solar energy finance company located in Washington DC.

Ontario Solar Explained

Ontario Solar Explained

According to the Canadian Solar Industries Association (CanSIA), the Canadian Province of Ontario had only 2 Megawatts (MW) of installed solar electric capacity in 2008. In 2010 alone, approximately 100 MW of solar capacity has already been installed in Ontario. Furthermore, CanSIA expects the province to install nearly another 100 MW of capacity in the remainder of this year. The Ontario solar market is booming, and it is because a relatively nuanced Feed-in-Tariff (FIT) program launched in 2009.

A FIT is a production-based incentive, in which a solar energy owner is guaranteed a fixed, above-market price for the sale of their solar electricity over an extended period of time. As an example, in a FIT program, a system owner may be guaranteed a sale price of their gross solar electrical output for $0.20 per kWH for a period of 20 years; meanwhile the weighted average price of electricity could be closer to $0.08 in the system owner’s geographic region. This program allows system owners to secure a stable and significant source of revenue and an appealing return on their solar investment.

After an extended rule making process, Ontario launched its FIT program at the end of 2009. This FIT program is delineated into six different tranches, in which different Feed in Tariff values are determined by the size and type of the solar generator. Below is a schedule of the FIT value for each tranche, and an estimated cumulative value of the incentive in the column to the right (this column estimates the total value garnered for each KW of capacity installed). As the column furthest to the right indicates, investing in solar is not a risky decision in Ontario currently, but a quite profitable one.

DC Area School Uses Creative Financing Tool to Go Solar

Located in Bethesda, MD, the country’s first LEED certified school is continuing its commitment to energy efficiency and environmental education through the installation of a renewable energy system. The Sidwell Friends Lower School plans to install a 27.6 kW photovoltaic system in time for the start of the 2010 fall semester.

In order to finance the project, the school turned to Common Cents Solar – a community co-op that helps homeowners and non-profits finance solar projects. CCS worked with Sidwell Friends School to create the Friends Solar Fund, which consists mostly of parents at the school and local community members. Each member will have partial ownership over the system through the purchase of “solar bonds”. The solar bonds are repaid through tax incentives, the sale of electricity produced by the panels, and the sale of SRECs.

The creative Common Cents Solar “solar bond” approach is a win for all parties involved. It allows members of the Friends Solar Fund to recoup their investment while the Sidwell Friends School can take advantage of fixed electricity rates protected against rising energy costs. Most importantly, the school will not pay any installation costs. Once the cost of the system has been recovered, the panels will be donated to the school under a tax-deductible charitable donation.

Common Cents Solar focuses on implementing community-based development strategies for acquiring solar energy. For more information on the non-profit organization, please click here.

Sol Systems will work with CCS to provide long-term SREC financing for the 27.6 kW installation. Sol Systems is proud to be part of the effort to implement creative financing solutions to install more solar systems within the local DC community. For a complete listing of SREC financing options with Sol Systems, please click here.

The End of Renewables As a Political Issue

The International Energy Agency (IEA) recently noted that solar electricity could represent up to 20% to 25% of total global electricity production by 2050 based on their Solar Photovoltaic (PV) Roadmap and Concentrating Solar Power (CSP) Roadmap, which are meant to assist governments, industry and financial partners accelerate energy technology development and uptake. The report concluded that PV technology will become competitive globally by 2030 on the utility-scale in some of the areas with the best insolation given the right climatic factors. Further, the report indicates that PV has the potential to provide more than eleven percent of all electricity worldwide.

This analysis is good news for those of us in the solar energy space; however, the stated assumption is that governments, like the United States, will implement more concerted policies to facilitate solar energy. Even as some argue that solar energy will soon pass cost parity with nuclear energy, solar energy will likely remain at a competitive disadvantage to traditional fossil fuels unless governments implement policies that recognize the numerous positive externalities of solar energy.

One may wonder: is this political support likely in a country that has failed to pass a comprehensive energy bill? Are the key political drivers that change how our government engages and incentivizes the development of solar and other renewables changing? Will they in the future?

