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Bundling Solar Performance Data to Give Investors TLC

One of the recurring themes in solar energy projects -- and for renewable energy projects writ-large -- is making them attractive to investors and capital. Put another way, it's giving investors some "TLC": Transparency, Longterm/Longevity, and Certainty.

A few weeks ago the US Department of Energy's (DoE) National Renewable Energy Laboratory (NREL) kicked off a working group for its Solar Access to Public Capital (SAPC) initiative, funded through the DoE's broader SunShot Initiative, which includes efforts to standardize solar contracts (PPAs and leases) and development of datasets to assess performance and risk.

Part of that effort involves the DoE and the SunSpec Alliance building an open-source database to track the long-term performance of residential and commercial solar facilities. (Here's an example of all the types data about the plant performance, array specs, etc.) The goal of the Open Solar Performance and Reliability Clearinghouse (O-SPaRC) is to help credit rating agencies and potential investors better assess risks involved with solar energy projects as an asset class, and thus improve access for those projects to capital -- and at the same time, help further develop solar-friendly investment vehicles such as asset-backed securities, master limited partnerships (MLP), and real estate investment trusts (REITs). SunSpec and NREL hope to secure the first data sources for O-SPaRC by mid-May, deliver a prototype by June 1, and build it out in July.

There's a glaring lack of consistency in solar power plant production data being measured and reported in completely different formats, explained Mike Mendelsohn, senior financial analyst at NREL. SunSpec, for its part, is leading efforts to standardize the way energy production and use is measured and reported. Any number of parties can have contractual rights to performance data -- "typically there are five or six entities" from the residential homeowner to a system component supplier, explained SunSpec chairman Tom Tansy -- but the fleet operator is the one who actually "owns" the data, so that's who SunSpec has to ultimately work with. (Monitoring companies, arguably the most familiar with a plant's performance data, are considered "custodians" of the data and usually have the least rights to it, he pointed out.)

Once that data is rolled up in aggregate it is anonymized so the consumer is protected. The goal is to build trust in the marketplace that "either the specifics of data are not being released, but just enough to support improved financing," Mendelsohn said.

Some power plants may consider long-term performance data valuable, proprietary intellectual property (IP), but "we haven't encountered a lot of resistance initially," Tansy said. Timing of participation may vary, if for instance a plant is already working on a private securitization, but "so far receptivity to the whole concept has been very strong."

That's because the broader message resonates: improving access to funding is in everyone's best interests. "Fleet operators are looking for capital to go build more plants," Tansy said. Lending rates for solar power plants can range anywhere from 9-18 percent, but securitization can end up being a third of that, maybe 3-6 percent, he explained. The cost of access to those capital pools is transparency into their operating fleet, so banks can make their own assessments about how risky the investment is.

This model has worked in other sectors, from cell towers to student loans to home mortgages and even wind projects, Tansy and Mendelsohn noted. In all cases, the key is making things as transparent as possible, so lenders can confidently grasp what the risks are.

The closer the industry gets to securitization, the more power-plant data will become accessible. "People will see the benefit of opening up their data," Mendelsohn said. And hopefully success will beget success. "If we build out a renewable energy deployment through securitization, that will lead to an increased need for modules, inverters, monitoring, and everything else," he added. "A rising tide will lift all boats."

Lead image: Key and binary code via Shutterstock

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