Oregon Solar Projects Get Insurance to Guarantee Production

Originally posted on Bloomberg.

  • GCL New Energy developing 50 megawatts of solar projects
  • KWh’s ‘solar revenue put’ ensures 95% of power plants’ output

GCL New Energy Holdings Ltd. is managing the risk related to the unpredictable nature of the sun, with an insurance-like policy that will guarantee the production from solar projects it’s building in Oregon.

KWh Analytics, a San Francisco-based risk-management software company, structured the coverage for the 50-megawatt solar portfolio, according to a statement Wednesday. Swiss Re AG is backing the insurance product and PNC Bank NA committed tax equity financing for the four solar farms. Terms weren’t disclosed.

The insurance product, known as a “solar revenue put,” can guarantee as much as 95 percent of a farm’s expected output, and can lead to better financing terms. The policy sets a floor for electricity output from a solar farm, where production will rise and fall with the sun. Clients typically pay a premium, and if a plant doesn’t generate enough power to reach the floor, the insurer covers the difference. Underpinning KWh’s puts is a database of historical production from other solar farms that helps predict output from planned projects and performance data from specific components at existing plants.

“Swiss Re is guaranteeing the volume,” Richard Matsui, KWh’s chief executive officer, said in an interview. “That’s game changing.”

Insuring the sunrise with Wall Street finance

Originally posted on pv Magazine USA.

kWh Analytics and Swiss Re have structured a deal with GCL New Energy and PNC Bank for 50 MW of solar projects financed using the Solar Revenue Put to guarantee 95% of solar generation.

The basics of the Solar Revenue Put are this: You, the sunlight farmer generating electricity, have built a machine that you believe will deliver a certain amount electricity. kWh Analytics, and its insurance company business partners, will offer to buy that electricity – and will even pay if you don’t deliver it – because they trust your farming skills and the hardware you bought. And while there will be a payment by you the farmer, kWh Analytics estimates that you will save up to 5¢ per watt on finance fees because of their guarantee to buy, yielding you a net profit.

And now kWh Analytics is signing up megawatts under this model. The company has signed a deal for four projects totaling 50 MW in Oregon with GCL New Energy and PNC Bank.

In kWh Analytics’ documents on its Solar Revenue Put (PDF), the company focuses on a specific finance benefit gained by a put – and that’s increasing the amount of cash a bank will loan against a project’s value due to trust of that project’s output. kWh Analytics says some of their their current financing opportunities are now above 90% of project costs, with the aim being a 1.10x debt service coverage ratio (DSCR).

The company suggests that portfolios supported by the put are increasing their DSCRs, on average, by 10%.

To a degree, we’re insuring our trust in the sunrise.

More technically speaking, kWh Analytics defines the Solar Revenue Put as a credit enhancement that guarantees up to 95% of a solar project’s expected energy output. The policy has been risk capacity rated as an investment grade portfolio by Standard and Poor’s. Specifically noted, the insurance covers “shortfalls in irradiance, panel failure, inverter failure, snow, and other system design flaws.”

The policies last up to ten years and are managed by Kudos Insurance Services, a fully owned subsidiary of kWh Analytics.

And even if you’re not getting a higher loan rate ratio, just the fact that you can get another form of solar generation insurance is a tool that a salesperson can use to sell to a business owner, and a business owner can use for getting a loan. In this way it is another symbiotic element in the growth of an economic ecosystem surrounding the solar power industry.

We are in a new world of finance for solar power.  More money, globally, was invested in solar power projects in 2017 than coal, gas and nuclear power. Dividend Financial got the industry’s first AA rating. Solar assets are part of AAA rated portfolios. And Sunrun’s first securitized portfolio showed 98.4% of assets performing.

kWh Analytics Closes Solar Revenue Put for 50 MW of Solar Farms Owned by GCL New Energy

Originally posted on Seeking Alpha, Yahoo News, BusinessWire.

SAN FRANCISCO – kWh Analytics, the market leader in solar risk management, today announced that it structured a Solar Revenue Put with GCL New Energy, Inc., a top five global solar developer, and PNC Bank, N.A., an industry-leading investor in U.S. solar projects since 2007. The 4 projects, totaling 50 MW DC of capacity and located in Oregon, were financed with the Solar Revenue Put protecting cashflows.

Using its proprietary actuarial model and risk management software (“HelioStats”), kWh Analytics developed the Solar Revenue Put, a credit enhancement for financial investors, to drive down investment risk and encourage development of clean, low-cost solar energy.

“We have a global mandate to rapidly expand our investment portfolio of solar projects,” says Frank Zhu, Executive President of GCL New Energy. “To support us in this growth, we were pleased to have found efficient and reliable execution with our partners, PNC Bank and kWh Analytics.”

“Strong relationships are the cornerstone upon which we have built this business,” says Dick Rai, manager of PNC Bank’s energy finance team, the bank’s renewable energy financing arm. “We have long-standing relationships with both GCL New Energy and kWh Analytics, dating back to their respective entries into the U.S. solar market.”

A recent survey of the solar industry’s most active lenders indicates that more than 40% of active lenders are now valuing the Solar Revenue Put as a credit enhancement. Solar portfolios ranging from thousands of residential rooftops to more than ten utility-scale plants have had financing structures supported by the Solar Revenue Put. Portfolios supported by the Put are securing, on average, debt sizing increases of 10%.

Swiss Re Corporate Solutions provides the risk capacity for the Solar Revenue Put. Brian Beebe, Head of North America Origination, Swiss Re Corporate Solutions, says, “We are bullish about solar, and Swiss Re is committed to providing innovative risk transfer solutions. kWh Analytics built the industry’s largest data repository, encompassing one-in-five American solar power plants, and owns the foundation upon which entirely new categories of risk management products will be built.”

