Will solar projects get financing more easily if they have something similar to a credit rating?
With the solar industry booming, you’d never know that less than 5% of the 6500 banks and lending institutions in this country are actively involved in financing solar projects.
16 leaders in the solar industry are coming together in the truSolarTM Working Group to change that by developing uniform standards that lenders can relate to.
Banks still tend to misunderstand the risks of investing in the industry, thus the need for uniform standards that screen solar projects and rate them.
So, the idea is for every solar project to come with a “credit rating” that conveys to investors what the project’s relative risk is. It will be based on a variety of factors, including the developer’s track record, the quality of components, and the ease of permitting in the jurisdiction where it will be sited.
Riskier projects would carry lower ratings and would thus be charged higher interest rates by lenders and as well as higher insurance premiums.
That would also foster best practices and educate the marketplace on performance, credit and deal term risks.
Founding members of truSolar include ABB, Assurant, SMA America, Standard & Poor’s, Booz Allen Hamilton, Rocky Mountain Institute and two of DOE’s National Labs, NREL and Sandia.
“The truSolarTM working group is focused on developing credit evaluation tools and standards to address the challenge of increasing the supply of funding at appropriate risk premiums to the commercial solar segment,” says Steve Dreyer, managing director of Standard & Poor’s. “The truSolarTM group has identified what we believe to be the key issues of concern for lenders.”
They expect these standards to reduce and reliably price financing risk, lower the cost of capital and broadly increase the availability of commercial lending for solar projects.
An independent organization will serve as the primary facilitator and develop the credit screens.
Distributed Sun will beta test the practices to establish a proven, de facto commercial standard. The framework will be transferred to a standards body in 2014 and made available as open-source to the entire industry.