Answer: Almost certainly so. The political and economic interests that have prevented a significant comprehensive approach to solar energy and other renewable energies are changing, and will continue to change dramatically.
Perhaps the single largest driver for political change is the economic change that has taken place in this country in the last two decades. As detailed in a fascinating article in the Washington Post by David Callahan, the United States has moved from a country where thirty-seven percent (37%) of the wealth for the country’s top 400 individuals came from oil and manufacturing in 1982 to merely seventeen percent (17%) in 2006. An overwhelming number of the richest individuals (and the largest political contributors) now represent industries such as finance and technology.

The political implications of these changes are enormous. Currently, according to Open Secrets, an estimated 17.4 percent of all state and national campaign dollars come from the top 100 donors, a hugely disproportionate share. As the political clout of traditional energy wanes, the clout of other industries has grown.

As Callahan points out, although John McCain far outraised Obama among employees of energy and natural resources companies in 2008, pulling in $4 million from this group, Obama simply went elsewhere, and raised $25.5 million from the finance and technology sector. Similarly, he oil and gas industry has been a traditional source of GOP cash and was consistently among the top 10 sources of money for federal candidates for decades, according to the Center for Responsive Politics. In 2008, it moved down to 16th. The entire energy and natural resources sector gave $77 million in campaign donations while lawyers gave $234 million, more than three times as much.

Moreover, many of the individuals in the financial and technology sector are committed to renewable energy. Last year, for example, George Soros pledged to make $1 billion in renewable-energy investments and other billionaires, including Warren Buffett, Bill Gates, John Doerr and Vinod Khosla, are also investing in the sector. Companies are doing the same. Google recently became an independent power producer with the creation of its affiliate, Google Energy LLC, so that it could purchase renewable energy for its large data centers and also purchase energy futures to hedge against an increase in electricity prices.

To make things more interestingly, Google’s most recent purchase of wind energy was from NextEra Energy Resources. NextEra is none other than large utility Florida Power and Light, which changed its name in January of 2009 to better market its commitment to renewable energy. Other utilities, including Duke, First Energy, Pepco Holdings Inc. and others have all made similar commitments to developing renewable energy resources either through direct development, or by helping to finance other projects. Exelon Energy, for example, recently developed a 10 MW solar project called City Solar that will provide energy to over a thousand homes.

In sum, the economic constituency is shifting towards solar energy and other renewables, and so too will the political constituency. The new economy is producing a powerful group of companies and individuals that are committed to fundamentally changing the politics and economics of renewable energy; politicians, both Republicans and Democrats alike, will not be able to ignore this constituency.

The result is an emerging political consensus, among both Democrats and Republicans, traditional energy businesses and financial ones, that renewable energy resources like solar must be supported. This may be through a carbon cap and trade legislation, but more likely the proliferation of solar energy systems will occur through a more incremental approach such as a national renewable portfolio standard and economic incentives like solar renewable energy credits (SRECs). In either case, renewable energy will emerge in the next five years as a non-political issue, and our guess is that the required market incentives to ensure the success of solar energy and other technologies will be implemented.

Update on Proposed Changes to Solar Investment Tax Credit and Section 1603 Grant Program

A discussion draft of the Domestic Manufacturing and Energy Jobs Act of 2010 was introduced by acting Chairman of the House Way and Means Committee last week. The Chairman’s discussion draft (the “Bill”) proposes significant changes to the current federal incentive structures for renewable energy.

One major change is that the Bill allows the Section 1603 Grant program to expire. Section 1603, which was funded through the American Recovery and Reinvestment Act (ARRA), allowed companies who installed solar energy systems to receive a cash grant in lieu of Investment Tax Credits or Production Tax Credits. In other words, a business investing $100,000 in a solar energy project could receive a one-time payment from the Treasury for $30,000. This allowed businesses who did not have a tax appetite (due to the recession of 2009-2010) to receive the same financial benefits as they would have received with a tax credit. (Click here for more information on Sec. 1603 Grants).

In place of renewing Section 1603, the Bill would allow the taxpayer to elect a refundable deemed tax payment in lieu of the Investment Tax Credit or Production Tax Credit. Using the example above, a deemed tax payment means that the $30,000 cash grant would be treated as a $30,000 tax payment. In the event that $30,000 exceeds the actual tax liabilities of the business, the taxpayer could file for a refund. Treating the ITC and PTC as refundable deemed tax payments means the system owner will likely need to wait longer to receive the value of the federal incentive, but would not need to have the full tax appetite to fully utilize the subsidy.

Sol Systems will continue to track this and other solar legislation.