#Solar100’s Anne Hoskins: The Adam Smith of Solar Policy

Originally posted on pv Magazine USA.

In this #Solar100 Interview, Richard Matsui, Founder and CEO of kWh Analytics, speaks with Anne Hoskins, Chief Policy Officer of Sunrun.

Anne Hoskins is best known for her work as an energy policy buff.

What people might not know is that she is an applied economist and lawyer by training (and holds degrees from Cornell, Princeton, and Harvard). Within her analytical economist track, Hoskins describes a rigorous quantitative course load that became foundational to her policy career.

Like Smith, Hoskins’ ideas shape policies. She thrives at the intersection of economics, policy, and energy, and now applies her analytical background to her work at Sunrun as their Chief Policy Officer.

In this interview, Hoskins talks about the frontier of home solar and batteries, whether utilities are “natural monopolies” for behind-the-meter storage, and the quantitative side of policy.

ARE POLICY EXPERTS “SAFE FROM SCIENCE”?

Richard Matsui:  How did your interest in economics start, and how did that result in a career in energy policy?

Anne Hoskins:   I studied applied economics as an undergrad at the College of Agriculture and Life Sciences at Cornell, which encompassed energy and other resource economics. I continued to focus on economics in graduate school at the Woodrow Wilson School at Princeton, including taking a course with professor Bobby Willig, who is renowned in antitrust and utility regulation circles. We studied economics related to monopolies and the regulation of them. Because of this, the economics I studied had practical applications in energy and utilities.

My formal introduction to energy began when I worked at the Energy Committee at the New York State Assembly. I supported the Chairman as he tackled the controversy around the closing of Shoreham nuclear power plant, as well as proposed incentives to support energy efficiency. It was a challenging area to apply analytical thinking and it’s pretty incredible that many of the same issues are being debated in state legislatures today.

Richard Matsui:  I went to Georgetown’s School of Foreign Service (SFS), and it had the nickname “Safe from Science.” There is an assumption that people in the policy world tend not have a quantitative background. Is that true from your experience? And how does your quantitative experience change the way that you view some of these policy issues?

Anne Hoskins:  People definitely look at us that way, but it’s so far from the truth! At the Woodrow Wilson School, there is an analytical economic track in which we took very serious quantitative economic courses. Many of my grad school colleagues pursued highly analytical positions, such as at the Office of Management and Budget, Congressional Budget Office, or economic consulting firms. I took a different path and became involved in policy roles right away; I went to a governor’s office, then to a policy shop, and then onto Harvard Law School. My economic and analytical background was invaluable as my career later expanded into working in the utility industry and as a public utility commissioner.  Today, my economics foundation is making me a stronger advocate for distributed solar and a more diversified electric grid. Having a handle on topics ranging from rate structures to the trade tariff case last year has given me insights to understand what is going to work for Sunrun’s consumers.

 

SOLAR + STORAGE, OR SOLAR vs STORAGE?

Richard Matsui:  Sunrun is obviously leading the charge when it comes to residential energy storage. I once met a policy person from Tesla, who noted that after the SolarCity merger, they suddenly had to contend with two—often competing—policy priorities. What is good for solar is not necessarily good for storage, and vice versa. How do you balance that dynamic as Chief Policy Officer for a company that sells both?

Anne Hoskins:  Well, first I challenge the premise. I don’t think they’re antithetical. We want to encourage customers to do both—to get solar and a battery, which they can use for backup and time-of-use management in a place like California. The technology allows customers to participate in the grid. We view the combination of solar and storage as maximizing the customer’s experience.  Simply speaking, solar and storage go hand-in-hand. 

Richard Matsui:  The specific observation that the person was making had to do with net metering, unsurprisingly. Could you comment on how the rise in behind-the-meter storage changes the debate, or shifts the evolution of net metering?

Anne Hoskins:  It’s pre-mature to shift away from net metering. It provides a simple construct for supporting customer adoption of solar, which is foundational for storage.  In California where solar penetration has reached higher levels than in most states, NEM has been adapted to incorporate time-of-use rates, which encourages customers to shift their consumption and adopt batteries. Net metering rules can be adapted to support storage where appropriate by incorporating time-of-use rates. Society benefits through cleaner, reliable energy, along with job creation when a customer makes an investment in solar. The best way to encourage that is to have a simple system, one in which customers are going to understand what they’re paying for and what they’re receiving for the power they share with their neighbors.

Richard Matsui:  When Sunrun installs and owns the battery, who’s the primary customer? Is it the homeowner or the utility? I read about how Sunrun is going to be delivering grid services, but my presumption is that it’s still the homeowner who needs to sign on the dotted line of the Sunrun lease contract. So the homeowners still needs to see some kind of value proposition from storage.

Anne Hoskins:  Yes, the primary customer is the homeowner. Depending on where the homeowner lives, the reason that (s)he wants a battery is going to vary. If you’re in California with time-of-use rates, then we would expect one of the top benefits would be time-of-use management. In New Jersey, where they don’t have time-of-use rates, folks are interested in having backup for storms. In that situation, they may have five terrible storms and outages, but there are many other times when that battery is not fully utilized. In that case, if we have a thousand customers in a region, we can aggregate energy and capacity from those batteries and provide grid services for both the distribution system and wholesale markets. We see a future that involves pooling resources from batteries, providing a benefit to the host customer, sharing that benefit with the grid, and providing an overall societal benefit.

At the end of the day, the utility and the homeowner both benefit from distributed solar plus battery systems.  The benefits of “value stacking” are not mutually exclusive for homeowners or their local utility.

