Bankability in Solar Project Development 0

bankability-solar

Nothing can doom a solar project faster than selecting non bankable equipment. Bring up a 3rd tier manufacturer and it’s like pissing in the punch bowl at the financier’s party.

The term bankability is used very often in the solar industry and in solar project deevelopment. In general the idea is that if a panel, inverter or EPC is bankable then it is able to be financed.

The concept is that a bankable piece of equipment comes from a high quality manufacturer who makes a good product and, this is critical, will be around long enough to stand by the warranties provided.

However in reality it is a very vague term. Bankable by whom? Every investor has their own idea of bankability. Large banks are very proprietary about this information.

For newer panel or inverter manufacturers not being bankable can be a very large hurdle to overcome.

In addition “bankable” solar companies have been falling by the wayside.  Just using the letter S we get: Suntech, Satcon, Schott, Shuco. All once bankable, not so much now.

So does the term have any real relevance? Is it still valid?

One of the only available lists of bankable modules is kept by Bloomberg New Energy Finance.

Their PV Module Maker Tiering System is available to subscribers. But in an interesting document they describe their system for how they tier PV module manufacturers.

“‘Bankability’ – whether projects using the solar products are likely to be offered non-recourse debt financing by banks – is the key criterion for tiering”

— BNEF

So far so good but what is bankability?

 

“Tier 1 module manufacturers are those which have provided products to three different projects, which have been financed non-recourse by three different (non development) banks, in the past two years. These deals must be tracked by our database, ie the project location, size, developer, bank financier and module maker must be in the public domain.”

— BNEF

BNEF goes on to indicate however, that this isn’t a recommendation, and that module manufacturers are “advised against spending much energy pursuing it”.

Another piece of public data on the tiers comes from Pike Research (now Navigant). 

 

(Source: Pike Research)

(Source: Pike Research)

One clear trend we see in bankability is increased testing and certification. This is helpful because it brings a bit more transparency to the process. UL Certification is the basic starting point but UL is offering more and more testing options for panel manufacturers.  The Renewable Energy Test Center (RETC), Intertek and PV Evolution Labs are all offering additional test for modules that either the financier or manufacturer can authorize. For a lot of information about this growing market GTM did run an excellent series of articles on solar panel testing. GTM also had article earlier this year about increasing inverter scrutiny from a bankability perspective.

So we see three approaches here to determining bankability: recent fundings from BNEF, company practices, from Navigant and finally module quality from a host of providers.

Even with all of this there is no telling in advance who your financier considers bankable.

I recommend that you discuss this very early with your finance partners. Often they will ask you what your total cost to install is but nothing else in the early stages. I find it can save a lot of headache if you also quickly describe the Panel, Inverter and Racking manufacturer you used to arrive at those numbers. In addition discussing the EPC is useful at this point.

Another approach if you want to have providers that are not banakble by the financier is to get some sort of wrap insurance for the project.  We can explore that in much more detail in the future.

By starting this early we have been able to get certain products and providers, who were not on the original list of bankability, vetted and then able to be approved by the financier.

Bottom line: Bankability is critical but opaque and confusing. Start early in the process with your financier, use available testing information and look to a wrap if all else fails.

Original Article on Tipping Point Renewable Energy

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