Sandy, Nemo, Sustainable Finance and SOLAR 2013

SGreeneBy SUSAN GREENE

As I write this, New York and New England are digging out from Winter Storm Nemo, with wide swaths of the grid down. It’s a sharp reminder of where the region stood after Hurricane Sandy and Hurricane Irene. And a foretaste of what comes next.

The climate-change debate is over. With the wholesale cost of modules bouncing around near 85 cents per watt, the cost-of-renewables debate is over. What the renewable energy industries need to resolve, and quickly, is a variety of interrelated financing issues. Companies that resolved these issues last year enjoyed 70 percent growth, according to SEIA, IREC and all the other organizations reporting solar installation rates. If your firm has trouble with financing, consider this:

In this issue we note that local banks have a hard time writing loans for solar installations, and as a result the big leasing/financing companies are eating their lunch in this market. Seventy-five percent of new residential installations are PPAs. A number of people on the installation side of the business have pointed out that banks treat solar arrays rather like car loans, with seven-year contracts, instead of like revenue-producing capital investments. If the revenue-generating life of a PV array is more than 20 years, the loan should be written for 20 years. A 4 percent seven-year loan on $20,000 costs $273 per month — it looks like a car payment in every respect. At 20 years, that same loan costs $121 per month. It looks like an electric bill.

The Alliance Commission on National Energy Efficiency Policy published a report in February, “Doubling U.S. Energy Productivity by 2030.” It puts relatively simple financial measures at the top of its to-do list. For instance, it recommends a PACE-like program, at the state and local level, for financing home energy projects with repayment included in utility bills or property tax bills.

The Alliance Commission, chaired by Sen. Mark Warner and National Grid President Tom King, is a blue-ribbon group of two dozen private-sector executives, including finance, utility and technology firms. It includes Dan Arvizu, director of NREL; Mike Eckhart, managing director and global head of environmental finance at Citigroup; retired General Wesley Clark; former New York Gov. George Pataki; and Fred Krupp, president of the Environmental Defense Fund.

The report, among other steps, advocates enabling institutional investors to buy energy-efficiency financial obligations on a large scale, using securities based on uniform contract structures (in place, for instance, of investing in fossil fuel limited partnerships and investment trusts). And it suggests that mortgage lenders should consider household energy and transportation cost savings, which reduce the cost of owning a home, when underwriting. The fact that a home- owner can afford a larger monthly mortgage payment may make for reduced risk and a more attractive loan.

These are sensible measures and most require no congressional action.

We’ll discuss these recommendations, and dozens more, at the ASES National Solar Conference, SOLAR 2013, coming to Baltimore, Md., April 16-20. You’ll come away with new ideas and, more important, new connections with the people now changing the face of solar financing.

Susan Greene (sgreene@ases.org) is president of the American Solar Energy Society.

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