Although solar power is often thought of as a bespoke investment, recent trends are causing investors and sources of capital to fight for limited supplies of feasible solar power projects. What has led investors to battle for solar power? The Distributed Energy System experts at Intersect Energy have outlined the three reasons why so many are now fighting over solar power projects.
Increases in Tax Equity Markets
Despite the many tax reforms that have recently occurred, the market for tax equity has significantly increased since 2016. In fact, Michelle Davis, a senior analyst at Wood Mackenzie Renewables & Power, stated that: “There’s 40% more tax equity investors since 2016, margins for debt are compressing, and residual value is making up 50%+ of utility solar required returns”. Because of this, the solar power investment landscape is evolving and tax equity investors, lenders and sponsors are being impacted.
More Competition Means More Willingness to Invest
As solar power becomes increasingly popular, investors are beginning to broaden the types of projects in which they are willing to invest. Although the heavy hitters are still only targeting projects that are $25 million or more, small projects that are significantly less than that number are now being considered by more and more investors. However, there is currently more demand for projects than there is projects available for purchase.
Solar Power Success is Leading to Evolving Deal Structures
The P50 and P90 ratings (the levels of generation forecasted to exceed 50% or 90%) are showing high confidence in the success of solar power construction. This has led to a change when it comes to solar power purchasing structures, as project sponsors have more capital available to distribute among development. Also, less cash is being required for a down payment, making the investment less of a risk for investors.
Interested in investing in a solar power project, but not sure how to find opportunities? As a Distributed Energy System developer, Intersect Energy has the expertise and services you need to find solar power opportunities and capital. Contact us today so we can help you get started with your solar power investment and make sure you keep up with the latest news in the world of renewable energy by following us on LinkedIn!