The Status of PACE Loans

Since their inception in 2008 in California, Property Assessed Clean Energy (PACE) loans have provided homeowners and businesses with the upfront financing necessary to implement energy efficiency retrofits as well as the installation of solar arrays. These loans are funded by municipal bonds at low interest rates and, in general, have a payback term of 20 years. Another benefit for borrowers is that they are only required to make payments on the loan annually through an increase in their property tax. In theory, the borrowers should gain more in combined energy savings throughout the year than they must pay out at the end of the year. As such, the idea quickly caught on with states across the country including Maryland, North Carolina, Ohio, and Virginia, all of which created their own PACE programs.

However, on July 6th, the Federal Housing Finance Agency (FHFA) stated that these loans “present significant risk to lenders and secondary market entities, may alter valuations for mortgage-backed securities and are not essential for successful programs to spur energy conservation.”i The FHFA have taken this position because PACE loans are senior liens on a borrowers’ property, which means they take precedence over other mortgages. The FHFA oversees Freddie Mac and Fannie Mae and the organization believes this senior lien presents a risk to their mortgage portfolio. Currently, all PACE programs have been put on hold until further notice.

The FHFA needs to understand that PACE is a key component to the successful implementation of a sophisticated domestic energy policy. Many stakeholders have voiced their concern are trying to reverse or sidestep the FHFA’s resistance to the program. The State of California has filed a lawsuit against the FHFA, while numerous senators have introduced legislation that could potentially save PACE funding. Hopefully, they will prevail, since the program is a great way to create growth in the renewable energy sector and does not burden the borrower with high interest rates like many other lending opportunities. The most promising option appears to be a compromise in which the FHFA allows for a “pilot project” of between 10,000 – 300,000 homes to test out their concern over the perceived risk of this financing option.ii If approved, the success of this test cycle could lead to an increase in funding for solar energy systems.

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i Werthan, Jeffrey. “Federal Housing Finance Agency Warns About PACE Loans; Warning Communicated by FDIC,” Corporate Financial Weekly Digest < http://www.corporatefinancialweeklydigest.com/2010/07/articles/banking/federal-housing-finance-agency-warns-about-pace-loans-warning-communicated-by-fdic/>
ii Hiskes, Jonathan. “Fate of PACE clean-energy programs about to become clearer.” < http://www.grist.org/article/2010-07-20-fate-of-pace-clean-energy-programs-about-to-become-clearer/>

Are SRECs taxable?

Today, many people are inclined to believe that income from solar renewable energy credits (“SRECs”) is not taxable because (1) the IRS does not have any publication or rule related to income received from the sale of SRECs and (2) the IRS has said that the sale of SRECs does not fit within the transaction types that would initiate the generation of a 1099 form.

However, one should consider that the underlying presumption of SREC income not being taxable is: SREC income is not “profit” – or at least SREC income is not profit for the vast majority of system owners who use SREC income to pay back the initial costs of investment. (In the majority of states where Sol Systems operates, the average system payback takes 4-8 years, although it can be shorter or longer depending on state incentives and SREC values).

What happens when the solar energy system is paid off? When the system is paid off, there is a chance that SREC income would be considered profit. In that case, the IRS may decide to tax SREC income and systems owners would need to disclose that source of revenue.

Taxing SREC income would be detrimental to the solar industry and for that reason, it is very important for solar installers to educate their customers on this matter. It would also be prudent for solar energy system owners to talk with a tax professional about their solar energy investment.

Please note that Sol Systems is not an official tax advisor and cannot give tax advice. We recommend that prospective and current system owners consult a tax accountant regarding their individual financial situations.

Sol Systems will continue to research this topic and inform our customers and partners as we become aware of any changes.

Sol Systems and Clean Currents Announce SREC Partnership

Sol Systems and Clean Currents, two pioneers in distributed solar energy finance and development, have partnered together. The collaborative partnership between Sol Systems and Clean Currents ensures more prospective solar energy system owners across the mid-Atlantic will have access to SREC financing, which makes generating solar energy both affordable and simple. “With Clean Currents’ accomplishments in context, it is a great honor for Sol Systems to announce this collaborative partnership” said Sol Systems CEO, Yuri Horwitz. Under the new partnership, Sol Systems will work with Clean Currents to ensure their customers continue to receive the highest value for the sale of their SRECs.