Richard Matsui: Your example was helpful to understanding this vision. Returning to that scenario where a storm passes through New Jersey and causes a grid outage for a Sunrun customer who has solar plus storage. The homeowner naturally wants to rely on the battery to provide backup power. This presumably could coincide with the societal need for that battery to instead feed that power back into the grid. Does that pose any conflict?

Anne Hoskins: No, it won’t. There will always be a certain amount of power that’s saved in the battery to meet customer needs. When you have thousands of customers, one customer may need the backup, but the one three blocks away may not, because outages are often localized. For the most part, as you get more of these systems, optionality increases. We’re optimistic that this combination of distributed and centralized systems is going to be the best solution, especially compared to relying on one centralized battery, where when that battery or connected transmission line goes down you lose the whole system.

 

UTILITIES: A “NATURAL MONOPOLY” FOR BEHIND-THE-METER STORAGE?

Richard Matsui:  There’s been a marked increase in awareness of how valuable behind-the-meter distributed storage can be from a societal standpoint. A while back, someone from a utility told me, “If energy storage behind-the-meter really does pick up, we are the natural owners because we know where the congestion is and we’re the trusted providers.” Are utilities the natural owners of behind-the-meter storage?

Anne Hoskins:  We don’t think that’s the case. Utilities have a lot of expertise in managing the grid, but they have no reason to go into a customer’s home on the other side of the meter. If you look at storage, all it really takes is for the utility to send a signal when they need access to the resource, which they can do. For example, PJM sends signals to energy generators without PJM owning or controlling the generation. Sunrun’s responsibility would be to manage its customers’ storage units and a system that responds to utility or RTO/ISO signals. This is not all that complicated.

The other point here is that utilities are monopolies—but there is no natural monopoly for behind the meter solar and storage. Competitive companies are ready and willing to provide these services. Utilities are given exclusive franchises to own and operate the distribution grid, which gives them greater market power and requires regulators to safeguard consumer welfare. When there is no natural monopoly, as is demonstrably true with storage and distributed solar, there is no justification for enabling increased market power. The best way to maximize consumer welfare is to facilitate—and certainly not undermine—competitive markets. We know that there’s a competitive market for distributed solar and storage, with new companies emerging to offer these services to customers.

Utilities will say, “Well, both can do it—we can own some and you can own some.” We will look at all options, and we know that some commissions may want to explore this. The challenge is that utilities are able to spread the risk of their investments across ratepayers and also are advantaged by access to customer data and all customers. They bear much less risk if technology, costs, or consumer demand changes. How can competitive providers compete with that? One option is for utilities to offer behind the meter services through competitive affiliates. If utility or their affiliates are allowed to offer service in a competitive market there would need to be stronger regulatory oversight of interconnection and data sharing.

Competition drives cost reduction and innovation. That’s what’s going to get us to the next technical innovation. At Sunrun, we have a strong incentive to ask and solve these questions and improve our quality and service in order to compete. I spent seven years at a utility and three as a regulator. Cost of service regulation just doesn’t give utilities the same incentives to reduce cost and try new approaches to problems. In contrast, companies that bear financial risk have incredible motivation to continually improve the product and service in order to stay in business and grow.

Richard Matsui:  This discussion reminds me of 2009, when Southern California Edison announced a behind-the-meter solar program for 500 MW. At the time, this was a massive program for solar, and especially C&I rooftop solar. SCE carved out a program that was half rate-based and the other half was not. The hotly debated question was, “Why should half of this be rate-based? Is there really a market failure where the private sector is unable to fulfill that role?” One could argue that utility ownership was necessary because solar technology and capital formation was less mature, at that point in time. Fast-forward 10 years, it’s evident that the argument has been decisively settled in favor of letting market force dictate where, when, and at what cost behind-the-meter solar systems get built. It strikes me that this conversation will likely be re-litigated in energy storage.

Anne Hoskins: I’m happy to see the utilities are embracing a role for distributed resources, but I’d like to see them embrace it more across the board. We spend too much time fighting over rate design, demand charges, and initiatives that appear to be intended to reduce the ability for customers to invest in solar.

My concern as a former regulator is that utilities are viewing storage as another way to rate-base capital expenditures. Utilities see that demand is falling for electricity, which leaves them unsettled, because we have an antiquated system for how we allow utilities to recover their expenses and earn returns on their investments. Utilities are investor-owned, so when they see customer interest in storage, they think, “We can grow by extending our network to behind-the-meter.” But why would we put a monopoly in charge of something when it is not necessary? I think this points to the need for regulators to start looking at performance-based regulation. Your home state of Hawaii just passed legislation on this. We need to encourage utilities by giving them incentives to reduce their costs and be more responsive to consumers, as opposed to allowing them to grow through capital investment.

A few years ago, Georgia Power was given the authority to do rooftop solar, and they only signed up a handful of customers. It just isn’t in their wheelhouse. Having spent time at a utility, I know that their strength is in engineering and keeping the system running. Utilities have done that for over 100 years. But most continue to think of residents as captive “ratepayers”—not as customers who they need to find and win over with competitive service offerings.

Richard Matsui:  That’s an important and powerful point. I’m glad that you are able to bring your experience as a former regulator to this conversation.

 

BRINGING STORAGE TO THE MAINSTREAM

Richard Matsui:  I think it’s widely acknowledged that behind-the-meter energy storage is in its early days. What are the important steps for energy storage to become a mature service that mainstream investors can get comfortable with?

Anne Hoskins:  Well, we know that home battery costs are expected to decline significantly over the next 5 years, by approximately 50%-60%. As costs decline, we’ll see greater market penetration.

