By transferring a portion of a commercial building’s electricity expenses to its property tax bill, Demeter Power is paving the way for an expansion of distributed solar generation in small- to medium-sized commercial buildings.
Demeter Power, a provider of financing solutions for commercial distributed generation, has been awarded $500,000 through the Department of Energy’s SunShot initiative for its efforts to help commercial buildings overcome a primary obstacle to securing financing for solar power investments: access to credit. SunShot’s aim is to make solar power cost-competitive with other electricity sources by 2020.
“The number-one obstacle that the marketplace is seeing for solar power investments by commercial building owners is credit,” said Demeter co-founder and executive vice president of development Yann Brandt. “For solar financing, credit security is the biggest driver of whether a project can move forward.”
Investing in solar electricity generation capacity is a long-term proposition. Financing models for these kinds of investments, such as leases and power purchasing agreements, tend to have time horizons in the 20-year range. “Like any two-way purchase in solar financing, it’s a guaranteed purchase of electricity for a period of time,” Brandt said.
These long-term agreements require appropriate counterparties, often established through a corporate guarantee provided by a building owner (such as a holding company) with a sufficiently strong balance sheet. But when it comes to smaller commercial spaces, the proprietor could be an individual.
“With smaller companies, sometimes you need a personal guarantee from company owners, which makes the project even more difficult: you’re putting your own personal balance sheet on the line for the transaction,” Brandt said.
Demeter’s solar financing product helps to avoid the corporate guarantee requirement by enabling building owners and tenants to shift a share of the building’s utility bill to its property tax bill. Demeter’s solar financing product builds on the Property Assessed Clean Energy (PACE) program, under which solar projects can be eligible for loans which are then paid back through property tax bills over a fifteen- to twenty-year period. When a
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