This past Wednesday (10/9), 30 leaders from the solar industry descended upon Washington to attend an invite-only meeting convened by the White House on “Increasing Capital Flows into the Solar Market.” It was a fascinating conversation, led by the President’s Counselor, John Podesta. Out of respect for the intimate nature of the dialogue, we won’t attribute statements to individuals, although we are glad to share some overall observations.
Unsurprisingly, the impending 2016 step-down of the ITC was a hot discussion topic. The consensus (but not unanimous) opinion of the industry was that the continuation of the ITC beyond 2016 ought to remain imperative for the President’s budgetary agenda. It was noted that our colleagues in the wind industry currently enjoy a prominent role in the President’s budget agenda, with a permanent extension of the current PTC being advocated for, while the ITC does not.
When discussing ways that the President’s office could assist the industry, a banker made the astute observation that the lack of clear guidance from Treasury on the definition of taxable basis has led to tremendous uncertainty about the possibility of future federal recapture of claimed tax benefits–uncertainty that is costing the industry dearly both in terms of financing costs for active deals, but is also effectively keeping potential tax investors on the sidelines. Clarity from the bureaucracy could be a cheap and quick fix to this issue.
We were glad that solar data, a topic near and dear to our hearts, was another hot discussion topic occupying the lion’s share of the second session. There was universal recognition that aggregated industry data about the historical performance of solar assets is badly needed in order to facilitate the entry of additional investors into the solar asset class. To paraphrase a saying often repeated by Mike Eckhart, formerly of ACORE, “equity gets valued on the promise of an asset’s future cashflows, while debt gets valued on an asset’s past history of cashflows.” Our industry is amidst a transition to capital market debt financing, which inevitably requires more data to provide the necessary certainty that debt investors will receive their cash.
One of the ratings agency representatives was asked to opine about the newest debt instrument gaining momentum, securitizations. The representative observed that two principal reasons why the solar securitizations were not receiving higher ratings was: 1) Regulatory risk, particularly with regards to utility pushback to DG solar and 2) Insufficient data on both historical payment and technology performance data.
(The kWh Analytics software platform enables users to tap the power of our industry performance database of 40,000+ operating PV systems. We have been able to demonstrate that our technology performance and historical payment data does indeed enable investors to enhance their knowledge base in order to build better underwriting processes and investment theses. As the market continues to grow, we plan to provide newer and deeper insights borne by the power of ever-increasing amounts of data.)