In part II of his Q&A with SNL Power Daily, Stoel Rives attorney Morten Lund gets to grips with the application of new financing models for renewable energy, such as REITs and other securitization. As described in Q&A part I, tax credits have traditionally served as the bedrock of renewable energy finance.
Lund notes that securitization is generally far more suited for a portfolio of projects. "Once you take a large bucket of small solar projects – they're maintenance free, cost-free, no O&M to speak of, and astonishingly predictable revenue – it starts looking like a financial asset and you start treating it like a financial asset and you can access a lot of different kinds of financing models," he said. "Every little old lady with a savings account can invest. Every pension fund can invest. It just becomes another bond thing that's sold on Wall Street and becomes a very easy investment to make. Instead of hunting around for banks, you're just raising capital for your solar plant."
Speaking more broadly about the investment tax credit (ITC), scheduled to expire in 2016, Lund said that we are approaching a point where the inefficiencies created by the structure will outweigh the benefits. "If the ITC went away tomorrow, the solar market would shrink drastically. When the ITC goes away in five years, the solar market will increase drastically; the shackles will be off. Right now the ITC is still more of a benefit than a shackle. In five years, it will be mostly a shackle."
"Small scale solar projects bundle easily for new financing options, expert say" was published by SNL Power Daily, July 4, 2012. Subscription required.