kWh Analytics structures Solar Revenue Puts on $500 million of solar assets

Originally posted on Solar Power World.

kWh Analytics announced it has structured its Solar Revenue Put credit enhancement on over $500 million of solar assets.

Rapid adoption of the Solar Revenue Put highlights kWh Analytics’ usage of data analytics and financial innovation to successfully lower the cost of solar.

With the Solar Revenue Put, industry-leading sponsors have been able to increase IRRs by 30+ bps, improve bids by up to 5% and free up cash availability. Notable sponsors include Coronal Energy, Ares EIF and AES Distributed Energy.

The Solar Revenue Put has also emerged as a powerful tool for solar lenders, enabling market leaders to differentiate themselves, help their clients succeed, and gain a valuable credit enhancement. According to a survey of the 50 most active solar lenders (the “Solar Lendscape”), more than 40% of these lenders are now underwriting the Solar Revenue Put as a credit enhancement. Project financings supported by the Put are securing approximately 10% more debt.

The Solar Revenue Put has been incorporated into a variety of project financings, ranging from thousands of residential rooftop power plants to centralized utility-scale solar farms. Both refinancing and “new build” financing have been supported by the Put.

Using its proprietary actuarial model and risk management software HelioStats, kWh Analytics developed the Solar Revenue Put to drive down investment risk and encourage development of clean, low-cost solar energy. Solar Revenue Puts are now set to guarantee production of more than 6 TWh of solar electricity, enough electricity to power every home in America for over a day.

“The Solar Revenue Put has quickly become a market standard,” said Richard Matsui, Founder and CEO of kWh Analytics. “With the Solar Revenue Put, industry-leading sponsors and banks are able to reduce the risk—and therefore the cost—of solar. Less risk, less cost, more solar.”

#Solar100’s Dan Shugar: The Bono of Solar

Originally posted on pv magazine. In this #Solar100 Interview, Richard Matsui, Founder & CEO of kWh Analytics, speaks with Dan Shugar, Founder & CEO of NEXTracker.

As the Founder and CEO of NEXTracker and as the lead guitarist for Groovity (a crowd-favorite at the annual solar ‘Battle of the Bands’), Dan Shugar’s as close as they come to a solar rockstar.

And as Shug says, “I think that music and building great companies are very aligned—what’s hard is having endurance, staying power, and sustainability. You don’t want to be a one-hit wonder or the band that does one great album and then breaks apart. It comes down to building cultures that encourage people to achieve their full potential.”

In this interview, Shug talks about securing his landmark customer at NEXTracker, advice for new solar entrepreneurs, and the theme songs of his favorite high-impact solar nonprofits. Nominated by fellow leader Danny Kennedy, Shug is the Bono of Solar and this month’s featured #Solar100 leader.


Richard Matsui: You have years of experience in solar and are well-known for your work at NEXTracker, SunPower, and Powerlight. Was Powerlight the start of your career in solar?

Dan Shugar: I got involved with solar through dumb luck. I was working at PG&E as an electrical engineer in the 80’s and when I was presented with an opportunity to work on a one year “temporary” assignment in the R&D group in San Ramon. That “temporary” assignment turned into a 30 year career. At the time, PG&E had the leading research and development program of any utility.

I saw solar and thought, “Wow, this stuff is very modular—let’s also consider the localized value of strategically setting it at the end of a weak electric transmission.”

So I authored this paper in 1990 called “Photovoltaic Grid Support Evaluation of System and Distributed Benefit.” We developed this methodology, and I ended up leading a small team of really talented people at PG&E, people like Howard Wenger. We were able to publish the results through a national program at the U.S. Department of Energy, and I personally published dozens of papers on this. I’m not trying to be like the godfather of the industry’s literature, seeing as we’re standing on the shoulders of people like Dick Swanson or Charlie Gay, but from an application standpoint and value creation standpoint, this created a new category. Instead of this hurting the grid, it actually helps the grid when it’s done properly.


Richard Matsui: Solar is a notoriously tough industry to build a company. Hardware is similarly notoriously tough. You co-founded a successful solar hardware company that experienced a very rare outcome: a lucrative exit. I heard that you had an impossible challenge in securing your landmark customer. Can you tell that story?

Dan Shugar: Yes. I had this virtually intractable problem: I needed to get my cost down quickly, and to do that, we needed volume.

