Illinois has finalized their SREC program and it is going to be a monumental boon to the state’s solar market. With less expensive electricity than the North East and fewer hours of sunshine than the South West, the state decided to implement an SREC program with the ambitious goal of providing 25% renewable energy by 2025. The SRECs are particularly useful for financing in the C&I market. Essentially, the commercial blocks provide an additional twenty to fifty dollars per megawatt hour (or 2-5 cents per kilowatt hour) in revenue. In addition, Illinois took the unusual step of creating a 15 year SREC term, but paying for all fifteen years within the first 5 years of a system’s operation. They essentially front-loaded the SREC payments to the system owners. 
 
This effectively makes projects that previously did not pencil, much more tantalizing for financiers – and many of the projects that were tabled in the past can now be built at no cost to the customer with savings in year 1. This is another example of how utilities, governments, and the solar industry can work together to provide well paying jobs while reducing the state’s greenhouse gas emissions. 
 
We can expect Illinois to climb up the ladder of renewable energy production. It is currently ranked 37th in the US with 6.6% of electricity production coming from renewables. If they attain their goal, they will be well on their way to becoming one of the greenest states in the country.

With over 15,000 attendees year after year, Intersolar is one of North America’s largest solar exhibitions for its industry and partners. SCF had the opportunity to walk the floor this year and here’s what we learned:

1) Intersolar has grown with the solar market
Where once small shop entrepreneurs gathered in line to inspect racking attachments to increase their crews’ installation speeds, business professionals and executives speculate on the future of the industry and the challenges of a mature market. The vendors are largely the same, but their old products have been refined and perfected. This is a great accomplishment and shows monumental progress for an industry that has tripled in size since 2010.

Solar industry progress is outstanding; albeit it comes with issues that are ever present when a new industry flourishes. The problems are new and different. The focus is now on ways to incorporate solar into our outdated grid, which is why there is now an entire floor dedicated to energy storage. At stands brimming with developers seeking to get ahead of the curve, storage companies hawked their products to customers who have tried and failed to effectively implement a cost-effective solution to demand charges and utility push back.

Everyone knows storage is the big question; and the teams that master it first will be in a league of their own.

2) Software is Taking over the Origination Game
One thing that has become evident over recent years of attending the Intersolar Show is that a new breed of software providers are providing new value added services that are dramatically reducing the workload to the EPC/Developer marketplace. The landscape of origination is changing rapidly, and it appears that software is at the forefront of this new paradigm shift.

Companies like Aurora have reduced the work it takes to design large and complex commercial solar systems to simply entering an address and performing a handful of mouse clicks. Other companies are using large scale public (and private) databases to estimate building energy usage and electricity pricing to dramatically reduce the amount of time it takes to provide customers with detailed proposals. Still other companies are using software to target the best properties for land leases for Greenfield development. All of these new platforms are combining to drive down the cost of customer acquisition which in turn will drive down overall installation costs. With that being said, it’s an exciting time to be in the solar market.

3) Meeting Clients and Partners Face to Face is Always the Best Part
Participating in Trade Shows can impart numerous benefits. While they can be costly to attend, a lot of value to be derived if proper planning and preparation is undertaken. Most people attend shows in hopes of learning more about their industry through seminars, or walking the show to experience new products, services or industry trends. In SCF’s experience, the most valuable aspect of visiting industry trade shows is the in-person meetings that take place at these events.

Getting to meet with people in-person, and learn about their companies, projects, and personal lives is invaluable in creating rapport, and ultimately trust. In an industry known for terms like the “Solar Coaster”, and the “Wild West” it is vital to form long term relationships with those you partner with. There are numerous attendees at these shows that find the face to face meetings so valuable, that they never actually set foot on the show floor,  and simply purchase a show pass so that they can set up meetings with their clients and prospective vendors. At shows like Solar Power International, you will rarely have an opportunity to meet with as many partners in one place.

There is a lot that can be learned at any industry trade show, but the in-person meetings have the longest-lasting impact.

Since it is June, the 6th month of the year, we wanted to present you with our thoughts on the six hottest markets for solar financing in the country. If you have questions or thoughts on these markets or any others not listed, don’t hesitate to reach out to Dan Holloway @ Dholloway@scf.com or Joel Binstock @ jbinstock@scf.com

1) California: California is the most developed and saturated solar market in the United States. In 2016, approximately 10% of all energy produced in-state was from solar generation. With $0.15+ per kwh rates, utilities with experience working with solar developers, and ample sunshine California will continue to deploy solar at a substantial clip going forward, particularly in the C&I and community solar markets.

2) Massachusetts: Out with the old, in with the new. Massachusetts has begun to phase out their SREC II Carve-out program and replace it with the new and improved SMART program. SMART is expected to be one of the most attractive solar programs in the country in 2018 & 2019 with significant available capacity to be deployed. Read more about the SMART program and SCF’s SMART offering here!

3) Illinois: Illinois, much like Massachusetts has decided against pursuing a traditional SREC Program to achieve its RPS standards. Instead, it has established the Adjustable Block Program (AB Program) which offers fixed incentives over 5 years in order to encourage solar deployment. The AB program is still in its early stages but anticipated opening is Q4 2018 or early 2019. One thing to note here is that while the Community Renewable Generation category is substantially oversubscribed (some have said by as much as 500% or more), the Distributed Renewable Generation category (2 MW and less) is still relatively unsubscribed.  You can read more about it from SCF here!

