On April 18th, Hannon Armstrong Sustainable Infrastructure Capital (NYSE:HASI) IPOed on the New York Stock Exchange. HASI is one of only two publicly traded Real Estate Investment Trusts (REITs) dedicated to sustainable infrastructure. The other such sustainable REIT is Power REIT (NYSE:PW), which I have written about extensively. PW is both illiquid and involved in significant litigation, two factors which may put off the conservative investors who gravitate towards REITs.
In December, Power REIT purchased the land under the 5.7MW True North Solar Farm in Salisbury, MA. Photo Source: Power REIT
HASI, on the other hand, has market capitalization approximately ten times larger than PW, and traded over five million shares on its first day. That is about as many shares as PW trades in nine months. HASI’s liquidity will fall as its shares enter the hands of long term investors, but the company will remain far more liquid than PW.
via A Clean Energy REIT: Hannon Armstrong Sustainable Infrastructure – Forbes.
Equipment leasing has been used for much of the last century by airlines, railroads, utilities, oil and gas developers and other industries as a way to finance expensive equipment. Indeed, equipment leases and similar instruments account for more than $600 billion of business each year. This number is remarkable as it constitutes more than half of the investments into all business and nonprofit goods and software in the United States each year.
It is not surprising that equipment financing has become common in the solar energy sector. Such financing systems make solar energy more accessible, allowing customers across a broader range of income levels to buy solar electricity without taking on the large upfront cost of purchasing the equipment.
via Guest Post: Solar Financing Explained : Greentech Media.
Yingli Green Energy has signed a module performance warranty insurance agreement with one of Munich Re’s specialty primary insurers.
Under the terms of the agreement, Yingli Green Energy and Munich Re will provide additional economic security for large-scale commercial and utility project developers, investors and debt providers. The agreement will cover Yingli Green Energy’s multicrystalline modules sold from October 1, 2012 to September 30, 2013.
In the event of an unexpectedly large performance loss below guaranteed performance specification, Munich Re indemnifies Yingli Green Energy for its performance warranty obligations, the companies explain. The agreement covers the 10-year and the 25-year warranties on all multicrystalline Yingli Solar modules, guaranteeing that within 10 years, multicrystalline Yingli Solar modules exhibit a power output of no less than 91.2% of the nominal power output specified on the module’s original product label.
Furthermore, it covers multicrystalline modules within 25 years exhibiting a power output of no less than 80.7% of the nominal power output as specified on its original product label.
via SolarIndustryMag.com: Yingli, Munich Re Enter Performance Warranty Agreement.
Top engineering, procurement and construction firms gathered to network, learn and do business with corporate-level project developers at the PGI Financial Forum, one of four co-located events that took place in Orlando, Fla. earlier this month. Richard Kauffman, Senior Advisor to the Secretary of the U.S. Department of Energy, gave the keynote address during a luncheon that took place during the conference.
During the luncheon, Kauffman explained to the 100 attendees that as someone who originated from the private sector, in his DOE role he is trying to understand where market forces can be harnessed in order to unleash the flood of investment that is needed to bring about large renewable energy projects.
Kauffman explained what he sees as a disconnect between returns in renewable energy projects compared to returns in other investments. On the one hand, today, renewable energy projects are financed in what he called an “old-fashioned, archaic way” where for the most part, projects rely on private sector money that is looking for high rates of returns, typically around 12-14 percent. On the other hand, money managers, wary of the stock market and its risks, have returned to the bond markets, which offer more steady (but lower) rates of return, in the 5 or 6 percent range.
via Renewable Energy REITs or MLPs Would Unlock Billions for Project Development | Renewable Energy News Article.
Geothermal capacity additions are on track to top 100 MW in 2012, making this year one of the best for geothermal deployment in the last decade [1,2]. This could be a tentative sign that conditions have been improving for geothermal finance (traditionally, finance has been one of the principal barriers to the technology’s wider adoption). Projects coming online this year have demonstrated some creativity in leveraging financial opportunities. Here are some highlights.
Commercial Lenders may be Revisiting Geothermal Asset Finance
One particularly notable project for geothermal finance was the 49.9-MW John L. Featherstone plant (formerly Hudson Ranch I), which began commercial operation in the Salton Sea, California area in March. According to Project Finance magazine, Featherstone was the first utility-scale geothermal facility in the United States since the 1980s to secure debt for construction finance from commercial lenders, a class of investor that has typically shied away from geothermal project finance [3,4]. The debt deal featured a club of banks, and amounted to about $300 million, about 75% of project costs. It is structured as a five-year, mini-perm, which equity holders plan to refinance in the capital markets .
via Drilling for Dollars: Notable Developments in Geothermal Finance | Renewable Energy Project Finance.
