Success of solar power in recent years built on innovation in technology and manufacturing
Today, innovative financing models are also important to broaden sources of capital and meet growing demand
A robust and innovative approach to technical assurance is essential to understanding and managing risk
In “Bright Ideas”, DNV GL draws upon the front-line experience of its solar experts working on five continents across all major solar market segments. The paper describes major trends in solar financing, defining what is needed to ensure technical risks are properly assessed, and looking beyond the current horizon to reflect upon what the future holds for solar energy finance: securitisation, new sources of debt and equity, new routes to market, and crowdfunding. Real-world reference cases are also highlighted.
“The growth of solar energy in recent years has been built on innovation in both technology and manufacturing,” says Ray Hudson, DNV GL Solar Service Line Leader. “Another type of innovation that is just as important is innovative finance models. Access to significant amounts of efficient capital is vital to support continuing growth. In addition to financial innovation, there’s also the crucial task of quantifying the risks associated with the technology and practices at the heart of the business.”
The new paper focuses on four major trends in solar finance:
Securitisation refers to the process of converting a pool of illiquid assets into tradable securities. In the case of solar PV projects, a portfolio of residential and/or commercial scale systems is assembled and asset-backed securities are issued and rated based on the combination of underlying cash flows.
(2) New sources of debt and equity
Placing the ownership of a large number of solar projects into liquid and publicly tradable vehicles provides investment avenues suitable for a wider range of investors and deepens the pool of capital available to developers. Due to the nature of solar assets – namely, the predictable cash flows – these vehicles can raise equity at rates similar to the cost of debt.
(3) New routes to market
As diverse solar assets are being combined to create investment products attractive to new sources of capital, the way that solar PV projects interact with electricity markets is undergoing its own revolution. Alternative offtake structures such as direct sales and even merchant solar plants are on the rise. The traditional role and model of a power utility is being challenged with new types of off-takers stepping in.
Crowdfunding sees project promoters using online platforms to directly connect with small investors looking for an investment return. In essence, crowdfunding allows investment decisions to be made collectively by potentially millions of people rather than by traditional financier credit committees.
DNV GL’s expert solar teams are located across five continents. As a leader in solar advisory services, the company has unrivalled understanding of long-term asset performance. “Innovation in solar finance equates to smarter and more effective investing opportunities,” says Ray Hudson. “With our experience and involvement in the global solar industry, DNV GL is uniquely suited to helping developers and investors move forward with confidence.” DNV GL provides services including due diligence, technology review, engineering support, asset management, and key component testing, and the company has been involved in over 2,500 successful solar project financings as well as a number of securitisations.
Preview copies of the new paper are being provided to visitors at DNV GL’s booth (342) at the Solar Power International conference in Las Vegas, Nevada. A global release is also planned as a special insert with the November edition of PV Magazine.