You may have heard of the global energy transition on the news lately. It's been a focus of most of the world's energy leaders for the last decade or so, spurring global accountability summits that have resulted in events such as the signing of the Paris Agreement in 2016 (read more about the Paris Agreement here).
When you're a homeowner who wants to invest in placing solar panels on their roof, you either float the capital upfront or you finance with the solar company you choose to work with. The same options are available for commercial and industrial (C&I) clients who want to install a solar system at their place of business with the addition of a third option known as third-party ownership: an investor may also finance the project and ultimately own the system, while the business or corporation signs a contract to purchase the electricity produced from the solar project instead of owning the equipment.
Investors in commercial and industrial (C&I) solar projects look for projects that;
1. Have the right tax credit structure and return profile, while passing ESG investment diversity tests,
2. Have a creditworthy offtaker (either investment grade, or with strong historical financials),
3. Use bankable or "Tier-1" equipment, and
4. Can be built correctly and on time.
Financing Commercial and Industrial (C&I) solar projects can be challenging, and for a myriad of reasons. We share our tried-and-true methods for pushing through each challenge and successfully financing C&I solar projects below.
This blog is intended to dive deeper into the subject of tax equity for solar projects. The prior blog opened up with a series of common questions (Solar Tax Equity 101) and answers. In this post, we discuss the most common tax equity structure and touch on why companies choose to invest in tax equity.
Tax equity is a hugely underutilized investment in the solar industry. It's complex, multi-layered, and a missed investment opportunity for many corporations and companies. We've outlined and answered the basic tax equity questions we hear all the time to help you make sense of it and to help you decide if it deserves a piece of your portfolio (hint: it does!).