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 @ or Joel Binstock @

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

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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 @ or Dan Holloway @

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.

It’s no secret that U.S politics has become massively polarized over recent decades. In the midst of political divisiveness, there is one area of common ground that has found consistent bi-partisan support in recent years, and that is Renewable Energy. It turns out that renewable energy has the power to bring people together in a way that few subjects do.

In a recent Pew Poll, respondents conveyed (overwhelmingly) that they would prefer our country move in the direction of solar and wind power over all other forms of energy, including coal, oil, natural gas and nuclear. 89% of respondents say they would be in favor of more solar power, and 83% said they would be would be in favor of more wind power. It’s hard to find any topic that Americans agree on with such consensus.

With this in mind, the question is,
if Americans disagree so fervently on climate change, why do they agree so strongly on renewable energy?

The answer may lie in how renewable energy is perceived by those with on different sides of the political divide.
For liberals, Renewable Energy is the answer to Climate Change. Many liberals believe that moving to a renewable energy based society will ultimately lead to decreasing carbon dioxide levels in the atmosphere, and eventual reductions in global temperatures. On the other hand, many conservatives view renewable energy from an energy-security or financial perspective.

If a home owner or a business can save money by moving to renewable forms of energy, then the decision is simple. Most would agree that people aren’t in love with coal or gas, as forms of energy. For the past 100 years, these forms of energy have simply cost less than other options.

Times are changing rapidly however; in many parts of the country, renewable energy is less costly than traditional energy provided by local utilities. Additionally, by adding solar financing to the mix, it is now possible for home owners and businesses to go solar with no upfront costs. Using instruments like Power Purchase Agreements (PPAs), many customers can reduce their monthly energy costs from day one without any money out of pocket.

While the dramatic support for renewable energy in the U.S. can, at times, seem paradoxical, when you break down the perceptions behind the support, it becomes very clear why it continues to dominate the field for new energy development.

About Sustainable Capital Finance:  Sustainable Capital Finance (SCF) is a third party financier & owner/operator of commercial & industrial (C&I) solar assets and is comprised of experts that specialize in structured finance and solar development. SCF has a vast network of EPCs and Developers across the US that submit project development opportunities through SCF’s cloud-based platform, the “SCF Suite”. This allows SCF to acquire and develop early to mid-stage C&I solar projects, while aggregating them into large portfolios. SCF has standardized the diligence and transaction process, thus creating cost-efficiencies and risk mitigation, in order to solidify the C&I marketplace as an investment-worthy asset class. For more information, visit Connect with us on Twitter at @SCF_News and follow us on Linkedin and Facebook!

30 Jan 2018
January 30, 2018

Using Trash to Help Balance the Grid

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California has set very ambitious goals for converting its energy supply to renewables. In a bill that is currently being discussed in the State Legislature, SB-100, California would officially establish the goal of reaching 100% renewable energy consumption by 2045. In addition to SB-100 being discussed in the State Capital, on September 8, 2016, Governor Jerry Brown signed into law SB-32, which commits the State of California to reducing greenhouse gas emissions to 40% below 1990 levels by the year 2030. While California’s emissions peaked in 2009 and have shown stable (if incremental) reductions over the past 7 years, there still is a great deal of work required to attain Governor Brown’s ambitious target.

While many believe that both pieces of legislation have obvious merit, there remain many challenges to attaining such lofty targets. One of the biggest issues with these goals is the inability of utility providers to balance the various intermittent power sources available that can produce renewable energy. Wind only blows a limited percentage of the time and solar only provides electricity when the sun is shining. Even hydropower is subject to droughts and variable rainfall. How then is a utility supposed to provide consistent and reliable power every day, to everyone, when any, or all, of these energy sources may or may not be available? Historically, the answer to that question has been power plants that run on storable fuels such as coal, natural gas, or other fossil fuels. So, the question becomes: how does California bridge the gap between a 100% renewable energy future and the current system that relies on more than two thirds of its energy coming from fossil fuels?
Is there a way California can solve both problems with currently accessible technology? The answer may surprisingly be yes, and the solution may come from a place very few expected.

