The Age of Solar Securities is Here, Finds Marathon Capital Report
Earlier this month Marathon Capital updated its white paper on solar securitization claiming that the age of solar securitization has arrived. The financing company observed, among other things that already in 2015 more than $235 million in rooftop solar securities have closed—more than closed in the entire year of 2015.
Securitization is an important new tool for financing solar arrays since securities offer long-term investment options at low interest rate. However, it’s still a relatively new financing tool for solar arrays of all sizes. As such, Marathon warns that it is not always the optimal cash equity monetization strategy for all developers.
That said it’s popularity is growing. “2016 is positioned to be the year solar securitization should become a mainstream financing option with multiple distributed solar financiers planning to issue asset backed securities,” Marathon said in its white paper, The Solar Securitization Opportunity. That’s also based on where Marathon has seen growth in the rooftop solar financing market. “Only SolarCity and Sunrun have completed issuances but several other distributed solar financiers, such as SunPower, are reported to be now considering securitizations,” the company’s white paper said. The overwhelming majority of solar securities in 2016, roughly $235 million, have come from SolarCity, the white paper stated.
The solar securities market still faces hurdles at this point, according to Marathon.
“Reliance on third-party tax equity financing restricts the maturity and advance rate of solar securitizations, affecting virtually all current participants,” the company said. However, “the increase in solar securitization yields in early 2016 is primarily due to weakening macro credit conditions but the Nevada net metering decision may have increased perceived policy risk for solar securitizations.”
The white paper also stated that solar securities will generally have a higher cost of capital and lower advance rate than traditional securitized asset classes. That’s even after they are established as a dependable asset class and costs have come down for them. The white paper referred to Bloomberg New Energy Finance, which, it said expects rooftop solar to increase from about 3 gigawatts of new installations annually in 2015 to over 6 GW by 2020, an annual growth rate of 47 percent.
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