We’ve been thrilled with how many customers have adopted batteries already. More than 20% of Sunrun’s solar customers in California are adding a home battery to their system, with up to 60% adoption in some markets. The energy storage industry benefits from manufacturing synergies with electric vehicles, and that’s helping us achieve scale and reduce battery costs.

Richard Matsui:  That’s stunning.

Anne Hoskins:  This is partly driven by offering the customer multiple benefits, such as time-of-use management as well as backup power. With the issues in California with fires last year, we see a lot of customers with reliability concerns. When you put all those things together, you can understand why there’s strong demand.

Additionally, when a few people in a neighborhood get solar panels, those early adopters have a domino effect on their neighbors. I think the same thing is going happen with batteries as people realize they can gain energy independence.

Richard Matsui:  For us at kWh Analytics, our lens into the solar market is through its performance data. We aggregate data on ~20% of the US operating fleet, and we use this data to help investors and insurers of quantify the risk and get them comfortable with deploying more dollars into solar. But it’s much more complicated to quantify the long-term investment performance of storage, because of the policy risk. We look forward to continue working with Sunrun and others to build greater investor comfort with this new asset class, because it’s clear that there will be no shortage of interesting challenges to overcome.

Anne Hoskins: Storage will run into many of the same challenges as solar did and many of the answers have already been battle-tested. We’re also seeing forward-looking states recognize the value of storage. Hawaii, California, and New York all have adopted distributed storage policies and incentives, with New York recently issuing a storage roadmap that includes distributed solar and storage. As more policymakers start recognizing the need and opportunity to optimize the use of solar, either for reliability or clean energy purposes, they will create related incentives. It makes a lot of sense to target incentives to nascent technology at the point when customers are on the cusp of adopting the technology, and I think we’ve seen that there’s enough interest in storage to drive these incentives.

 

LESSONS FROM THIS YEAR’S BIG POLICY WIN

Richard Matsui: You recently had a big policy win in Florida. What’s the takeaway for this industry when it comes to opening markets that have been more resistant to rooftop solar?

Anne Hoskins:  I think we achieved that incredible result in Florida because it simply made sense for consumers. We knew from their ballot initiative fight a year and a half earlier that consumers felt strongly about gaining access to solar, especially in Florida, a state that is known for its sun.

As we work with policymakers in places where there should be greater access to solar, we try to keep the focus on the consumer. People want solar, and we have many success stories where we have benefitted not only the direct customer, but also the state as a whole. For example, California is now able to forego natural gas plants and transmission projects because of distributed solar.

My approach is to help policymakers see that not only is there consumer demand for it, but it’s also an avenue for solving larger problems in a cost-effective way. In Florida, we demonstrated to the commission that equipment leasing was perfectly appropriate under their law. When they realized we were focused on serving the needs of Florida customers, they approved it.

Live Oak Bank’s Renewable Energy Team Partners with kWh Analytics for Efficient Capital Deployment

Originally posted on Solar Power World.

SAN FRANCISCO – kWh Analytics, the market leader in solar risk management, today announced that they have deployed their HelioStats risk management software with Live Oak Bank’s Renewable Energy team, a leading provider of financing for renewable energy projects.

As the costs of building solar have come down, it has become increasingly important to efficiently underwrite and manage distributed solar portfolios. HelioStats enables investors to automate reporting, draw insights from their own portfolios for better capital deployment, and draw upon industry insights to support underwriting determinations, while providing a backbone of risk management compliance by tracking the ongoing financial and operating health of large and small projects alike.

“We have a very diverse portfolio ranging from small commercial projects to community solar projects to utility scale assets,” says Jordan Blanchard, General Manager of Renewable Energy Lending at Live Oak Bank. “kWh Analytics offers a best-in-class solution that is easy to set up and that allows us to identify risks before they materialize. We can deploy capital across a range of project types with confidence because we know our risk management function is scaling with us.”

“Live Oak Bank is widely known for innovation in service of their clients. They are a leader both in structuring new products and in leveraging technology to ultimately provide the best outcome for their customers,” says Jason Kaminsky, Chief Operating Officer of kWh Analytics. “As Live Oak Bank continues to scale, we look forward to streamlining reporting processes with their development partners and supporting their capital deployment strategies.”

Live Oak Bank joins a growing segment of the finance community who relies on kWh Analytics for solar risk management products, including HelioStats and the Solar Revenue Put credit enhancement.

###

Media Contact:

Sarah Matsui

sarah.matsui@kwhanalytics.com

About kWh Analytics          

kWh Analytics is the market leader in solar risk management. By leveraging the most comprehensive performance database of solar projects in the United States (20% of the U.S. market) and the strength of the global insurance markets, kWh Analytics’ customers are able to minimize risk and increase equity returns of their projects or portfolios. kWh Analytics also provides HelioStats risk management software to leading project finance investors in the solar market. kWh Analytics is backed by Anthemis, a leading fintech Venture Capital firm, ENGIE New Ventures, the venture arm of France’s largest energy company, and the US Department of Energy. For more information about kWh Analytics, please visit: www.kwhanalytics.com or follow us on Twitter @kwhanalytics.

About Live Oak Bank

Live Oak Bank, a subsidiary of Live Oak Bancshares, Inc. (Nasdaq: LOB), is a digitally focused, FDIC-insured bank serving customers across the country. Live Oak brings efficiency and excellence to the banking process, without branches, by using a focused approach to technology and innovation. To learn more, visit www.liveoakbank.com.

#Solar100’s Bryan Birsic: The Tony Stark of C&I Solar

Originally posted on pv Magazine USA.