Some Brief Facts about Trash:

  • The U.S. creates, roughly speaking, about 250,000,000 tons of trash a year. In pounds that’s 500,000,000,000lbs per year. To make this more clear, that’s 500 billion pounds of trash, every year!
  • About 30% of Municipal Solid Waste is made up of organic materials such as yard clippings, food waste and other organics
  • That means that the U.S. disposes about 75,000,000 tons of organic waste each year
  • All of that organic waste breaks down over time and emits massive amounts of methane gas into the atmosphere
  • As a Greenhouse Gas, Methane is 21 times more potent (meaning it traps heat in the atmosphere)

Hidden within that organic waste is an enormous amount of chemical energy. There are a number of ways that this energy can be captured, but the primary two are:

  • Organics converted into methane – also known as Anaerobic Digestion
  • Organics converted into ethanol – also known as Fermentation

Converting Trash into Fuel:

Each of these methods, when done correctly, yields a storable fuel source. In the case of anaerobic digestion, the storable fuel is methane, which most in the industry would call Biogas. Biogas is equivalent to natural gas depending on the purity and concentration levels reached. The second method, called fermentation, yields ethanol. Ethanol is a type of alcohol, and many might know it as grain alcohol, or moonshine. Both of these fuels can be used combusted in generators to generate electricity.
Through either of these methods, a fuel source, that can be stored for later use, can be derived from something that society pays to store in landfills. Additionally, if California were to utilize organic waste to create energy, it would reduce its landfill content by close to 30% and would capture the methane emitted by the decaying waste,. Utilizing this approach would yield the following benefits:

  • Less waste going to landfills
  • Less methane going into the atmosphere
  • Very low cost fuel that can be used to generate electricity

Additionally, because these fuels can be stored, they don’t have to be used right away. That allows electricity to be consumed in a few different ways:

Energy Consumer

    A typical business could use electrical generators powered by either of these 100% renewable fuels, while not taking up massive roof space, or building intensive carport structures to support solar panels. Additionally, unlike solar, because the business can store the ethanol or methane on site, it can essentially run “off-grid” in the case of a power outage. As long as the business had a large enough fuel tank or regular deliveries, it could run off-grid indefinitely. Lastly, if the business sized its generator for extra capacity, it could deliver additional energy back to the grid. If the business were to send power back to the grid, it could program the generator to wait until energy demand peaked (and corresponding energy prices are at their maximum) before transmitting that power onto the grid. In this way, the business could achieve the highest rate of return on its investment.

Utility Provider

    If a utility placed a small 1-10 MW generator at each of their substations, they could create mini-Peaker Plants (Peaker Plants are power plants that are typically operated only during extreme electrical load peaks) and could fill in the gaps when renewable energy sources are not providing sufficient electricity.
    By doing so, the utilities would get the best of both worlds. They could add significant amounts of additional load capacity to the grid, while maintaining the 100% renewable energy mandate. Additionally, this new load capacity would not be intermittent in nature and would be entirely under the utility’s control.

The only issue not addressed by ethanol/methane driven generators, is the problem of “over production”. Due to the intermittent nature of most renewable energy technologies, it’s not known if they will all be on, some will be on, or they may all be off from day to day.
Given the substantial amount of new solar and wind generation added to California’s grid over the past 10 years, there are times when both solar and wind are producing at their maximums across the state and the grid does not have the corresponding load requirements to use all of that energy. During these times (which are not very common) utilities will ask some of their heaviest usage customers to take some of this additional load if they can. As more renewables get added to the grid, this problem will only worsen. To achieve a goal of 100% renewable energy, utilities will still need to add battery capacity to the grid to balance load and energy production. This is one area where a waste to energy solution will not be an effective solution. Waste to energy is a “supply side” only solution, and can’t be used to add demand to the grid in times of over production. That being said, figuring out ways to add a 100% renewable energy source (derived from waste) to California’s energy mix could be a huge benefit to the grid, to the climate, and to businesses and other users of electricity.


