Insuring the cash flow of residential solar power

Originally posted on pv Magazine USA.

kWh Analytics has structured its Solar Revenue Put for a portfolio of 4,000 residential systems totaling 35 MW-DC, insuring the long term production of the portfolio to ease investor’s worries.

The insurance companies trust solar power enough to consistently offer real protection to big investors. This protection is a reflection of solar power’s probability of generating the volume of power that it is projected to produce.

kWh Analytics has applied its Solar Put to a portfolio of 35 MW-DC worth of residential projects, averaging about 8.7 kW across the 4,000 units. For kWh Analytics, it is the first U.S residential portfolio financed with the support of the Solar Revenue Put. The group said that it has now structured its Solar Revenue Put credit enhancement on over $250 million of solar assets.

The IGS Solar portfolio is being funded by a commitment from Ares EIF, the power and infrastructure strategy at global asset manager Ares Management, L.P., as well as a term loan commitment from ING Capital LLC, a financial services company.

One way of describing this probability are the p50 and p90 values (which DNV GL gives a great explanation of). Recent portfolio offerings of securitized solar leases have begun to reference these ratings, and they are suggesting that solar power will far outperform their p50 and p90 ratings. For instance, a SunPower portfolio’s long term generation projections notes that its ‘A’ rating is based on a projected degradation of 1.02%/annum, while p50/p90 ratings project that SunPower’s degradation value will be 0.25%.

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.”

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 relative to the cost of the insurance.

This continued normalization of investing in solar power will offer more companies the opportunity to bundle packages for global investors who have far more money to invest than there is solar that can reasonably, financially be built right now.