In this #Solar100 Interview, Richard Matsui, Founder and CEO of kWh Analytics, speaks with Bryan Birsic, Co-founder and CEO of Wunder Capital.

While Bryan Birsic probably doesn’t self-identify as a “genius-billionaire-philanthropist-superhero,” elements of his story mirror that of Marvel’s business magnate Tony Stark.

Leveraging their tech expertise and respective skillsets, Stark and Birsic both changed their careers to respond to important needs they saw in the world around them. For Stark, this means using tech and physics to stop villains, and for Birsic, this means using tech and finance to combat climate change while making returns for his investors. Birsic began his current business after a realization that his previous work wasn’t “addressing the big challenges that humanity faces.” Birsic’s archenemy? Barriers to solar deployment in the C&I lending space. Birsic’s work is resonating with people, and his company recently raised $112MM towards this effort.

In this interview, Birsic discusses finding purpose in solar finance, cracking the C&I market, and the wrong approach for solar startups to take.

Finding Purpose in Solar Finance

Richard Matsui: You first established your career at Bain, then spent 5 years as a VC with Village Ventures. How did you get into solar?

Bryan Birsic: It started when my cofounders Dave, Sam, and I hit a point in our careers where we no longer felt comfortable pursuing tech start-ups that weren’t addressing the big challenges that humanity faces. We wanted to move past only having nights and weekends to pursue our real passions and fulfill what we defined as our purpose. I think this is a common framework for millennials: Looking for jobs that utilize their skillsets and provide good compensation, yes, but also looking to find purpose in their work that extends beyond the requisite financial incentive.

I joke about this, but it’s true: Dave, Sam, and I were basically having a bitch session about how difficult it is to motivate yourself and others to work at the kinds of start-ups where we previously worked. That conversation prompted the questions: What do we care about? What would feel better to work on? And really importantly, are we the right people to do those things?

We convened in Boulder to figure out how we might manifest those ideas into a company. Dave, our CTO who worked at the DOE’s Lawrence Berkeley National Laboratory, came in with this religious fervor about what was happening in the energy space, particularly with distributed solar. He won the day. We saw that there was an under-penetration of software entrepreneurs in solar, and particularly that financing seemed to be an acute problem. On the C&I side, we saw a really big opportunity to grow the solar space with improved financing. All three of us were coming from very different roles—how software applies to finance, advertising, and marketing tech—but those winnowing forces brought us to start something in commercial solar finance.

Founding a Solar Startup

Richard Matsui: You’re a fellow ex-management consultant. Did your management consulting work influence what you bring to the Founder and CEO role today? More broadly, what would you say are the pros and cons of your job as Founder and CEO?

Bryan Birsic: My favorite CEOs are passionate about things like how to structure a company, how to create feedback loops, how to experiment, and how to deliberately create strong cultures and operating principles. The skill of being able to learn quickly, implement that knowledge, and repeat is a virtuous cycle that carried over from the management consulting role to the Founder and CEO role. This is also one of the biggest pros of my current job.

Richard Matsui: That’s interesting. The biggest lesson I learned from my stint in management consulting is that there are very few truly novel problems in the world. The vast majority of problems that any company faces has already been solved before by someone, somewhere. As a consultant, your job is to find that person, learn the answer, tailor the answer to the unique circumstance, and then execute. So it’s a very similar framework to your “virtuous cycle”.

Bryan Birsic: Exactly. And on the con side, it can be very lonely work. You don’t often have the opportunity to share fears or vulnerabilities, at least not in a “I’m having a terrible day” way. You certainly talk about challenging things with your team, but there has to be some “presentation layer” on top of your day-to-day feelings, and that dynamic obviously applies to your investors as well. Even with someone like a spouse, who has some financial connection to what you’re doing, it’s hard to be a 100% vulnerable and honest. That is compounded by the fact that there aren’t a lot of people who can empathize with some of the pressures, demands, and fears incumbent with being a CEO. One thing that I do that I recommend that every CEO do is find a group of CEOs who are all interested in being authentic. Without that resource, the CEO dynamic can be difficult to handle.

Richard Matsui: How does your experience as a VC change that way that you’ve built this business?

Bryan Birsic: Time in VC provided two advantages: The first and obvious one is fundraising, and the second is the focus on the scalability of our software. Non-software teams tend to suffer from diseconomies of scale when they get to a certain size. Our team build and brand positioning as a software-first company stems from my understanding of what my VC audience is looking for. To be really specific, we actively work against the idea that we’re a solar company, because that industry is painted with a slow-to-develop, hard-to-scale brush.

Cracking the C&I Market

Richard Matsui: When I think about Wunder, what strikes me is the difficulty of the problem you are tackling. C&I has been a “next big opportunity” for a long time, despite a lot of smart people working on it. What makes the market so challenging?

Bryan Birsic: I think the reason that there aren’t five Wunders running around is because this work requires a particular knowledge set that doesn’t often come together organically. There are a lot of people who understand this problem space, see the opportunity, and understand that software is required to reduce the fixed and bespoke costs associated with cracking this sub-$2mm, sub-1MW market in commercial solar. However, the folks who have that solar background and see that opportunity tend to be people without technology experience.

Generate, Sol Systems, and Seminole—all firms that I really like and respect—are not software companies, and they all struggle with lending to projects below 1 MW because they have not been able to combine their deep understanding of the problem space with the tools of a software company.

We took a very different approach. I had some knowledge of how software applied to lending, and Dave had experience as an engineer and spent some time at the DOE. We are software people first who only had a few relevant solar experiences. We had to spend two years getting up the curve on some pretty complex topics to gain solar expertise. This approach led us to a different place then a lot of other people who have been in the market for years.

