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Jan 28, 2013

Bringing Bank Money to Solar: Can truSolar become the solar industry’s Kelley Blue Book?


Solar HouseFewer than 5 percent of the 6,500 banks in the U.S. will finance solar. Yet bankers who work in solar tout the asset’s excellence. A new industry consortium of solar's leading players wants to make it easier for the remaining 6,200 banks to get in the game.

Banks don’t look at loans for solar projects because, leaders of the truSolar™ initiative said in a special session at Solar Power Generation 2013, the nascent industry lacks standards adequate to make the notoriously financially conservative bankers confident of a return on their investments. truSolar would create a score -- something like a credit rating -- for each solar project.

With standardized ratings for every significant element in a project, from component quality to the developer’s track record to the regulatory expediency of the project’s jurisdiction, a project would earn a truSolar score that would tell financial institutions and investors what its relative risk is.

With industry-wide standards and rankings for asset manufacturers, developers, installers, managers, funders, and regulatory procedures, and standardized forms and contracts, the risk associated with loans would be reduced because lending institutions could be more confident of the predicted performance of the systems they invest in. This could increase the flow of money to the solar industry while cutting transaction costs and the cost of capital.

Establishing such standards would also attract insurance and ratings agencies, further increasing liquidity and volume. Riskier projects would be rated lower and charged higher interest rates by lenders and higher insurance premiums by risk adjusters.

truSolar Logo“If you have a project that is going to need a lot of care to even get across the finish line, my premiums are going to be higher because of the risks involved,” explained truSolar partner and solar project insurer Assurant's VP David Schroeder. “You are condensing not only insurable risk but all the aspects of risk into a score.”

“The bankers have said they have a quality problem,” explained Ian Gregory, Managing Director at panel quality specialist SolarBuyer. “They don’t understand where the issues are, but they know they can no longer rely on traditional methods of evaluation.” SolarBuyer European Managing Director Peter Rusch speculated that well over half the banks in Germany lend to solar.

“In my experience in international finance,” agreed Assurant’s Schroeder, “German banks were a common occurrence in the renewable space.” One of the important things truSolar could do, he acknowledged, would be to bring the resources of a comparable portion of U.S. banks into play.

During the conference, Hertz (NYSE:HTZ) Environmental Director Susan Pinera said her company hadrun into only the normal obstacles of construction during its ongoing development of rooftop commercial projects. But, she stressed, Hertz had done its due diligence. That is exactly the effort truSolar would minimize for lenders and insurers.

“Standardization,” said Sungevity President Danny Kennedy, “is necessary to get big money comfortable.”

Where Solar Mosaic CIO Greg Rosen now has two analysts working 30 hours on project due diligence, the solar financier said, standardization would allow him to have them working only three hours because the project's score would be pre-established.

“The cost of capital and risk premiums are misaligned and capital is overpriced,” said consortium member PanelClaw’s CEO Costa Nicolau. “Even the banks in the space spend too much time [trying to] understand the space. And since there is no standard, they understand it differently.” As a result, Nicolau said, “the commercial and industrial PV market in the U.S. is grossly underexploited. And mispriced.”

In the current environment, truSolar advocates say, bad projects may be paying too little for capital and risk mitigation and good projects may be paying too much.

An industry consortium effort led to standards in the cell phone sector, said Distributed Sun's Senior VP Doug Payne. It started with internal conversations at Distributed Sun about bankability. Inundated by proposed projects’ inconsistencies, they coined the term "truSolar" to describe the standardization they wanted.

Talks with representatives of DuPont (NYSE:DD) Photovoltaic Solutions about their Materials Matter initiative advanced the idea. In September 2012, Payne said, Distributed Sun, DuPont and the Rocky Mountain Institute introduced the truSolar initiative at Solar Power International.

Looking ahead, Payne said, he sees an alpha tool for internal testing in six months to nine months, followed by perhaps twelve months of beta testing. Twelve to eighteen months later, the consortium hopes -- pending working group consensus -- to do a full open-source release to the industry.