We had very little working capital, and it was incredibly difficult to raise money as a solar hardware company. We also did not have a significant track record at that point, and we needed someone really big to help get our volume up. I decided to have a conversation with Ahmad from SunEdison—I knew his team was dissatisfied with other providers in the tracking industry at that moment because they weren’t getting a reasonable cost and price roadmap. And in 2013, SunEdison was the 800 pound gorilla from a demand creation standpoint in the global solar industry.

I got Ahmad on the phone and he said, “Dan, we’ve developed and now have our own tracker, the AP-90, and it’s great.” I said, “Okay, what’s great about it?” Ahmad started rattling off the attributes, and I realized that the AP-90 was almost a direct variant of the tracker that we had done for fifteen years previously. It was a linked push/pull tracker, so they all move at the same angle, like Venetian blinds. Twenty-five years ago, the supporting technology wasn’t there, so it made sense to build a tracker like that. However, that’s not the case in this decade.

So I said, “Ahmad, let me tell you why your thing is a dinosaur and why ours is better.” I asked him to meet me at NEXTracker, and we spent three hours in a field on a Sunday afternoon discussing NEXTracker’s prototype. After that, he had his team build three systems at their test facility in Colorado: a system with their tracker, ours, and a third party’s. It turned out our tracker was three times faster to install.

They started allocating projects to us right away, and we saved them a lot of money. We captured the huge wave of U.S. projects that happened in 2015, 2016, and 2017—over 90% of their tracker volume for a two to three year run. We’re still doing projects today that came from that original Sun Edison pipeline. They drove us really hard, but we were hugely responsive.

Do you remember “Rope a Dope” with Muhammed Ali and Joe Frazier? You have this super strong adversary, so what you do is kind of lay back, cover up, and let the opponent exhaust themselves. Then you come in and hit him. We basically used that strategy. Whatever they wanted, we said, “No problem.” We played ball with them, and then we produced a very vigorous customer diversification strategy.

Richard Matsui: You’ve succeeded in closing massive, high-stakes deals. How have you done it?

Dan Shugar: Well, any hubris aside, I think we had a better mousetrap in that instance. But generally, I think it’s really about listening to the customer—where are their pain points? Listening and understanding where we can add value that aligns with our customers’ goals and motivations is key. It sounds very high level, but it’s really that basic. You probably did the same thing with the Solar Revenue Put.

Richard Matsui: Kind of. No one ever wakes up and says, “You know what would solve my biggest pain point today? Insurance.” But if you listen very carefully, you hear the true pain point that underlie the proximate pain point. For us, it was realizing that in order to reduce the cost of solar energy, this industry needs to quantify the risk/reward profile of our assets. That requires data.

Your landmark customer story is pretty incredible. What other advice would you give to a new solar entrepreneur?

Dan Shugar: One, listen to the customer. And two, I would add that I’m hugely in favor of capital-light business models.

Richard Matsui: [Laughs] Says the guy who started a hardware company?

Dan Shugar: But guess what? NEXTracker has no factory. If you look at our capital expenditure, the depreciating basis that we have is extremely low. We work with others that run factories better than we could ourselves. Then we focus on working with partners in logistics and operations. We have offices and manufacturing partners on five continents, and we’re optimizing the flow of material and manufacturing goods, in real time. It’s very comfortable for us to operate a global business.

And that differentiates one as a manufacturer, because operating from a global platform helps keep production levels fairly steady. Markets expand and contract rapidly but while one market is down, another one might be up. That strategy served us extremely well, and it was built from a demand and supply standpoint. We had the DNA to do that.


Richard Matsui: We recently interviewed Jenny Chase from BloombergNEF, and her prediction for 2019 was “bifacial models everywhere.” Why is everyone taking about bifacial?

Dan Shugar: I’ve had a love affair with bifacial from day one. I first saw bifacials around 1990 or 1989 at the PVUSA site in Davis. When we built the site 12 years ago with PowerLight, we had 2 of the 14 MW of that bifacial, we used the Sanyo HIT. It worked extraordinarily well. We measured something like 12%-14% yield gains, but that was an extraordinarily good site, and it was an extraordinarily optimized tracker for that application, with a very low GCR at the site and high albedo.

When we did the original NEXTracker system, the NX-100, it was predicated around bifaciality. Our client Invenergy announced a 224 MW project being built in Georgia that’s bifacial. In the US alone we’re building over 750 MW of bifacial systems.

A lot of manufacturers are telling me they’re sold out for this year with normal stuff. Some companies are being vocal and really driving bifacial, and others are happy to be followers and are waiting to see how the market responds to the situation.

