Archive for the ‘Solar Financing’ Category

Scaling up Solar Finance: Standards to Reduce Soft Costs

Posted April 18th, 2017 by SRECTrade.

On Thursday March 30th, SRECTrade participated in the annual SunSpec Alliance meeting, presenting as part of a panel on reducing soft costs in solar. The panel explored factors contributing to high costs and specifically how open data standards can reduce these costs across the solar value chain. SRECTrade has long been a proponent of open data standards as we focus on building products and services that increase the efficiency of portfolio management and provide access to the REC markets. To derive these and other benefits, standard adoption needs to be considered and applied in both a technology and service orientated approach.

Currently, the two technology factors with the largest potential positive influence on the market are providing open and equitable access to underlying registries and the development of software solutions that institutionalize portfolio management. Over the last 2 years, SRECTrade has campaigned to open up the underlying REC registries, resulting in the development of the first Application Programming Interface (API) for NEPOOL GIS and an improved API interface for PJM GATS. Open and equitable access to the underlying REC management platforms is fundamental to the continued growth and prosperity of renewable energy adoption. Failing to provide access has increased asset management costs as organizations build bloated teams to manage complex portfolios. Our analysis shows in 2017 the SREC market alone is estimated to exceed $2b in transactions, exposing many organizations to possible costly operational mistakes and strategic risk as it fails to capture institutional knowledge.

Despite the new APIs, adoption of open data standards at the registry level remains a challenge. Most of the national registries still do not have open APIs and even for those that do, are often limited and heavily restricted. The benefits derived from the open communication and exchange of data continues to challenge those that stand to gain most from the existing barriers to entry. Additionally, decision makers are often apathetic and resistant to change, particularly where bureaucracy and legacy software makes the process for change painful. The benefits however are clear. Monopolistic access to data increases costs to participants and stifles innovation that would otherwise lead to reduced costs in the market. Open and equitable access places the cost of innovation on the market and reduces the ability for a central authority to decide market winners. The advent of blockchain technology that promotes decentralized distributed communication has, and continues to, disrupted many industries where data managed by a central authority restricts access and transparency. It is both a sign that modern technology can replace centralized autocratic processes and that consumers are demanding greater access and control of their data.

To reduce portfolio management costs and mitigate operational risk, the ability for organizations to either buy or build software is critical. Unfortunately, to date, in both cases choice is limited or often completely lacking. The absence of APIs prevents organizations from building comprehensive tools and in many markets the ability to procure services. SRECTrade is seeking to solve these problems by lobbying for new public APIs and providing comprehensive portfolio management services through our new SRECTrade-X platform.

Coupled with these technology changes, standardization of business services will also contribute to reduced costs and a greater variety of financial services. Our efforts on this front are focused on unlocking liquidity in the market by establishing standardized processes for creating derivative products and the securitization of REC contracts. Last April, SolarCity announced that it closed the first SREC securitization round, unlocking $40m of residential and commercial solar funding, part of which was originated by SRECTrade. Ron Klein, VP, Capital Markets at SolarCity said at the time that it was “evidence of the maturity of the SREC market”. To unlock similar value for other organizations, SRECTrade has been working to create clear data and reporting structures, backed by our technology platforms, to establish a methodology for financiers to price risk appropriately and provide securitization as a turn key solution.

In summary, a lack of standards and access to underlying data fuels complexity and in turn, increases risk and ultimately the cost of doing business. To reduce soft costs and the burden to REC portfolio managers, the industry needs to continue to drive towards free and open data communication and exchange platforms. Achieving this will unlock innovation, investment and value across the market.

Congress Passes Extension of Investment Tax Credit (ITC) for Solar

Posted December 18th, 2015 by SRECTrade.

Earlier today, Congress passed the FY 2016 Omnibus Appropriations bill, which includes tax extenders and $1.1 trillion in government funding. The spending package includes a pivotal extension of the federal investment tax credit (ITC) for solar energy. The bill is the result of a bicameral and bipartisan compromise, by which Congressional Democrats pursued the extension of this federal subsidy as partial compensation for lifting the ban on US crude oil exports. At first, Democrats believed that the bill would be a loss for the environment, but Democratic leaders urged their party members to recognize the net benefits of extending support for renewable energy development.

“May the force be with you,” quipped Senator Dianne Feinstein (D-CA), encouraging her fellow Senators to vote in favor of the package just hours after the House passed the bill. The bill passed both chambers of Congress by impressive majorities. The House approved by a 316 to 113 vote, and the Senate approved by a 65 to 33 vote.

