Beyond 1603 — There is Still Hope

July26, 2012 by Shannalee in Financial News

investment for solarThe Federal 1603 Grant, which famously allowed for the monetization of the 30% ITC (investment tax credit), expired at the end of 2011—but that doesn’t mean the end of solar for commercial and industrial customers.

According to a recent report from Renewable Energy World, some renewable energy companies are currently working with commercial and industrial companies to develop new models that provide access to third-party capital. Success will require the combining of several different systems, all of which have similar characteristics like these:

  • Standardization of Documents: Project documentation and varying credit quality are two of the greatest limiters of the C&I market in a non-1603 grant environment. The ability to produce and use a set of repeatable documents will greatly reduce the transaction cost and the time needed for investor review and approval.
  • Utilizing a Single EPC Provider: Quality design and installation and a firm financially capable of providing real installation warrantees will be required to access larger sums of capital and debt to allow for efficient and reliable financing solutions in this market. This will require larger, more financially sound EPC providers or the continued consolidation of smaller firms. Either way the risk of poor design and installation will need to be minimized.
  • Utilizing a Single O&M Provider: The long-term nature of these assets will require professional and guaranteed maintenance from a firm that can stand behind each project and ensure the highest quality of ongoing operations. Large-scale O&M providers will in essence protect the power generation and cash flow of a system backed by institutional investors. This will require higher quality components with long-term bankable warranties.
  • Providing a Bankable Production Guarantee: Different production profiles will add complexity to the predictability of cash flows and will have a profound effect on the availability and cost of project level debt. A meaningful production guarantee from the O&M provider or a credible third party will help to reduce financing costs and streamline the approval process.

Those who can meet these kind of demands will find major benefits from a more streamlined solar market. For more information, see the original article at Renewable Energy World.

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