About Sustainable Capital Finance:  Sustainable Capital Finance (SCF) is a third party financier & owner/operator of commercial & industrial (C&I) solar assets and is comprised of experts that specialize in structured finance and solar development. SCF has a vast network of EPCs and Developers across the US that submit project development opportunities through SCF’s cloud-based platform, the “SCF Suite”. This allows SCF to acquire and develop early to mid-stage C&I solar projects, while aggregating them into large portfolios. SCF has standardized the diligence and transaction process, thus creating cost-efficiencies and risk mitigation, in order to solidify the C&I marketplace as an investment-worthy asset class. For more information, visit Connect with us on Twitter at @SCF_News and follow us on Linkedin and Facebook!

On Monday, January 22, 2018, The Trump administration reached a decision on the Section 201 Trade Case that has been lingering over the solar industry for the last several months. Sustainable Capital Finance will provide further updates as we learn more but here are the preliminary findings:


  • There will be a 30% tariff on all imported crystalline silicon PV modules & cells with the first 2.5 GW of cell imports being excluded.
  • The tariffs will decrease annually at a rate of 5% over the next 4 years finalizing at 15% in 2022.
  • There are no floor prices or quotas established, despite being included within the initial recommendation proposed by the two petitioners Suniva & Solarworld.
  • According to GTM Research, the proposed tariff should equate to a tax of $0.10-$0.15/W which will hamper deployment of utility-scale solar installations by as much as 9%.
  • Solar jobs will undoubtedly be affected by this tariff, but the industry as a whole can breathe a sigh of relief that further damages were avoided. 



18 Jan 2018
January 18, 2018

January Industry News

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Regulatory News

New Jersey Senate Passes Bill 2276 to Raise Solar Energy Targets

The New Jersey Senate passed a bill on January 8th, 2018 as a short term fix to avoid the collapse of the solar market once the current goal is hit later this year. It is still unknown as to whether or not Gov. Chris Christie will sign the bill and his term expires next week.

FERC Rejects Energy Secretary’s Plan to Bail Out Coal and Nuclear Industries

The Federal Energy Regulatory Commission issued an order officially ending Energy Secretary Rick Perry’s plan to bail out both the coal & nuclear industry, citing the DOE didn’t provide evidence that the existing market rules are “unjust and unreasonable”. The proposed plan helped subsidize the stored fuel costs required to operate coal & nuclear plants.  FERC’s order was praised by both environmental groups & energy advocates.

Technology News

Panasonic Begins to Ramp Up Solar Cell Manufacturing at Tesla Gigafactory 2

Back in 2016, Tesla and Panasonic developed a partnership to produce and distribute high-efficiency Panasonic cells & modules. After a year of delays and trial runs, the Gigafactory 2 is officially producing both cells & panels. A portion of the manufactured panels are dedicated to the Tesla’s much hyped solar-roof. Systems are starting to be installed on roofs of non-Tesla employees.

DOE invests $12 Million in 8 projects with goals to improve solar forecasting.

These projects will seek to improve solar forecasting, building upon similar projects that were awarded funds in 2012. Expanding the solar forecasting from 24 to 48 hours in advance will help grid operators manage day-ahead planning. An example of one of the awarded projects is IBM’s Watt-Sun Program.

Schneider Electric SE & Cybersecurity Firm FireEye Confirmed Successful Hack of Industrial Control Systems at an Unnamed Facility

Cybersecurity has become an increased focal point for the electric industry in 2018 & beyond. With more and more cyber-attack attempts occurring every year, industry leaders are being challenged to address such a critical issue. Consulting Firm Accenture recently found that more than 75% of utility executives in North America believe a cyber-attack is probable in as soon as five years.

15 Dec 2017
December 15, 2017

18 Solar Wishes for the Holidays

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‘Tis the season to…come up with a 2018 solar wish list? Yes, that’s precisely what the team at SCF compiled. Some of these wishes are realistic, others are not…like that 120 crayon Crayola pack that never made its way under the tree. Check out SCF’s #SolarWishList, and please feel free to add to the list, by utilizing the comment section.

Happy Holidays!

1) Preserve the ITC & throw in an extension, better yet, extend it indefinitely!

