Insights Solar Asset Transparency
By Chris Doyle, Senior Consultant
NREL’s Solar Access to Public Capital (SAPC) working group recently released its second publication from the Solar Quality Initiative focused on establishing standards for quality management and investor transparency for commercial and industrial scale solar installations. The Best Practices in Commercial and Industrial (C&I) Installation was developed by leading solar industry professionals with the intent of standardizing and improving solar asset transparency and reduce securitization (or other secondary market strategy) transaction cost.
According to a new report by Marathon Capital, capital raised from securitizations has increased six-fold from 2013 to 2015 and they project securitization to be the mainstream financing option in 2016 as multiple distributed solar finance companies like SolarCity, Sunrun, and Dividend Solar planning to issue asset backed securities.
The Solar Quality Initiative continues to be a source of confidence for an industry going through expected growing pains in the secondary markets. The Solar Quality Initiative consists of volunteers across the value chain (both finance and solar) seeking to proactively self-regulate quality and asset management in order to further develop the asset class and attract a wider range of capital sources.
The continuation of the Best Practices provide valuable uniformity in the way solar assets are developed. Capital markets can have increased assurance that solar energy systems are deployed and maintained with consistency and in a manner that protects long-term system production and asset cash flows. As investors become more familiar with and confident in the industry-developed SAPC protocols, the hope is that due diligence costs, project review time and the required yield to raise capital will all decrease.
As unsettling news of SunEdison’s landslide and the controversial Nevada PUC ruling attract widespread attention, it is important not to forget that we are talking about a renewable energy asset class that reduces the monthly spend of a working class household, reduces greenhouse gas emissions, reduces dependence on foreign oil and provides a low-risk, stable cash flow for investors.
The organization currently hosting the Solar Quality Initiative is the Institute for Building Technology and Safety (IBTS), a 501(c)(3) non-profit organization that works with solar developers, EPCs and finance companies to ensure firms have an effective quality management programs.
Matt Golden, one of the co-founders of the Solar Quality Initiative and senior advisor to IBTS, states, “This initiative was created by a number of our customers and fellow quality assurance providers who shared our mission to have a unified approach to ensuring quality management in the industry. The results of these efforts adds additional layers of consumer protection, product life cycle, installation costs, and ultimately long-term sustainability of the solar industry.”
The Solar Quality Initiative is also developing a Solar Provider “Credentialed Provider” protocol that will allow large solar finance companies such as SolarCity, Sunrun and Dividend Solar, a process to differentiate themselves in the capital markets by adhering to the industry-developed Best Practices. The working group developing the Credential Provider process consists of volunteers from leading solar finance companies, capital providers, developers, manufacturers, engineers, and installers.
The development of these protocols and industry standards is supported across the board and organizations like IBTS, Solar Energy Finance Association, SunSpec, and NABCEP are all collaborating to ensure the future remains bright for the solar industry.
The C&I Best Practices is one of several work products developed by the Solar Access to Public Capital (SAPC) working group, generally engaged to open capital market investment. Capital market investment includes debt and equity securities procured by pension funds, family offices, endowment funds and other large managers of investment. These sources of institutional investments allow for the industry to access the lowest cost of capital financing.