Finance flows for US solar installations

22. June 2011 | Applications & Installations, Markets & Trends, Top News, Global PV markets | By:  Jonathan Gifford

Banks, corporations and insitutional investors are making funds available for U.S. solar power projects as the market expands. Some investments are facilitating certain solar companies to make the shift from photovoltaic installer to turnkey provider.

A house installation in America.

Investments from banks, corporations and institutional funds are flowing into American solar industry. Image: Flickr/Department of Energy.

Last week Google announced a $280 million investment in domestic solar installations and it seems that confidence in the solar sector’s ability to deliver is growing, as banks’ readiness to make funds available grows.

In a seeming confirmation of the trend, yesterday Californian Borrego Solar Systems announced that it had closed its latest fund that will finance solar energy projects in Massachusetts, New Jersey and California. Its partners in the fund are the U.S. Bank and Southern California’s East West Bank that have financed, with Borrego, more than $100 million in commercial and utility scale solar installations in the last 12 months. The most recent projects funded by the program are worth a total of around nine megawatts (MW).

Borrego has structured a Solar Power Purchase Agreement for these more recent installations, where-by Borrego installs, operates and maintains the solar power system and then sells back the energy to the customer at a reduced and fixed rate. "The preliminary investment from U.S. Bank and East West Bank kick-started our PPA, and their continued support has enabled Borrego Solar to provide a cost-effective opportunity for our customers to lower their utility rates through solar energy," said Borrego Solar’s Mike Hall.

From the banking perspective, the East West Bank’s K.Y. Cheng says expertise and access to projects is vital. "Borrego has consistently proven that it is an ideal investment partner by presenting us with shovel-ready projects and significant industry expertise," Cheng said in statement.

Government incentives, such as a deal only open for a year giving institutions and companies a 30 percent tax credit for their solar investments, are a part of the attraction. Solar installations’ ongoing income generation and the low interest rate environment are also proving factors. However, the bank or investor itself must have solid ongoing revenue to allow them to benefit fully from the tax credit.

The fund that closed yesterday, that brought the total investment in Borrego by the two banks to $100 million, is the third installment by the banks. Each investment has increased in value with the latest investment of $45 million, equaling the total of the first two combined. While Borrego has worked with East West Bank and U.S. Bank on each of these purchase power agreement funds, increased interest in solar investment could signal competition between investors and falling equity prices for the solar companies.

Corporate investor Google may be in a unique position to continue investing in renewables and solar, as it is well situated to fully take advantage of the 30 percent tax credit however their aggressive entry into the market may provide a signal to other companies. Certainly renewable funds are facilitating large capital flows into large photovoltaic projects in the U.S.

Reuters reported yesterday that CleanPath LLC will pour more than $800 million into large photovoltaic projects in North America. The fund will fund the installation of 1,000 MW of solar plants over five years. The plants will be worth between five MW to over 100 MW.

These kind of investments indicate that institutional funds for photovoltaic installations are recovering to levels approaching that of before the global financial crisis. These investors may also be interested in purchasing photovoltaic installations after construction or at a later stage. Matt Cheney from the San Fransisco based Cleanpath said their company will be looking for projects that can eventually be sold. "We came to the realization that there were a lot of buyers looking to own these built assets," he was reported as saying by Reuters.


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