2) Minimal tariffs & quotas on cell & module imports (Section 201 Trade Case)

3) Blockchain Investment & development of additional use cases

4) More Solar-Inspired Art & Architecture

5) InterSolar & SPI to be in a beautiful city near me

6) Increased Solar + Storage Deployment (Read more on storage bankability here)

7) Less Solar Degradation (Loss in production due to panel aging) – SunPower’s most recent degradation rates are testing at 0.25%/annually (Source here).

8) To help reverse Climate Change

9) Cheaper Panels and more efficient ways to install panels

10) Bankability of SRECs & additional rebate programs

11) Improved Community Solar Asset Management & Development of Solar for Low-Income Housing

12) More solar jobs & diversity in the solar industry

13) Reconstruction & Renovation of Puerto Rican Grid to include DERs

14) Significantly more institutional capital in the marketplace therefore lowering the cost of capital

15) Expansion into new markets: States like Illinois, Massachusetts, New Hampshire & others are positioning themselves to make significant progress in solar development in the next couple years.

16) Cooperation & teamwork from all stakeholders continuing to promote a sustainable cause

17) 365 days of sunshine a year, throw in some rain and snow when/where needed

18) Tax reform that incentivizes more tax equity in the market.

12 Dec 2017
December 12, 2017

Employee Spotlight: Jonathan Worthley

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What are 3 words to describe SCF?
Solar financing specialists.

What do you like most about SCF?
I enjoy being part of a small, knowledgeable team, that get’s to work on very interesting solar projects, from schools and churches, to home owners associations, municipalities and general commercial Jonathan Worthleycustomers.

What is your role at SCF?
I head up the project operations team, as their Project Operations Manager (please don’t call me the POM 🙂 that manages the due diligence, development and construction process on all of our acquisitions and developments. Our team prepares financial models, updates contracts, reviews various technical documents and manages schedules to ensure that projects meet our requirements.

What career advice would you give for people trying to enter the solar field?
Leverage your existing skills and experience as there are a great variety of roles in the solar industry. Whether it be in manufacturing, sales, engineering, construction, science, real estate, tech, insurance, finance, risk, or law, there are numerous people with different specialties that are involved in a project. Be well read on various topics, complete short courses (NABCEP and Heatspring offer affordable courses) and attend various networking events, such as those for young professionals and women in solar (organised/attended by our very own Maggie Parkhurst!).

What professional accomplishment are you most proud of?
Being able to apply my skills in different countries and industries.

What is the best book you’ve read?
I tend to read mostly non-fiction and historical fiction (sad, I know), but I found Richard Muller’s Energy for Future Presidents and Physics for Future Presidents interesting and helpful reads for anyone entering the renewable energy industry.

What do you like to do in your free time?
Stay outdoors and active, catch a game of footy (Aussie rules football) and spend time with family and friends.

What are your hopes for the solar industry?
Given solar is now cost competitive with traditional energy, I think the future is very bright. I don’t believe the phase out of the ITC will be too much of a hindrance as we will likely see more competitive and efficient financing markets. China and the corporate sector’s commitment to securing renewable energy sources, not only for environmental reasons but also for financial ones, is also a good sign. So I hope and believe it will continue to grow.

What is the best concert you’ve ever attended?
Being Australian, I’ve only ever been to Men at Work and ACDC concerts, and they’re really hard to split.

What has been your favorite city you’ve ever lived in and why?
I really enjoyed Hong Kong. It has a good mix of professional, travel and social opportunities. The city itself has a lot of bars and restaurants, but there is also a lot of hiking trails and water activities on its doorstep. It’s also an excellent base from which to travel to any place in Asia, and it’s really easy to meet people and make friends.

If you could only drink one beer for the rest of your life, what would it be?

Shiraz Madan, CEO, Sustainable Capital Finance

Shiraz began his professional career working for LaSalle Bank/ ABM AMRO in the Chicago Financial District. He served as a credit analyst and commercial banker for middle market to large corporate clients. Shiraz left the banking world and became a shareholder and Vice President at SEO Design Solutions (SDS); a startup specializing in search engine optimization and internet marketing, located on the “Magnificent Mile” in Chicago. Shiraz was responsible for business development and managing access to the capital markets, working with SDS’ investor base. Shiraz was appointed as the Chief Executive Officer where he successfully grew the company’s profits..

