Best Practices: Creating a New Asset Class for Distributed Solar Energy Generation
Keywords: distributed generation, solar, finance, investment, PPA
Abstract:Solar project finance, as many investors have learned, can be both time consuming and costly: a new asset class, complex tax equity and debt structures, and the high transaction costs associated with financing a single distributed generation project have historically turned many investors away. However, the emergence of solar power purchase agreements (PPAs), which enable corporations, municipalities, and utilities to purchase solar electricity as a service without incurring any upfront capital costs, has created enormous opportunities for both debt and equity investors. To successfully invest in solar projects, investors can aggregate large pools of capital and deploy them across a discreet set of solar assets. According to SunEdison Vice President William Lee, “stripping out the inefficiencies of solar project finance and reducing the transaction costs per kilowatt of installed capacity are critical factors for the continued success and growth of the solar industry, particularly for distributed generation projects.” The speaker will discuss how these financing vehicles work, best practices, and real world examples. It is an approach that has enabled SunEdison to become extremely efficient financing its solar projects, with over 175 projects financed through 2008.