While existing law provided the 30% solar ITC through the end of 2016, the extension guarantees 30% through 2019, declining to 26% in 2020 and 22% in 2021. After 2021, the 10% credit for Section 48 (commercial) projects will remain in place, per existing law. However, the bill includes “commence-construction” provisions that allow projects to qualify if they come on-line by the end of 2023. These extensions will help states to meet their Renewable Portfolio Standard and other renewable energy goals by helping project owners offset the cost of investing in renewable energy. The federal ITC, coupled with additional incentives, such as Solar Renewable Energy Credits (SRECs), encourages investment in renewable technologies across the country.

The ITC extension will undoubtedly have a significant impact on the solar industry. Experts project that the extension will increase solar installations by 54 percent (compared to a non-extension scenario) and create a 20 GW annual solar market through 2020. The extension is expected to impact utility-scale solar the most, where installations could increase by as much as 73% through 2020. Comparatively, residential installations are expected to experience a 35% growth, and commercial installations are expected to grow by 51%. This anticipated development will spur economic growth and an anticipated incremental investment of $40 billion in the solar industry.

After proposing an extension of the ITC in his 2016 budget earlier this year, the passage of this bill reinforces President Obama’s inaugural commitment to addressing climate change and protecting the planet for future generations. The bill also follows the historic adoption of the Paris Climate Agreement, which was made at COP21 in Paris earlier this month. Although the Agreement still needs to be adopted by the U.S. Government, the President is resolute that the Agreement will survive Republican opposition and become law. In a statement following COP21, President Obama said that “this moment can be a turning point for the world[,]” and this bill is certainly a step in the right direction for America’s commitment to the new international goal.

Mass. DOER Seeks Stakeholder Input on Residential Solar Loan Program Design

Posted June 27th, 2014 by SRECTrade.

The Massachusetts Department of Energy Resources (DOER) recently announced a plan to solicit stakeholder input regarding the implementation of a Residential Solar Loan Program.  The goal of this program is to provide homeowners with access to solar loans while providing new business opportunities for local lenders. This new program is anticipated to launch in the fall of 2014.

Feedback will be solicited during three public stakeholder meetings hosted by the DOER.  The time and locations of these meetings are as follows:

Eastern Massachusetts
Monday June 30th,  10am – 12pm, Conference Room C & D, Second Floor, 100 Cambridge Street, Boston, MA

Western
 Massachusetts
Tuesday July 1st, 1pm – 3pm, Dining Commons, 1 College Drive, Greenfield Community College, Greenfield, MA

Central Massachusetts
Wednesday July 2nd, 10am – 12pm, Weiss Room, Massachusetts Technology Collaborative, 75 North Drive Westborough, MA

To RSVP for a meeting please email: (emma.krause@state.ma.us )

A copy of the official announcement letter can be found here.

PSE&G Announces Solar Loan Program Extension

Posted July 22nd, 2013 by SRECTrade.

PSE&G has announced that they will begin accepting applications this fall for the Extended Solar Loan Program. This program will finance 97.5MW of solar over the next three years. The program is similar to the previous Solar Loan program with some important changes. Like the previous program, the Extended Solar Loan will offer a loan to system owners which is repaid with either cash or the proceeds of the sale of SRECs generated by the system and sold by PSE&G. Also like the previous program, there will be a floor price on the amount the loan recipient is credited for those SRECs even if the actual sales price falls below that floor price. As is currently occurring in the original Solar Loan Program, ratepayers make up the difference when the market price falls below the floor price.

The major change in this program is that the floor price will not be set by PSE&G, but will be determined by a competitive solicitation. PSE&G will hold 4-6 competitive solicitations each year, offering only a portion of the total capacity of each segment each round. In addition, the loans will all be 10 years, and there is no longer a “call option” for SRECs. Finally, this solicitation will require borrowers to pay administrative costs associated with the loans (fee structure for residential/commercial). There will be a set interest rate of 11.179% for all borrowers.

This program is only available to new, un-built systems. In general the program will contribute to increased oversupply in the NJ SREC market, since it increases the SREC supply and allows systems to be built at a higher price than the current SREC market price supports, with ratepayers making up the difference.

Distributed Solar East Finance & Investment Summit (June 8-10, 2011)

Posted April 25th, 2011 by SRECTrade.

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.

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Senators Introduce Renewable Electricity Standard

Posted October 20th, 2010 by SRECTrade.

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.

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California Sues Fannie Mae and Freddie Mac

Posted July 22nd, 2010 by SRECTrade.

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.

Diamond Castle’s equity-only approach to Solar

Posted July 20th, 2010 by SRECTrade.

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.

PACE Energy Efficiency Program Derailed

Posted July 8th, 2010 by SRECTrade.

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.


Solar Power Finance & Investment Summit, San Diego, CA

Posted February 26th, 2010 by SRECTrade.

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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