Shiraz decided to rejoin the financial and startup worlds and founded SCF. With experience in project finance and access to the capital markets, Shiraz partnered with Dan Holloway and DV Patel to form the necessary foundation for launching a successful solar finance company.

As the CEO, Shiraz currently serves as the primary communicator, decision maker, leader, and manager.
Shiraz holds a BA in Business Management from Millikin University.

Stratton Report: Please briefly describe how Sustainable Capital Finance (SCF) is playing in the behind-the-meter C&I market.

Shiraz Madan: SCF is a third party financier of commercial and industrial, municipal, school and non-profit projects. We work with EPCs who are looking for a PPA provider to finance their solar projects and we work with developers who are looking for a takeout partner to acquire solar projects either during development or construction. We’re unique in our approach to C&I in that we’re able to offer solutions for projects as small as a 100kW and we’re very comfortable with unrated offtakers. With these two segments being significantly underserved, we’ve been committed to being the solution for our partners for these segments. The way we deliver our third-party financing service to our partners is through our proprietary cloud-based software called the SCF Suite. The Suite allows our partners to price projects in real time, upload project-level data in a centralized place, upload all project files such as drawings, agreements, permits, financial statements, etc. It allows our partners to auto-populate counterparty agreements such as term sheets, PPAs, and EPC agreements. Overall, it’s proven to be a comprehensive tool that streamlines the origination, development, financing, and construction process for our partners and internally for SCF and it has allowed us to bring capital to the small C&I sector.

SR: For this market, what business models and strategies are you seeing market players deploying now and what is the rationale for it?

SM: The C&I market has seen a great increase in new business models and strategies recently. On the distributed side, we’re seeing software play a huge role in creating efficiencies for developers and installers. From sales and design software like Aurora and HelioScope to Energy Tool Base for rate schedule access and cost avoidance calculation to GELI and Homer on the storage side. The use of these platforms, and our very own SCF Suite, has lowered the barrier to entry for installers and developers and has paved the way for scalability. With regards to community solar, we continue to see an increased presence in the market. With regulatory support, we’ll likely see additional states adopt the community solar approach which will include a blend of C&I and residential customer subscriptions. On the finance side, new capital has entered the solar C&I sector from institutional investors looking for returns that are unattainable in utility or residential. This has resulted in smaller developers having access to development capital and thereby have the ability to originate and develop portfolios of projects for takeout partners like ourselves.

SR: How do you see the market landscape shaping up in the future— a consolidation of players? Still fragmented with lots of smaller, local players? A market dominated by utilities with existing customer relations? Something else?

SM: With the residential market being so saturated, opportunities have opened up for smaller EPCs and developers to enter this small commercial sector. As mentioned previously, with enough scale, these parties can obtain development capital and continue to build portfolios for takeout partners. We really enjoy working with partners that are new to C&I as it’s presumably a part of their growth process and it’s exciting to grow with them. Having said that, with so many smaller developers entering the fray and new capital in the mix, it is and continues to be a very fragmented marketplace and I think we will see strategic acquisition from larger solar entities and from investors that are looking to own platforms and assets as opposed to simply buying assets. With regards to utilities dominating the market, since most utilities are not fully tax efficient, I don’t think we’ll see them dominate the market place until the ITC steps down and is marginalized or eliminated. They have an inherent low cost of capital which is definitely advantageous so we’ll continue to see them participating and I think we’ll see that participation growth in C&I as well.

SR: How is the U.S. 201 solar trade case currently impacting the market?

SM: We’ve seen two major current impacts. The first being module availability with the punitive uncertainty of the looming tariffs. Sponsors and investors have gobbled up inventory from most tier 1 manufacturers. We fall into this category as we’ve also secured modules to assist our development partners fulfill their pipeline. The second current impact is a reluctance of developers and financiers to engage in new projects that aren’t supported by existing inventory. Essentially not wanting to take tariff risk.