Clean Currents is a leading independent solar energy installer and clean energy broker, operating in the mid-Atlantic region. Clean Currents provides a diverse array of services, ranging from solar installations to power switch agreements for homeowners and businesses. Recently, Clean Currents provided Sol Systems with a Wind Renewable Energy Credit (REC) purchasing agreement that offset Sol Team’s entire business and personal carbon footprint. Clean Currents has been honored with such awards as the Maryland Green Company of the Year in 2010 and the DC Mayor’s Environmental Excellence Award in 2009. For more information about Clean Currents, please visit www.cleancurrents.com.

Sol Systems is a Washington D.C. based solar energy finance and development firm. With more than 1,000 customers across 13 states, Sol Systems has become a critical player in developing SREC markets and financing solar energy systems. Sol Systems currently offers long-term, fixed price SREC contracts, upfront SREC contracts, and SREC brokerage solutions in New Jersey. By utilizing Sol Systems’ options, customers can reduce solar installation costs anywhere from 20-40%. For more information about Sol Systems, please visit, www.solsystemscompany.com.

Update on New York Solar RPS

The New York State legislature recently introduced Bill S7093 (the “Bill”), its response to the growing appetite for solar energy in America.  The Bill contains draft legislation to effectively grow solar photovoltaic capacity to at least 5,000 megawatts (MW) by 2025, with interim targets of at least 500 MW by 2015 and 1,500 MW by 2020.  This is an ambitious target when viewed in comparison to existing capacity of approximately 34 MW at the end of 2009.  In addition, New York is positioning itself as a major player in the solar industry with higher solar PV targets (by capacity) than its neighboring states, with the exception of solar heavyweight New Jersey.  Aside from the obvious environmental benefits, the draft legislation, if enacted, is estimated to create 22,200 new jobs as well as boost GDP by $20 billion.

In terms of specifics, at least twenty percent of each energy supplier’s annual SREC obligation shall be met through the purchase of SRECs from retail distributors of solar energy generation (i.e. less than 50 kW systems), and at least an additional thirty percent of the obligation shall be met through retail distributed energy generation of any size.  As a result, this promotes a more distributed use of solar energy due to the combined 50% SREC purchase requirement from retail distributors.  Furthermore, the Bill requires energy suppliers to purchase at least 75% of their SREC compliance obligation from systems owned by an independent third party. This effectively provides for a robust secondary SREC market.

While this may seem like a win for solar enthusiasts, certain ambiguities contained in the Bill makes it toothless.  Specifically, the alternative compliance payment (ACP) is not mandatory.  According to the Bill, the New York Public Service Commission is charged “… to establish an alternative compliance payment that electric distribution companies may pay in the event they cannot meet their annual SREC obligation [Emphasis added].”  Without tougher language for enforcement, Bill S7093 may be ineffective.  We look forward to tracking the development of this Bill, and will be sure to keep you posted.

Delaware Senate Passes Amendment to Strengthen RPS

On June 30th, the Delaware House of Representatives voted to pass an amendment to Senate Bill No. 119. The bill would strengthen the RPS requirement and increase penalties for non-compliance. Taken together, these measures will improve the growth prospects for the solar industry.

The legislation ramps up the amount of renewable energy required in Delaware from 20% in 2019 to 25% by 2025. The proposition also raises standards for solar energy, from 2.005% in 2019 to 3.5% by 2025. Short-term solar energy prospects in Delaware are addressed by increases in annual targets for solar that move to .2% by 2011 (previously .048%) and .354% by 2014 (.8%).  The new targets ensure immediate incentives for the development of solar energy and will be seen as welcome news for regional installers and developers as well as Delaware homeowners interested in financing their solar energy systems.

The legislation has different effects on electricity suppliers in Delaware. The fine administered to utilities for non-compliance, known as the ACP, is raised to $400 per MWH (it was previously set at $250). As previously legislated under SB-119, a $50 increase in the ACP will be administered annually to non-compliant utilities.

A new provision in the amendment grants the State Energy Coordinator the authority to adjust the ACP by 20% “to determine reasonableness compared to market-based SREC prices.” Another new provision allows the solar requirement to be frozen if the total cost of compliance exceeds 1% of the retail cost of electricity. These amendments exhibit Delaware’s intent to provide more robust compliance incentives while also safeguarding against unreasonable increases in the cost of electricity.