It is no secret that the last couple years have been rough for PV manufacturers globally. Panel makers have had to contend with compressed profit margins and an oversaturated market, both of which have driven many firms to shutter operations and enter into bankruptcy protection. Facing the difficult task of betting on which companies will be around in the future to honor product warranties, PV project developers, owners, and financiers approached the insurance industry to see if it could devise a solution for their concerns. The response came in the form of OEM (original equipment manufacturer) warranty insurance.
NREL recently completed a round of discussions with professionals from the insurance, finance, and PV industries on these new OEM warranty policies (as well as other topics in PV risk management). This blog provides an advance overview of our findings, which will be published in a forthcoming report on solar PV risks and mitigation solutions.
OEM warranty insurance is a new and still niche product, but there are indications that demand is growing. According to our research, in 2011 only a few panel makers had publicly announced that they had purchased manufacturer coverage. As of this writing, NREL has identified more than 20 manufacturers with an OEM warranty policy, at least five of which could be considered “Tier 1″ suppliers. At least three insurance carriers offer warranty coverage, with Munich Re providing perhaps the most capacity (in terms of dollars) in the market right now. Several brokers and broker-type entities are also active in this space. These entities generally craft policy terms and arrange for the sale between the carrier and policyholder.
via To Insure or Not to Insure: PV’s New Fangled Warranty Insurance Option | Renewable Energy News Article.
Soft costs can be pretty tough. The cost of solar installations can be generally separated into “hard” costs — representing primary components such as modules, racking, inverters — and soft costs including legal, permitting, and financing. While the former group — particularly modules — have dropped dramatically over the last several years, the latter have not. According to a recent NREL analysis, these costs represent roughly 30% of both residential and utility installations (slightly less for commercial-host systems). See Figure 1.
In fact, soft costs are so critical to the overall success of solar adoption, their reduction is a primary focus of the Department of Energy’s SunShot Initiative to make solar energy cost-competitive. In order to reduce the cost of financing, NREL recently completed and continues to work on various efforts to tap public capital marketsand enable other vehicles that securitize project portfolios.
via How Do We Lower Solar Installation Costs And Open The Market To Securitized Portfolios: Standardize And Harmonize – CleanTechnica.
Third-party financing has become the mechanism for funding solar at the residential level in many markets. For example, third-party financed systems—which can include solar power purchase agreements (PPAs) and solar leases—are reported to have made up two-thirds of installations in the California market during the first half of 2012 . The reason for their popularity? PPAs and solar leases significantly reduce or even eliminate the high upfront costs associated with solar photovoltaic (PV) systems.
Launched in 2008, Connecticut’s (CT) Solar Lease is one such program. CT’s Solar Lease is the first in the nation to pair a ratepayer-funded organization—Connecticut Clean Energy Fund (CCEF)—with a financial institution to leverage federal incentives . The program used a combination of solar rebates, investment tax credits, and accelerated depreciation to help Connecticut residents gain access to less-expensive solar energy and lock in electricity costs. The first installation of the program ended in February 2012; the CT Solar Lease program is currently undergoing a redesign and anticipates launching the second version of the program in January 2013.
via Connecticut’s Solar Lease Program Demonstrates High Borrower Fidelity | Renewable Energy Project Finance.
Solar panel prices have continued to drop this year, but solar project development remains a capital-intensive business. The 1603 program allowed solar developers to monetize the solar investment tax credit (ITC) much more quickly than they could otherwise, and this essentially reduced their cost of capital. As the rush of projects begun before the end of 2011 are completed, developers are looking for new ways to finance their next projects, especially since traditional forms of financing have been harder to come by since the financial crisis.
Jan Schalkwijk, CFA, a portfolio manager with a focus on sustainable investments at JPS Global Investments based in San Diego, CA says, “Any solution that further improves financing of solar projects should be of interest to investors; especially if returns come in the form of dividends, from financial structures that are collateralized.”
via Solar REITs: A Better Way to Invest in Solar | Renewable Energy News Article.
How much is it worth to us today to avoid climate disruption later this century? To understand how that question has typically been answered, you need to understand what economists call “discount rates,” key parameters in the economic models used to assess climate policy costs. Such models inform policymaking and shape conventional wisdom, but their use of discount rates has led them to lowball the threat and recommend insufficient action to meet it.
YAAAwwwnnn. “Hm? Parameterzzz…”
You see my problem here: You’re already bored as sh*t. And the literature on this is as voluminous as it is technical. You could be much more bored. Trust me.
But don’t give up! It really does matter. Understanding discount rates will help you understand the climate-policy landscape — not only the technical details, but the struggle over values that lurks underneath them.
So stick with me. To help counter the soporific effects of the subject, I shall endeavor to explain it in a lively, accessible fashion. Failing that, I’ll use otters.
via Discount rates: A boring thing you should know about (with otters!) | Grist.