SR: If tariffs are imposed, how do you think that will that impact the market in future?

SM: It really depends on how punitive the tariff is. If the administration is interested in the aesthetics of the tariff and the potential for Americans to view the tariff as sticking up for American labor then we may see a 20% to 40% tariff which isn’t ideal but it’s also not a backbreaker for the industry. If the administration is interested in significantly penalizing manufacturers, the US solar industry would take a big hit. Thousands of jobs will be lost and all the positive momentum that has been gained over the years will be lost. Let’s hope it’s the former and not the latter.

SR: Do you see or expect to see a shift to more systems purchases rather than PPAs in this market?

SM: Under the current capital landscape and ITC window, I don’t. With an influx of capital in the marketplace we have seen margin compression and simply more PPA options. In a rising interest rate environment with an ITC step down or elimination then yes, I do think we will see an increase in system purchases relative to PPAs, as investors will look elsewhere for returns.

SR: Is the flow of tax equity into the market sufficient to meet the demand?

SM: With so many buyers scouring their networks for projects that will reach commercial operation in 2017, I would say there’s definitely a healthy amount of tax efficient capital in the marketplace currently. Now where that capital is being deployed might be a little saturated with utility, large-scale C&I and residential garnering the large majority of it. With small C&I, there are only a few tax efficient capital sources available.

SR: Creditworthiness has been an ongoing challenge in this market. Do you see any solutions developing to tackle this challenge?

SM: We definitely agree that the unrated sector of the market has been drastically underserved for years and due to its size has huge potential for Behind-the-Meter solar. There are two general approaches to credit; 1) Pricing credit risk into projects, and 2) Mitigation through off-taker contractual obligations.

Through our software, the SCF Suite and in conjunction with the use of Moody’s RiskCalc, we’ve developed a credit rating system that can be utilized in real time. With data from an off taker’s financial statements, a credit rating can be obtained within our software as well as an indication of whether we view the off taker as an investment grade party. Now this system and methodology has allowed us quantify credit risk, price that risk into our projects, and ultimately bring capital to the C&I sector.

Another approach would be to insure against off-taker default. These products are relatively new and can be cost-effective in some instances, but the market isn’t fully developed yet.

I think the key for the marketplace as a whole is to take a view on credit using a rational benchmark. Whether that benchmark is Moody’s or another analytic, making assumption on a probability of default and price it into the project. Insurance is certainly a viable alternative, as long as it’ cost effective. With more insurance products available, this approach will take-off. Either way, I think pricing our perceived risk into a project or obtaining insurance, is a much better way to address credit concerns as opposed to requiring a letter of credit, or including financial convnants in a PPA.

SR: If we get a tax reform, what is an impact you see happening to the market?

SM: It really depends on what level of tax reform is effectuated. If we see a major tax reform on corporate taxes, it could very well reduce the available supply of tax equity in the marketplace and thereby an increase in the cost of tax equity capital. If reform is minor, which is likely given the lack of party cohesion, we might see a slight decrease in the supply of tax equity capital and a slight increase in the cost of tax equity capital. Now all of this assumes that there isn’t a large influx of new tax equity capital into the marketplace which I don’t think is accurate. I think we will see new tax equity investors enter the marketplace and offset some of the impact of potential tax reform.

About Sustainable Capital Finance:  Sustainable Capital Finance (SCF) is a third party financier & owner/operator of commercial & industrial (C&I) solar assets and is comprised of experts that specialize in structured finance and solar development. SCF has a vast network of EPCs and Developers across the US that submit project development opportunities through SCF’s cloud-based platform, the “SCF Suite”. This allows SCF to acquire and develop early to mid-stage C&I solar projects, while aggregating them into large portfolios.

SCF has standardized the diligence and transaction process, thus creating cost-efficiencies and risk mitigation, in order to solidify the C&I marketplace as an investment-worthy asset class. For more information, visit Connect with us on Twitter at @SCF_News and follow us on Linkedin and Facebook!

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This interview was original published here by Stratton Report and was republished with permission.