Richard Matsui: There’s a saying that all founders know a secret about the industry they work in, and that secret becomes their company. It sounds like your company’s founding secret was  this software-first mentality. What are the big C&I problems that software solves?

Bryan Birsic: While we use software in many ways, we have identified two main problem areas that software can address.

As outsiders coming in trying to figure out this market, the first thing that struck us was just how much paper and legal work is required in order to get a C&I solar deal done. You oftentimes have three- or four- party contracts, lien or UCC1 filings, regulatory dynamics in different states depending on the size of system, and so on. We mapped out and color-coded all the required steps and realized that around 50-60% of the steps were fundamentally contractual, legal, or involved something regulatory. If you’re an project finance provider in a market where your loan might be a million dollars, and you might make 2.5% as your total closing fees on that loan, that means you have $25,000 to spend, including your margin and fixed expenses, in order to be profitable. If you’re engaging a lawyer or putting contracts together, you’re going to eat most of that $25,000 budget immediately on legal costs. We needed to eliminate the legal-cost table stakes.

So the first thing we built is Docsund, intelligent software that—with five clicks—drafts a custom contract package for each of our deals. Once we encode changes, this system requires no legal costs and no human being to create custom contracts. That is the most important thing we’ve done, and it’s necessary to attack this market.

The second big efficiency that we’ve realized is executing deals quickly. We built Koalify, the second leg of our software stack, to qualify our deals. We’re seeing about two billion dollars of buyer demand annually now, with projects that average roughly half a million dollars each. For each project, we need to first gather the data that requires minimal human interaction, and focus on data that is most likely to kill a deal.

Those are our two big cornerstones. Between those two software products, we’ve been able to realize about a 10X efficiency relative to what we see from manual financing players in the C&I market, taking our minimum project size to $200K from the industry-norm of ~$2MM.

Lending Small and Moving Fast

Richard Matsui: On the borrowers’ side, what is the typical project size that you lend against?

Bryan Birsic: Our average is around $500k or $600k in terms of their debt need, which corresponds to a 200-300 KW system.

Richard Matsui: That’s incredibly small. Late last year I asked Jigar what he was bullish on, and he identified small C&I, saying, “For whatever reason, the investors have all said, ‘We only want to do deals that are 750 kW and up,’ which I think is huge mistake.”

Bryan Birsic: That’s 100% right. We see the rest of the market as willing to go down to 750 KW, about $2mm, and we just don’t see folks that are down market of that besides us.

Richard Matsui: What do your borrowers want?

Bryan Birsic: We have two value props. The first one is that we understand the solar asset well enough that we’re not going to ask for additional assets from the borrower. What you often see in the small C&I space is that a developer gets a potential borrower excited, they quote the system, but they don’t have a solar specific financing offer for these smaller systems, so they send them to their local bank or credit union. That underwriting team does not have a group specialized in solar, so they’re looking at just the financial history of the business, and will require collateral, for example by putting a senior lien on borrower property.  By contrast, we offer non-recourse debt, so even if our rate is incrementally higher, in almost all cases we’ll win that business because we only have recourse to the solar asset. We can do that because we’re underwriting a wide range of aspects of that solar project’s ongoing value, and are capable of monetizing it effectively if God forbid there’s a default.

Next, our partners would tell you that speed and transparency are the two things they value most in Wunder. Installers and developers generally understand that financing sometimes doesn’t come through, so generally what they like is that we’ll tell them within a couple of days if a project is not going to be approved so that they can stop working on it and reorganize their sales efforts. We’ll also let them know why they were rejected, which can often be a black box with other lenders. Then on the speed side, we’ll promise them an executable document within five business days. That is an order of magnitude faster than some of the folks they’re used to dealing with.

Richard Matsui: From our experience developing the Solar Revenue Put, we have gained some insight into what small scale project developers value most. It turns out that certainty and speed are very important factors because the developer is likely working on multiple projects at a time. Upfront cash is also critical to borrowers in the C&I segment, because they need this capital to develop more projects and run their business.

Bryan Birsic: Absolutely. To your point, we did not realize how important speed would be in that smaller C&I segment. These guys are often trying to fill 10 or 15 projects through their quarter, and financing has really been slowing them down. And to your point about cash, I can say explicitly that with your Solar Revenue Put, which I like, we change our loan-to-value rate that we offer on a solar project.

The Wrong Approach for Solar Startups to Take

Richard Matsui: What does Wunder become in five years? Is it a building improvement lender like a GreenSky for C&I? Or does it become something else?

Bryan Birsic: I love that analogy, given GreenSky’s recent valuation. I think we’ve addressed about half of the solution to date. If you look at GreenSky or Dealertrack, they’ve succeeded in overcoming the primary challenge in technology-enabled lending, borrower acquisition costs. They’re not only a great financing option for their partners, but they also bring their partners borrower demand for free, they pull financing into the sales funnel, they help their partners target customers based on the likelihood to get financing, and help onboard new customers through the relatively complex financing process. Mosaic’s also done some really interesting work along these lines in residential solar.

We need to make sure that we’re not only your financing partner, we are also your partner in cracking small commercial solar through the sales funnel. That’s the next big thing for us operationally. The other big shoe to drop is going to be storage. We believe that distributed PV plus storage is going to be a big market and so between those two challenges, we’ll stay pretty busy for the next five years.

Richard Matsui: What else is broken or inefficient in solar? Put another way, had you not started Wunder and were looking at the landscape today, what would you want to tackle?

