Solar Financing: Four Things You Need To Know Now


The landscape for financing and executing solar power projects is shifting rapidly, and significant changes are still yet to come. What are some of the most important factors that developers and integrators should keep in mind today?
1. The value of the ITC

Implemented in 2006 and extended in 2008, the solar investment tax credit (ITC) has been instrumental when it comes to propelling solar projects forward. In fact, according to the Solar Energy Industries Association, since the ITC went into effect, it has helped solar installations in the U.S. grow by more than 1,600% – a compound annual growth rate of 76%.

Why? It provides a 30% tax credit for both residential and commercial solar systems and assists with tax equity-based funding – a huge bonus for the solar community, which often can't fully utilize available tax benefits. For project developers, the ITC has brought both stability and flexibility.

2. What industry shifts are ahead

With the ITC set to drop to 10% at the start of 2017, growth in the solar industry is expected to decrease significantly, leading firms to worry about what they will do when left with less subsidy support.

With the step-down of the ITC looming on Dec. 31, 2016, component prices, EPC models, development strategies and other factors are shifting as people rush to get projects built.

3. The complexity of going solar

A few years back, the buzz and excitement was around the fall of panel prices. Everyone was planning their next deal, dreaming of all the opportunities lower prices would bring the industry. While it certainly has boosted solar sales and more installations have emerged, the discussion has now shifted to how developers can make deals more efficient.

When it comes to going solar, there are many moving parts and multiple parties at play. Just to get everyone to the table to deal with permits requires accountants, appraisers and legal professionals. When the entire process is conducted efficiently, deals can work well and everyone involved gets paid quickly and fairly. But the unfortunate reality is that deals too often stall when multiple entities with divergent agendas try to work together to prepare the installation, arrange financing, and secure operations and maintenance agreements.

4. What innovative models are available

With a hot deadline fast approaching, there's no time for inefficiency, and the solar community is doing whatever it takes to make it ahead of the bell signaling the drastic drop of the ITC.

Today, the industry is beginning to adopt new financing models that help streamline the process so that solar can be implemented smoothly and remain the cost-effective solution that lower panel prices and the rise of power purchase agreements have allowed it to become. Financing innovations and green bonds have also emerged, playing a key role in the industry today. With strong solutions in place, barriers are overcome and solar power is put into place, right in the nick of time.

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Jamie Evans is managing director and head of U.S. Eco Solutions for Panasonic Enterprise Solutions Co.

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