Richard Matsui: We’re also seeing a dramatic uptick in the number of projects considering bifacial modules, and are actively working with a few clients to enhance their financings by bringing in Swiss Re to guarantee the energy yield uplift from bifacial. What performance levers do you see in bifacial projects?

Dan Shugar: I can point out two major determinants in performance, especially related to PVSyst: backside efficiency and albedo. Back side efficiency of the panel is determined in the lab, and you can model efficiency by flashing the panel, and you basically know that the back side is going to do X, Y, and Z. Albedo is probably one of the biggest single drivers. And as literature shows, albedo varies by different terrains: If you’re over black asphalt the albedo is 10%, over green grass and it’s about 20%, in the Sahara and it’s 40%, over white snow and it’s closer to 70-90%. That can be measured on sites with an albedometer over time. Then you start getting into the system configuration. If you run numbers for how systems are typically built, first of all, you want a tracker, because the trackers have lower GCRs.

You need reflection from the site. The more granular your array, the higher the bifaciality. In our case, we have one portrait design, that is just intrinsically better than a two portrait design, because from a bifaciality standpoint, the umbrella is half the width. Therefore, in order to compensate for width, you have to lift it really high. So you can get a two portrait tracker with the same back side reflection as a one portrait tracker, but then you have a bunch of structural cost involvement and all that coming into play. So, you want to be one portrait, and in our case, you want to suspend the modules between with piers and expanding over those and over the drive system. So we’ve got a pretty damn near optimal configuration for bifacial. We’ve been working with these customers, educating the market, talking to IEs and so forth.

Richard Matsui: Generally speaking, what are you seeing in terms of cost-benefit from the developer’s standpoint?

Dan Shugar: It depends how much of the incremental cost is on the module. From my standpoint, yield dwarfs everything. You really want more yield out of these plants. That’s why our TrueCapture technology is taking off so nicely. There’s a lot of fixed cost in development, maintenance, and insurance, so if you can amortize those in kilowatt hours, the leverage is unbelievable and the financial leverage is incredible, especially if the Solar Revenue Put is guaranteeing the energy yield improvement. I absolutely love bifacial, but there are right ways and wrong ways to do it. Our recommendation is basically to do a one portrait orientation.

The only other thing we haven’t talked about that’s really important for bifaciality is the DC/AC ratio. If the DC/AC ratio is really high, you are curtailing a lot of the bifacial gain. If the DC ratio is 1.0, over 90% of the bifacial is gained based on the capture. If the DC ratio is at 1.5, it will probably be less than half, due to clipping. It then drives you to a lower DC ratio than otherwise would be optimized for the site. TrueCapture performs on the shoulders, so the early morning, late afternoon, and in diffuse conditions. It’s purely additive to bifacial, so they play very nicely together.


Richard Matsui: You’re a mainstay at solar’s annual Battle of the Bands. We’d like to propose something here: First, can you name five nonprofits that are making a difference in solar, and second, if they each had an anthem, what would it be?

Dan Shugar: Certainly. I think that music and building great companies are very aligned—what’s hard is having endurance, staying power, and sustainability. You don’t want to be a one-hit wonder or the band that does one great album and then breaks apart. It comes down to building cultures that encourage people to achieve their full potential. Whether in a great company or a great band, you want to give space for everyone to contribute and listen to what is happening.

In terms of specific nonprofits I think are making a difference and their anthems:

Wind Solar Alliance – “We Can Work It Out” by the Beatles

Wind and Solar are finally playing well together, for the benefit of both key renewables and to fight the same fight.

Vote Solar – “You Are the Sunshine of My Life” by Stevie Wonder

They’re working, state by state across the country, to expand solar access through advocacy and policy.

Sierra Club – “Only So Much Oil in the Ground” by Tower of Power

I was on their board for six years and the Sierra Club, more than anyone else, really helped transition the North American grid off coal. They do fantastic work, they’ve got a great brand, and they’re very involved in energy.

GRID Alternatives – “Towards the Sun” by Rihanna

They’re making both clean, affordable solar power and solar jobs accessible through residential solar installations to low-income communities.

Local State Chapters – “Come Together” by the Beatles

Lastly, I would say the state chapters—CALSSA is a great example. Folks should engage in whatever state they’re in (a/o country association). People really need to man up and woman up and support these industry associations. All our key suppliers are required to be members in good standing with these organizations in order to sell to us. The folks that don’t do that are free riders on the industry, and that’s not cool. We’re going to keep pushing, and we need to rally together.