Bryan Birsic: I think pure customer acquisition is really interesting. We see a lot of folks that are trying to generate leads and then kick them over the transom. Part of the reason that we didn’t start there is because if I send you a lead for a $500k system that you can’t get financing for, solar developers probably won’t even want the lead. We had to start with financing before folks would be interested in solving that customer acquisition problem. The really hard thing is getting a business efficiently through the landlord tenant dynamic. How do you solve that? We see a big opportunity there.

There’s a real misunderstanding of how to apply software to solve the industry’s problem of soft costs. By the way, I think your team at kWh Analytics is doing it right. There’s a broad and mistaken belief from many solar startups that are thinking like traditional software companies: We’re going to sell software licenses to installers. That simply does not solve what customers are looking for. Installers and developers are not people who want to be on their computer all day. If you’re building them software, you have to consider where they are, not where you think the market should be. If I were to go to the bank and say, “Hey, I’m going to sell you software for small C&I,” they would respond, “We don’t do small C&I.” Software is necessary to bring down soft costs, though I think the big opportunity is in software-enabled services. Don’t show up with the software—use your own software to deliver the value to customers. And that will probably be a better business model and an easier sale, too. I’m highly skeptical of folks that are selling software under a SaaS model, as opposed to using software inside of their businesses to be incredibly efficient or building a differentiated data asset like your team. I think most folks are taking the wrong approach there.

Richard Matsui: That’s an often unsaid but brutal truth about our industry. Even though we offer different products, I think that our teams are practicing a similar mentality. If a solar startup thinks of itself as pure-play software, an honest assessment of the total addressable market will usually be small. And small can be great, because small means lean, which can mean profitable. Folsom Labs is a standout example of this. But if a startup is seeking venture-type results, software-only is a challenging path. Those founders need to answer the big picture question: What is the real pain point here? What is our industry fundamentally doing wrong? Software can play a role in that answer, but software alone is often not the full answer.

Renewable Energy World Announces Its Inaugural Solar 40 Under 40

Originally posted on Renewable Energy World.

San Francisco, Calif. — In an effort to recognize the up and coming rock stars of the solar industry, Renewable Energy World is pleased to announce its first “class” of 40 under 40 changemakers in the solar industry.

Renewable Energy World’s Solar 40 Under 40 recognizes these individuals and their unparalleled accomplishments within the solar industry. Their mission is to bring solar far into the 21st century and build on the roots of the solar industry and those who have come before them.

They are, and will continue to be, advocates for solar.

Each one is unique, shows a great deal of passion and has achieved accomplishments within the industry.

In alphabetical order, the inaugural Renewable Energy World Solar 40 under 40 are:

  1. Adedoyin Adeleke, Founder/Executive Director, International Support Network For African Development (ISNAD-Africa)
  2. Mike Arndt, Managing Director Of Development, Recurrent Energy
  3. Amanda, Bybee, CEO, Amicus O&M Cooperative
  4. Thomas, Byrne, CEO, Cleancapital
  5. Franco, Capurro, Partner & CEO, Banverde
  6. Alison, Ciesla, Post-Doctoral Fellow and Project Leader Of Industry Collaborations, UNSW
  7. Becky, Diffen, Partner, Mcguirewoods
  8. James, Ellsmoor, Director, Solar Head of State
  9. Kate Bashford, Epsen, Executive Director, New Hampshire Sustainable Energy Association
  10. Patrick, EUGENE, CEO, Digitalkap Solar
  11. Adam, Gentner, Director of Business Development – Latin American Expansion, Sonnen
  12. John, Gurski, CEO, Energytoolbase
  13. Brett, Hallam, Research Director for Advanced Hydrogenation, UNSW Sydney
  14. Walid, Halty, CEO, Dvinci Energy, Inc.
  15. Nate, Hausman, Project Director, Clean Energy States Alliance
  16. Bram, Hoex, Associate Professor, UNSW Sydney
  17. Justin, Hoysradt, President / CEO, Vinyasun
  18. Jason Kaminsky, Chief Operating Officer, kWh Analytics, Inc.
  19. Pari, Kasotia, Mid-Atlantic Director, Vote Solar
  20. Esther, Katete, Founder, Suntap Uganda Limited
  21. Laura, Klein, Managing Director of Development, Eagle Solar Group
  22. Kathryn, Klement, Director, PV Power Systems, Phoventus Inc.
  23. Mallory, Lindgren, Director, Solar and Storage, Westwood Professional Services
  24. Sarah, Lovell, Vice President, Commercial Asset Management, Longroad Energy
  25. Muhammed, Lubowa, Managing Director & Founder, All In Trade Limited
  26. Raghav, Malhotra, Head of Project Management, Cleantech Energy Corporation
  27. Rhys, Marsh, Managing Director, Avenue Capital
  28. Jaime, Martinez Soto, CEO, Proyecto Terra
  29. Jon, Powers, Co-Founder and President, Cleancapital
  30. Aneri, Pradhan, Executive Director, Enventure
  31. Laura, Recchie, President and Founder, Root + Branch
  32. Steph, Speirs, Co-Founder And CEO, Solstice
  33. Amro, Tabari, Senior Renewable Energy Engineer, Mott Macdonald
  34. Jan Pieter, Versluijs, CEO, Solar Monkey
  35. Britta, Von Oesen, Director, Cohnreznick Capital
  36. Joshua, Weiner, CEO, Sepisolar
  37. Tom, Weirich, Director, Cohnreznick Capital
  38. Emily, Williams, Director of Energy Supply, Edison Energy
  39. Maura, Yates, Managing Member, Co-Founder, Mothership Energy Group
  40. Thatcher, Young, VP, Business Development, Radiance Solar

Swiss Re Stops Insuring Businesses With High Exposure to Thermal Coal

Originally posted on Greentech Media.

