1. Solar Market Pathways Leadership Academy
Solar Financing Overview

2. Sustainable Capital Advisors
Sustainable Capital Advisors (SCA) is a global strategic consulting and financial advisory firm
We assist clients in developing sustainable programs, analyzing and structuring financial options, and implementing capital strategies
Work with commercial entities, educational institutions, non-profits, utilities, and municipalities
Reach across a range of sustainable infrastructure technologies

3. Primary Financing Options
The primary options for on site solar financing are
Direct Ownership
Direct Ownership + Debt
Power Purchase Agreement
Prepaid PPA
Operating Lease

4. Power Purchase Agreements
Useful for entities that want to purchase electricity with no capital commitment
Allows entities to implicitly enjoy tax credit benefits
No operational or system risk to customer
High credit hurdle
PPAs are typically priced at an after tax IRR of ~8% for investment grade credits and 10%+ for non-profits and non investment grade entities

5. Prepaid PPAs
Allows third party to monetize tax benefits while providing additional discount to customers due to upfront cash payment
Typical discount to installation cost is 10-15%
Especially useful for tax-exempt or low credit entities
Prepay capital can be raised via
Cash on hand
Bank Loans
PACE
Crowdfunding
Bond issuances

6. Prepaid PPAs
Sunrun offering prepaid PPAs for Grid Alternatives projects in CT focusing on low income communities
Sunrun’s prepaid also used for CA Single Family Affordable Solar Homes (SASH) program
CollectiveSun providing prepaid PPAs for non-profits in CA and other states
Figtree (merged with Dividend Solar) provided non- profit PACE funded prepaids in CA in 2016

7. Non-profit/Tax-exempt Financing
Non-profits and tax exempt entities cannot utilize solar tax benefits
Entities with strong credit can get PPAs from established solar investors
Prepaid PPAs alleviate need for credit review, many ways to raise prepay capital
In certain situations might make financial sense to own the system outright including via debt financing even though tax credits cannot be monetized
Mission based non-profits may be able to receive grant funding or discounted equipment/services

8. PACE Property Assessed Clean Energy
Allows commercial and residential customers to borrow for energy upgrades and pay off loan via tax lien
Removes credit risk from transaction
Useful for low credit individuals and entities
Can be used for other energy technologies
Huge amount of potential to break down barriers
Must be approved by local counties
Some challenges with lender consent
Current legislative shadow

9. Overcoming Challenges to Financing
Projects in the 25kW – 500kW range are often difficult to finance
Key factors for successful financing:
Standardized project development and installation processes
Aggregation of small projects into larger (2MW+) portfolios
Standardized documentation for all agreements (eg SAPC)
Credit enhancements and support

10. Community Solar
Community solar allows large solar installations to sell electricity to local subscribers via utility crediting
Allows efficiencies and economies of scale on technical side while offsetting residential electricity rates and generating larger revenue for project
Allows for lease payments to site-host even if they cannot use electricity directly due to tariff structure or credit
Can be a tool to help serve LMI communities

11. Community Solar Structure

12. Community Solar Financing
Community solar has unique features for financing
Need to acquire and maintain large customer base with appropriate infrastructure
Subscriber agreement structure is key, may be short dated and fixed discount in which case utility rate risk is shifted to investor
Can remove credit risk from project if subscribers can be switched in efficiently, allows all types of subscribers to participate
Ability to scale large portfolios within utility service areas

13. Solar Capital Stack
For those who want to structure their own financing strategy
Three major parts to the capital stack
Equity
Tax Equity
Debt
Typical projects will have 25-35% equity, 30-35% tax equity and 25-45% debt.
Complex tax structures and expensive legal fees
Want to have at least 5-10MW to attempt bespoke structuring

14. Tax Equity Three major structures Sale-leaseback Partnership Flip
Inverted Lease
Market moving to partnership flips due to shorter tenor and accounting treatment
30-40 total institutional investors, $6bln in 2016
Minimum size for institutional: $10mm-$50mm
Small amount of high net worth individual tax equity investors and funds; expensive and difficult to find

15. Solar Finance Outlook Strong regional markets
Community solar model offers significant benefits
Still need innovative small scale financing solutions for underserved communities
Financial feasibility still heavily dependant on local regulations (TPO, net metering, RPS, tariff structure) and incentives
PACE consumer protection legislation
Tax overhaul uncertainty, corporate tax rate change from 35% to 15% will have large impact to tax equity and project economics