4) New Jersey: New Jersey is a challenging but exciting market. While the SRECs in the state are some of the highest in the country, their price volatility creates uncertainty and risk exposure for owners of PV systems. As a result, the cost of capital typically is the highest for states like New Jersey with uncontracted risk exposure. However, there is considerable discussion going on within the state related to modifying the current SREC structure to make it look more like the MA and IL incentive programs. Everyone will have to wait to see how these conversations ultimately play out.
5) Rhode Island: Rhode Island is a smaller more nuanced market than the previous states listed. There is a feed-in-tariff opportunity called the Renewable Energy Growth Program which allows developers to supply electricity directly to National Grid in exchange for a bid-rate locked in for a 20 year term. Similar to the MA SMART program, SCF can provide programmatic site lease pricing using the SCF Suite. Please contact us if you would like to learn more.
6) Arizona: Sunshine galore. Arizona has some of the highest insolation rates in the country. Combined with sophisticated solar developers & installers, Arizona is a state that is trying to compete with California for state-unsubsidized solar. As build prices continue to decline and the price of electricity continues to rise, we are finally reaching an inflection point where financing becomes an attractive option for this market.
31 May 2018
May 31, 2018

Talking SMART

0 Comment
Introduction:

The state of Massachusetts has a long track record of promoting renewable energy & sustainable development; however, recent legislative changes have prepared the Commonwealth to become one of the largest hot-beds for renewable energy development in 2018 & beyond.
The Department of Energy Resources (DOER) recently finalized the Solar Massachusetts Renewable Target (SMART) Program as its plan to replace the widely successful SREC (Solar Renewable Energy Certificate) Carve-Out II Program implemented in 2014. This program was designed to assist in the procurement of 1,600 MW of solar by 2020. While the SREC program helped jumpstart renewable development in MA, the state’s RPS standards dictate that even more renewable resources be installed; hence the creation of the SMART Program.

The SMART Program

Learning from the past, the SMART Program seeks to integrate the fixed nature of rebates (typically 1 lump-sum payment) with the performance-based & longer-term REC structure. RECs, while critical for solar deployment in Massachusetts, have challenged the financeability of solar projects due to price uncertainty. Simply put, while RECs can offer upside for project economics, they also provide significant risk due to price fluctuations. Rebates on the other hand provide fixed upfront incentives that are often paid within the first year of deployment, therefore ensuring those respective economics. SMART, through significant research & development, hopes to resolve the price uncertainty of RECs through locked-in contracts (20 year terms for projects over 25kW).
SMART is predicated on a “Base Compensation Rate” plus location based, off-taker based, and energy storage based rate adders. The base compensation rate varies based on utility provider, system size, and block availability – once program enrollment hits a certain capacity, there is a 4% step down in the rate for the following block.

SMART Rate = Base Compensation Rate + Location adder + Offtaker adder + ESS adder

These fixed 20-year contracts are incredibly important for solar financing. By locking in revenue that is guaranteed through the SMART program, solar financiers can reduce their risk exposure and offer a lower cost of capital while providing a better solar offering to the market. With base compensation rates ranging from $0.15/kWh – $0.36/kWh, the SMART program expects to be one of the most attractive state solar programs administered in the US.

How SCF is taking advantage of SMART

Sustainable Capital Finance has been following the SMART Program through its development, and is in the midst of incorporating a new site-lease solving feature, soon be integrated into SCF’s Quick Quote calculator and the SCF Suite. SCF’s Developer & EPC partners will be able to use the new feature to approximate site-lease payments that SCF can support under SMART and other programs as well. While the SMART Program is expected to be activated in the coming months, SCF is actively seeking out opportunities for site control in MA. If you are evaluating a project for the SMART program or are interested in learning more, don’t hesitate to reach out to Joel Binstock @ jbinstock@scf.com or Dan Holloway @ dholloway@scf.com.

What are 3 words to describe SCF?
Tight-knit, Agile, and Talented.

What do you like most about SCF?
The team. SCF has worked tirelessly to assemble a multi-talented team armed with skill sets that blanket the solar industry (as well as the surrounding territory). We have team members who came from banking, construction, marketing, and sales. Everyone has a niche within the company and together we are greater than the sum of our parts. It doesn’t hurt that everyone has a great sense of humor either. 

What is your role at SCF?
I manage developers, EPCs, and conduct diligence from a construction risk standpoint.

What career advice would you give for people trying to enter the solar field?
It is important to have a baseline understanding of every component of the industry. This includes sales, engineering, construction, client relationships, utility requirements, financial obligations etc. Even if only one of those areas is your focus, it will enable you to make informed decisions as well as anticipate pitfalls for your project or portfolio.

What professional accomplishment are you most proud of?
I started as an entry level installer and have worked my way up to the top of the solar food chain. I was also named a CohnReznick Capital Juniors in Energy Finance 30 under 30.

What is the best book you’ve read?
Development as Freedom by Amartya Sen with The Book of Laughter and Forgetting by Milan Kundera as an honorable mention.

What do you like to do in your free time?
I enjoy watching and playing sports, eco-tourism (off the beaten path), and sampling restaurants with my friends.

What are your hopes for the solar industry?
I want to see the utilities work with solar companies in order to optimize the grid to handle more renewable energy, and the solar companies to implement more storage into their systems to offset peak demand.

What is the best concert you’ve ever attended?
Vampire Weekend.

What has been your favorite city you’ve ever lived in and why?
Park City. I grew up there and was able to ski, bike, hike, and play team sports as much as I wanted.

If you could only drink one beer for the rest of your life, what would it be?
River Ale by Deschutes Brewery.