 |
Given the relevance of SRECs in financing solar, SRECTrade has been involved with the Distributed Solar Finance & Investment Summit for the past few years and will be attending Distributed Solar East this summer in New Jersey. The event runs June 8th-10th, 2011 in Newark, NJ and is one of the best opportunities to network with a variety of stakeholders in the solar financing world.
For more information or to register, visit the event’s website.
At the end of September, Senators Jeff Bingaman, Sam Brownback, Byron Dorgan, Susan Collins, Tom Udall, and Mark Udall introduced a Renewable Electricity Standard (RES). The bill will require electricity generators to acquire specific percentages of electricity supplied to customers from renewable energy sources.
Senator Bingaman commented, “I think that the votes are present in the Senate to pass a renewable electricity standard. I think that they are present in the House. I think that we need to get on with figuring out what we can pass and move forward.”
The legislation proposes the following targets to be met from either renewable energy resources or energy efficiency improvements:
YEAR __ %
2012-2013…….……..3
2014-2016…….……. 6
2017-2018…….……. 9
2019-2020………… 12
2021-2039………… 15
Eligible renewable energy resources will include wind, solar, ocean, geothermal, biomass, landfill gas, incremental hydropower, hydrokinetic, new hydropower at existing dams and waste-to-energy. Energy providers can comply with the RES by producing renewable energy, implementing energy efficiency measures, purchasing renewable energy or energy efficiency savings, purchasing renewable energy credits or energy efficiency credits, or paying an alternative compliance payment (ACP) at a rate of $21/MWh. The national RES program will not affect state programs.
Click here for the entire press release.
Last week, the state of California filed a lawsuit against mortgage giants Fannie Mae and Freddie Mac. California’s Attorney General, Jerry Brown, hopes the legal action will realign the momentum of the Property Assessed Clean Energy (PACE) financing program. Earlier this month the Federal Housing Finance Agency (FHFA) instructed the mortgage lenders to avoid homes or tighten lending standards in geographies with PACE financing in place.
The lawsuit filed claims that the FHFA violates California law, which approved the PACE programs, and “severely hampers California’s efforts to assist thousands of California homeowners to reduce their energy and water use, help drive the state’s green economy, and create significant numbers of skilled, stable and well-paying jobs.”
Additionally, the lawsuit states, “the actions of these government-sponsored, shareholder-owned private corporations have placed California’s PACE programs – and the hundreds of millions of dollars in federal stimulus money supporting them – at immediate risk while benefiting their own pecuniary interests.”
The FHFA’s response focused on the additional credit risks PACE programs could impose in the event of a mortgage default. The PACE financing structure puts the clean energy loans in a position ahead of the home mortgage. If a property were to go through a foreclosure process, the PACE loan would be paid off prior to the home mortgage.
In addition to the California lawsuit, representatives from the California Public Utilities Commission and the U.S. House of Representatives took action against the FHFA’s decision. Click here to see the full blog post from the New York Times.
A recent Wall Street Journal blog post highlighted a new approach to solar financing. Diamond Castle Holdings LLC has committed up to $225 million of equity to KDC Solar LLC to develop solar projects in New Jersey. The company will finance the project completely with equity, which will give them increased freedom with their SRECs over the more traditional method of financing solar projects by taking out debt.
The genius behind this strategy from an SREC perspective is simple: most solar projects today are financed with debt. The off-taker of that debt requires an SREC contract with a suitable counter-party. Bilateral long-term contracts have been hard to come by and have traded at a significant discount to ACP levels. This is one reason we’ve seen such growth in our long-term SREC contract markets and Diamond Castle is solving the problem yet another way. Rather than giving up this value, it seems the private equity firm is forgoing the leverage and financing the projects with equity suggesting they believe the discount in a long-term SREC contracts wipes out the benefit of taking on leverage.
This groundbreaking strategy could prove influential in SREC markets moving forward, illustrating an alternative model for the financing of solar projects. It highlights the issues that many developers face in financing projects in the SREC market world. More importantly, it demonstrates that despite the challenges created by a market-based structure for subsidizing solar, private industry will always find a solution. This is at the core of why the U.S. favors SREC markets over the state-controlled Feed-In-Tariffs that are popular abroad. A fixed subsidy for solar energy may be a whole lot easier to implement on day one, but in the long-run, a successful market-based mechanism is an optimum solution (not to mention, far more American).
When New Jersey passed the 2010 version of its SREC program, the most important takeaway wasn’t the increasing of the requirements, the creation of a safety net or the extension of the program through 2026: it was the overall statement coming from the legislature that this program is here to stay and it is only getting stronger. Now it is time for the industry to come up with its own solutions for playing within the parameters of the SREC market. The companies that solve those solutions creatively will be successful while the rest wait around for something to change. Hopefully the banks will find a way to participate, but until they do, firms like Diamond Castle will lead the way.
For more information on this story in the Wall Street Journal blog, see here.
Property Assessed Clean Energy (PACE) programs face push back from Fannie Mae and Freddie Mac. PACE is a financing program through which local governments raise money for renewable energy retrofits by selling municipal bonds. Homeowners can then access this capital to help finance home energy improvements, such as solar panels for their roofs. The loan is paid back over the course of 15 to 20 years through a property tax assessment, which stays with the home in the event of a sale.
The problem, in the eyes of Fannie and Freddie, is that the loan is senior to the home mortgage. In a foreclosure process, the energy efficient loan is paid off before the mortgage lender gets their money back. The financing structure was implemented with other types of specialty property taxes in mind. Other property tax assessments for municipal improvements (i.e. sewers and sidewalks) are senior to home mortgages and have not raised red flags from mortgage lenders in the past. Additionally, the loan’s first lien status helps during the fundraising process when cities sell municipal bonds.
The Federal Housing Finance Agency (FHFA), which regulates Fannie and Freddie, announced that it directed the mortgage lenders to allow current borrowers with existing energy efficient liens on their homes to participate without penalty. Additionally, the FHFA instructed Fannie and Freddie to consider avoiding the programs or tightening lending standards in areas where PACE programs move forward. Tightened standards could include approval from the lenders prior to borrowers implementing PACE financing or require homeowners to payoff the assessment in a sale or refinancing.
These tightened standards could seriously hinder PACE programs, which were intended to increase clean energy jobs and incentivize renewable energy adoption. Some municipalities have been holding back PACE applications because of the future uncertainty of the program. The municipalities are wary of putting the homeowner in a position that would violate their mortgage. The FHFA announcement was followed by letters from Reps. Henry Waxman and Barney Frank stating that resolutions should be developed to continue the PACE programs without increasing the risk taxpayers or mortgage investors take on.
SRECTrade will be heading to the Solar Power Finance & Investment Summit in San Diego in March. We’re excited to attend! Here are the details of the conference:
The Solar Power Finance & Investment Summit has established itself as a major gathering place for the solar power industry’s decision makers—the one deal-making venue where the solar power and financial communities come together year after year to network and conduct business. Previous Summits have been enormous successes, busy with major industry and financial professionals networking and discussing deals. The 2010 Summit is slated for more of the same.
Hear From Leading Solar Power Project Developers, Utilities, Financiers, Investors and Other Industry Players at the Solar Business and Networking Event of the Year!
http://www.infocastinc.com/solar10
|
|