Swiss Re took a step forward this week in its commitment to manage carbon-related sustainability risks and support the transition to a low-carbon economy.

As of Monday, the Zurich-based firm no longer provides insurance or reinsurance to businesses with more than 30 percent exposure to thermal coal.

The thermal coal policy announced in June 2017 was based on Swiss Re’s pledge to adopt the principles of the Paris climate agreement in 2015, which seeks to keep global warming under 2 degrees Celsius.

As part of that commitment, “Swiss Re supports a progressive and structured shift away from fossil fuels,” according to a company statement.

The thermal coal policy applies to both new and existing thermal coal mines and power plants, and is implemented across all lines of business and Swiss Re’s global scope of operations. The policy is an integral part of Swiss Re’s Sustainability Risk Framework, which the reinsurer uses for all underwriting and investment activities.

“It has been our goal to develop a comprehensive approach to coal underwriting,” said Patrick Raaflaub, Swiss Re’s group chief risk officer. “This has been a complex task and I am very pleased that we are now in a position to start rolling out our thermal coal policy.”

The 30 percent threshold on Swiss Re’s insurance practice is in line with the threshold on the firm’s investment practice. As of 2016, Swiss Re stopped investing in companies that generate 30 percent or more of their revenues from thermal coal mining or that use at least 30 percent thermal coal for power generation. The reinsurer also divested from existing holdings.

These measures are designed to contribute to a low-carbon environment and to actively mitigate the risk of stranded assets, according to Swiss Re.

California Insurance Commissioner Dave Jones focused on the issue of stranded assets in his 2016 Climate Risk Carbon Initiative, which requires insurers with $100 million in annual premiums doing business in California to disclose investments in fossil fuels and asks all insurers operating the state to divest from thermal coal.

Earlier this year, Jones became the first U.S. financial regulator to complete a climate-related financial risk stress test for the insurance sector. The analysis underscored that thermal coal presents long-term financial risks for investors, “despite any short-term fluctuations in market price and policy signals.”

U.S. coal-fired power plants are already retiring at a rapid pace. According to Jones’ office, financial analysts expect more coal-fired capacity retirement in 2018 than under the first three years of the previous U.S. administration.

The risk to insurance companies is that fossil fuels become stranded assets on their books, with little or no value, as governments and markets reduce the demand for carbon-based fuels.

Swiss Re isn’t the only insurance firm to restrict its participation in the coal sector in recent months. In May, Germany’s Allianz stopped insuring single coal-fired power plants and coal mines, in response to criticism from environmental groups. Dai-ichi Life Insurance recently became the first Japanese institution to stop financing coal-fired power plants overseas, and Nippon Life Insurance is considering limits on coal plant financing.

In addition to shifting away from coal, Swiss Re underscored its support this week for sustainable energy projects, including insurance coverages and investments in renewable energy sources.

Swiss Re helped to develop an international guideline on risk management and sustainability of solar panel warranty insurance, known as the Solar Panel Code of Practice. It has also invested in a new product with kWh Analytics, dubbed the Solar Revenue Put, which drives down investment risk by guaranteeing solar project performance, making these projects cheaper to finance.

Banks Wade Carefully into Solar Merchant Waters

Originally posted on Power Finance & Risk.

Lenders financing solar projects are beginning to give credit to uncontracted revenues and novel hedging products amid intense competition in the bank market, with certain caveats.

According to a new database called Solar Lendscape, launched by risk management and data firm kWh Analytics, as many as 10 lenders are already valuing a merchant tail that goes beyond solar projects’ contracted revenues.

Ares Credit, Brookfield, CIT Group, ING Capital, Investec, Live Oak Bank, MMA Energy Capital, North American Development Bank, Open Energy Group and Prudential all attribute some value to uncontracted future cash flows in certain cases, according to the data.

The directory—the brainchild of kWh Analytics ceo Richard Matsui—also highlights more than 20 lenders that are prepared to give credit to the solar revenue put, an insurance product underwritten and distributed by kWh Analytics’ own licensed insurance brokerage subsidiary, Kudos Insurance Services, and backed by investment grade insurance carriers.

Coronal Energy used the product when it secured tax equity from PNC Bank for a 30 MW solar portfolio in Virginia early this year ( PFR, 1/30).

Despite an increased awareness of post-contracted cash flow risks, project finance bankers are reticent to give them too much credit.

Ralph Cho, co-head of North American power at Investec, described the steps banks would take when sizing debt based on merchant revenues when he spoke on a panel at the 15th Renewable Energy Finance Forum in New York.

Lenders modelling amortization scheduled would eschew the traditional 1.25 times debt service coverage ratio for uninsured utility-scale solar in favor of higher DSCRs of 2 to 2.5 times, he said.

Financiers would also assume a downside scenario in their projections—usually incorporating higher-than-expected operating costs.

In addition, they would use conservative capacity price estimates, taking the low-end of the range of values forecast.

Investec, according to Lendscape, is open to valuing both merchant tails and kWh Analytics’ Solar Revenue Put.

Lenders Want Solar Deals

Originally posted on SolarWakeup for June 26, 2018.

Lenders Want Solar Deals. The great team at kWh analytics is sharing some data about lenders interested and active in solar. Catching me off guard was the sheer number, almost 50 banks, that made it into the ‘solar lendscape’ which explains the competitive cost of capital that is being found by project owners. One of the topics that we don’t talk much about is the installation methods in the underwriting process. While BNEF has the tier 1 list for modules, who ensures that the right products are being installed to install the systems on the ground or on the roof? The IEs are barely scratching the surface on that and given the 30-year lifespans being modeled, there should be a complete system analysis.