The U.S. solar industry experienced a transformative 2013, with a proliferation of physical assets, installed capacity and new finance mechanisms. The wind industry raced to begin projects by end-2013 in order to receive production tax credits. The next few years -- and 2014 in particular -- will be marked by new advancements in these sectors as rooftop and utility-scale solar continue to mature, utilities grapple with changing business models and investors continue the search for opportunities that offer the greatest yield.
“The word on the street is another big [solar] securitization -- twelve or more in the next year -- could be expected. These would be SolarCity-type deals and a number of yield cos,” according to John Lochner, Vice President of Corporate Development for Locus Energy.
“The market right now believes ITC will remain intact at 30 percent for 2014 then go down to 10 percent in 2017,” said Dan Loflin, Locus Energy’s Executive Vice President of Business Development. “The market sees solar government tax benefits as pretty static. The differences come with state and local rebates added on top of the ITC. Take New Jersey, for example. The expectation is local subsidies on top of the ITC will diminish, and as that happens, other costs like installation will come down. As the market moves forward, physical costs should continue coming down significantly, and that makes up for reduced subsidies,” said Loflin.
Locus Energy sees the conversation shifting slowly away from tax equity and into new investment strategies. How many new deals can the market expect to see, and how will the structure of these deals differ from what’s been done in the past? “A lot of the discussion around residential and commercial solar activity had been about whether tax equity deals would diminish and whether loans [would] come into the market. The number and structure of new SolarCity-type deals and what they look like is the question,” said Lochner.