Today’s solar installers and developers are faced with a broad array of project finance options. Exposing prospective clients to too many alternatives can confuse and delay a sale. Fail to present the right option and you may lose a deal to the competition. So we’ve written a Solar Finance Guide that installers and developers can share with prospects to focus their thinking and speed the path to closing a deal.
Solar Finance Guide
If you’d like to go immediately to the Solar Finance Guide and learn how to objectively narrow an offtaker’s project finance options, click here. But if you are an installer or developer and seek more insight into how these alternatives affect your returns, read on.
When Financing Hurts
When a solar project is sold to the offtaker for cash, the math is relatively simple and there are two primary beneficiaries to the transaction: the offtaker, who is willing to front capital for long term energy savings, and the installer/EPC, who (hopefully) gets a fair margin on the project. But when an offtaker requires financing there’s extra work involved, and too often the compensation is not commensurate with the contributions. This is especially true when an installer facilitates traditional bank or PACE loans, capital leases or CREB financing for the offtaker.
Traditionally installers and EPCs have viewed the provision of financing as a necessary cost of getting a deal done. They often lock onto the project’s cash price and fail to build in any fee or commission to cover their incremental costs relating to delivering financing. Selling resources are scarce and expensive, and reps should be compensated for extra work relating to financing (contact us for compensation model guidance), or should use the combination of a work authorization to lock out competition and our Solar Finance Guide to quickly direct the prospect to a trusted financing partner who can take over the financing work.
When Financing Helps
Solar Project developers understand how to monetize their cost of sales and development better than most EPC-focused installers. Developers tend to think in terms of a “development fee” – incremental to the EPC price – which serves to compensate them for their work securing site control, interconnection, permitting, the EPC and financing. Many developers also negotiate to retain ownership in a project so they can benefit from their work by receiving annuity revenue over a longer term. We invest a lot of time with our installer and EPC clients teaching them how to generate development fees.
A Customized Solar Finance Guide for Installers and Developers
Developers achieve this advantage over installers by using third party ownership structures – typically PPAs or Tax Leases, which afford structured financing approaches that better allocate benefits to the different stakeholders: the offtaker, installer/EPC, developer and different classes of investors. The Solar Finance Guide makes a clear distinction between systems owned by the offtaker and third party owned systems… for a better understanding of how to optimize your development fee see our article on solar developer project pricing, or contact us for a free structured financing consultation.