The amendment to SB-119 is currently awaiting final approval from Governor Jack Markell who is expected to sign the bill this week. The amendment follows similar legislative changes in neighboring Maryland, which has recently expanded its renewable energy targets. Delaware’s proposed bolstering of the RPS is further evidence for the success of RPS programs implemented in several states across the mid-Atlantic region.

As New Jersey Announces a New Round of Solar Funding, SRECs Remain Prominent in Project Finance

After several weeks of uncertainty, the New Jersey solar energy rebate program set a start date of September 1st, 2010 for the third funding cycle for solar energy systems. Known as the Renewable Energy Incentive Program (REIP), the program has been extremely popular with New Jersey homeowners looking to take advantage of the state solar incentives. In the previous round of funding in April, 2010 more than 1,000 applications were received within the first week – despite the fact that incentives had been lowered from $1.75 per watt to $1.35 for residential installations. The popularity of the program caused a delay in the new round of funding which was finally confirmed last week.

The current cycle of funding will offer $0.75 per watt in incentives limited to the first 7.5 kW of solar installations. Excluded from funding eligibility are commercially owned systems as well as all systems over 10kW. The current rates mark the lowest incentive offerings by the REIP since its inception.

Overall the REIP program has been very successful in making solar energy more affordable. However, as REIP incentives are scaled down and applications for incentives are backlogged, homeowners interested in installing solar energy are relying more heavily on SREC income to finance their solar energy systems. New Jersey SRECs remain the most valuable in the country and as state incentives decrease, SRECs will play an even larger role in making solar energy affordable to homeowners across the state.

Currently,  NJ homeowners and businesses interested in SREC financing have three different options to monetize their SRECs, each of which are available through Sol Systems: multi-year fixed-price contracts (Sol Annuity), upfront payment for SRECs (Sol Upfront), and a short-term market-based option which allows owners to sell SRECs at their current spot-market value (Sol Brokerage).

For more information on Sol Systems products, please click here. For more information on solar energy rebates and incentives in the state of New Jersey, please visit the Database of  State Incentives for Energy and Efficiency.

Update on Proposed Changes to Pennsylvania’s Alternative Energy Portfolio Standard

This week, the Pennsylvania House of Representatives will review the Clean Energy and Jobs Bill (HB-2405), a proposed amendment to the Alternative Energy Portfolio Standards Act.  The bill includes a solar carve-out, which would mandate an Alternative Compliance Payment of $450 in 2011 for utilities that do not meet solar output requirements. The newly proposed solar carve-out would raise the required solar component of Pennsylvania’s RPS from .5% to 3% by the year 2025. The proposed bolstering of PA’s solar carve-out mirrors recent legislative changes in New Jersey and Maryland that mandate a solar RPS component of 2% or higher. The net result will be greater financing incentives for Pennsylvania homeowners and small businesses looking at solar energy, as well as a stronger platform for installers located in Pennsylvania looking to include SREC values in their sales.

Under HB-2405, Pennsylvania’s RPS would cease to accept SRECs from solar systems located outside PA but within the PJM region. If passed, this component of the bill would be detrimental to out of state homeowners and businesses looking to take advantage of PA SREC income to defray the high installation costs of solar energy. The bill also adversely affects regional developers who incorporate the value of PA SRECs into the financing of solar energy systems located outside the state.

Sol Systems will continue to monitor and provide updates on HB-2405 in the coming weeks.

Sol Systems to Present at SEIA Solar Road Show

Sol Systems’ President and CEO, Yuri Horwitz, will be presenting at National SEIA’s road show conference on May 10, 2010 in Philadelphia.  The conference is tailored for small businesses and designed to give them the tools and information to maximize revenue and business growth.  Topics will include the following:

  • Latest policy and market information
  • SEIA’s installer campaign, including free marketing materials and legal resources to grow
  • New financing opportunities
  • State policies to benefit installers and their customers.

Horwitz will be presenting on the solar renewable energy credit (SREC) market and SREC financing for homeowners and businesses.  Horwitz will also be addressing market factors, such as supply and demand, for the Mid-Atlantic states.

The meeting will run from 10am to 4pm and will take place at the Philadelphia, Pennsylvania at the downtown Marriot Hotel.  For those interested in registering they can explore the opportunity here or register by email with pvdivision.rsvp@seia.org.