Solar Financing Tips Good Credit? Good Deal! This has been the obvious requirement to go solar no matter what type of organization needs solar financing. The rules around solar project financing are being changed and creative solutions are always at the drawing board. Solar project developers are struggling to get the permission to move forward where they are actually bankable.
Solar is a “no brainer” to many organizations and the developers are successfully seeing the motivation to make a decision. To get to this point there is a certain amount of time and money invested to get a solar project through its early stages. The demand for solar is present, but the biggest stumbling block is getting the projects financed. This becomes frustrating for all parties involved and often results in solar projects dying on the vine.
Federal Tax Credit Expires in 2016 The reality is that the Federal Tax Credit is expiring at the end of the year in 2016 and the clock is ticking for solar projects that are depending on it. The immediate observation is to take a look at the solar projects that are getting financed and realize they share a commonality. According to SEIA over 80% of solar projects are third party owned and the vehicle that is getting them to cross the line is the Power Purchase Agreement (PPA).
What is a Power Purchase Agreement? According to Wikipedia, a power purchase agreement (PPA) is a contract between two parties, one who generates electricity for the purpose (the seller) and one who is looking to purchase electricity (the buyer). The PPA defines all of the commercial terms for the sale of electricity between the two parties, including when the project will begin commercial operation, schedule for delivery of electricity, penalties for under delivery, payment terms, and termination. A PPA is the principal agreement that defines the revenue and credit quality of a generating project and is thus a key instrument of project finance. There are many forms of PPA in use today and they vary according to the needs of buyer, seller, and financing counterparties.
A PPA that is executed will make a financier jump ahead because the risk is much lower. Solar project developers who become familiar with how to sell a PPA solution are going to have a competitive edge and provide the best service for the client. The first thing to do is to become familiar with what a PPA is and work with an Independent Power Producer and or PPA Provider. A good strategy after that is to form a partnership for future solar projects.
Solar Industry Education Clean Footprint has positioned itself to help projects get completed. Over the next several months the company will focus on how to provide the resources and information that solar project developer’s, clients and other solar firms need to enable the vision of a “Clean Energy Economy.” As a start to our solar education program, if you would like to learn the basic solar terms click here to download the 57 Solar Terms You Must Know.