Wiser Capital Blog

September 2, 2014 | No comments yet

Bringing Standardization and Liquidity to the Solar Market

In 2012 the US Dept. of Energy provided a grant to the National Renewable Energy Labs to fund an initiative focused on encouraging new sources of capital to invest in solar projects. This resulted in the creation of the SAPC (Solar Access to Public Capital) Alliance. SAPC is a working collaborative with over 120 active participating members from throughout the solar and financial services industries including many of the major legal firms, the five major credit rating agencies, accounting firms, investment banks, solar equipment manufacturers and solar industry developers and financiers.

SAPC’s primary efforts center on the standardization of power purchase agreements (PPA), leases, and other documents relevant to residential and commercial solar project development. They are also working to develop robust datasets to assess performance and credit-default risk. These activities are designed to allow projects to be grouped into tradable securities. Securitization is expected to attract additional investors to the solar asset class, enabling the industry to tap a larger and more liquid pool of capital than currently available.

In November 2013, the group released their first set of standardized documents including a Residential Lease and a Commercial Power Purchase Agreement. Under development are a Residential PPA, a Commercial Lease and a Commercial Construction Contract.

Wiser Capital has been an active participant in SAPC for the past 18 months and has recently incorporated the Commercial PPA into the Wiser Capital Platform. This means that every commercial project moving forward will be able to take advantage of the efforts of the SAPC Alliance. These standardized documents will increase the likelihood of project finance and drive down the costs.

The ability to drive down costs is especially important for the projects Wiser Capital deals with, small to medium scale commercial and industrial, because soft costs have been a primary barrier for these deals. Essentially a 100 kilowatt (kW) project cannot absorb the fees associated with negotiating complex PPAs. Standardizing the PPA decreases the time and money spent by both the Host (entity agreeing to purchase the electricity, also known as the off-taker) and the financier. Projects that previously didn’t pencil, now make economic sense.

Furthermore, the design and layout of the PPA is significantly easier to understand than what was previously used by the industry. Host facilities entering into the contracts gain confidence in the documents knowing that finance and industry experts have worked to improve transparency and preserve the interests of the off-taker.

Wiser Capital is proud to have partnered with the SAPC Alliance over the last 18 months and we hope all of our users will appreciate the implementation of the SAPC PPA as a key tool in the platform.

Mike McGuire, a co-founder of Wiser Capital, currently oversees finance and risk management for the company’s transactions. McGuire has more than 40 years of financial management, investment management and asset securitization experience serving as president and CEO of several community banks.

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