The best analogy, though not a perfect one, Payne said, is a sort of Kelley Blue Book for Solar. Other industries have “a standardized set of forms, terms, conditions, documents, scoring and rating that all play off a common backbone or framework.”

“A developer would put together a project,” Payne said. “The terms, pricing, technologies and other factors would earn the project a truSolar score. Based on that score, rating agencies such as Standard and Poor’s -- which is part of the consortium -- could rate that project. That rating would generate the developer’s cost of capital and a risk mitigation premium.”

Other members of the consortium include ABB (NYSE:ABB), Booz Allen Hamilton (NYSE:BAH), National Renewable Energy Labs, Sandia National Labs, and SMA America.

Recommended Reading

This post originally appeared on GreentechMedia.

Solar house image courtesy of shutterstock.com.


Showing 1-2 of 2 comments

January 31, 2013

SolarCity has a lease program for residential rooftop PV. At the time they installed mine, they were dealing with only one bank to underwrite the leases. They had to have spent time educating that bank. Perhaps they would join truSolar, in order to gain the benefits of a standardized interface to many banks, so they could lower their financing costs?? Perhaps they could contribute to this standardization?

February 1, 2013

Three revolutions have shaped the course of human history: the industrial revolution and the recent information revolution we are now living through.

Hermann Scheer, with gale-force enthusiasm, initiated and began the solar revolution.

Most people in the world do not realize that a new solar revolution is sweeping the earth, because it is happening so quietly and so fast.
Scheer drafted a solar feed-in tariff policy that became the model which the whole world is now following, except the USA.

This was a simply policy that suddenly gave enormous economic and political power to homeowners and farmers who installed solar panels. Scheer’s idea was that if we had a million homes with 50 million solar panels on the roofs, all feeding their surplus onto the grid, and being paid $0.54 kwh for 20 years, that would give the homeowners just enough of an incentive to buy their own panels, and then they would be able to both get their investment back, plus be able to make $60,000. a year extra from solar. Depending on the number of panels they expand each year, on their property.

Many activists do not see what the buzz is about around solar. That is because they do not see how solar impacts war and peace. Human rights, job creation, hunger, health, mass migration, nuclear, coal, gas, oil and especially economics are all being radically changed by the rise of solar.

When I say solar, I include wind, water, geo and all renewables.

But since all energy on earth comes from the sun, I use the shorthand of “solar”.

When I speak about climate collapse and renewable energy, I often mention Herman’s writings, because his book “Energy Imperative” provides me with a road map of how we are going to achieve 100% solar power in my lifetime.

Many people look at Utilities like PG&E and tremble, thinking “there is no way we will ever be able to get a feed-in tariff passed in San Francisco, or any other city, because they own the Mayor and all the Supervisors.”

Scheer’s book provides a blow by blow account of how he fought every battle and won. It is inspiring. Scheer and I both believe that our human transition to solar energy by 2020, is the over-riding moral imperative of our time. He states that solar energy cost will generally go down, as they largely consist of technology expense. Mass production and technological innovations will bring dramatic decreases in cost.

That is the trend we are witnessing in China today.

This is the worst of times. This is the best of times. He was certain that we would see the growth of solar, not as a cost, but as a unique opportunity that will create millions of jobs and cash flow worldwide. As we stop climate collapse by 2020.

Millions of people in the US have heard Scheer speak. Yet almost none of these young people have taken up his torch to lead a movement to petition for a solar feed-in tariff. What happened? Why did people listen, applaud and then go back to sleep?

I have met over 1,000 people in the US who have heard Scheer speak in Washington, DC and nationwide, yet none of them developed any fire in their belly to do the work he was doing to develop a feed-in tariff.

Towards building this solar movement, we are petitioning in California. Join us. Fax Paul: 415-861-0870, if you wish to volunteer. Yes, you can make a living petitioning, if you ask for donations. Necessary work.

After I read Scheer's books, I quit all my other projects to focus only on creating a feed-in tariff for SF.

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