Solar Investment Strategies to Bridge the Gap for Community Solar & LMI

Insights from the Solar Energy Industries Association’s

Annual Finance & Tax Seminar

Solar can be a powerful tool for expanding access to clean energy in low- to moderate-income (LMI) communities. But traditional financing models have been ineffective at accelerating equitable solar access. On June 24th, Sunwealth CFO Omar Blayton joined leaders from banking, solar development and finance to moderate a discussion on “Bridging the Gap for Community Solar and LMI” at Solar Energy Industries Association’s annual Finance and Tax Seminar.

Blayton’s panel included Alexandre Huot, Managing Director of Capital Markets at National Bank of Canada, Chris Turner, Director of Community Solar Arcadia, Laura Stern, co-CEO of Nautilus Solar and Mihir Mehta, Senior Vice President of Finance at Soltage.The panel discussed successful strategies to financing solar projects for LMI communities and the ongoing evolution of business models for community solar. Key takeaways:

LMI Communities Represent Underserved Market and Important Business Opportunity.

43% of households in the US are qualified as LMI, equating to fifty million households with limited or no access to clean energy. These households have often been targets of predatory marketing campaigns; it’s important to address these communities with nuanced messaging and approach (Mehta).
LMI consumers represent a large and diverse market opportunity; it’s important to avoid incorrection generalizations about credit quality (Stern and Mehta).
Community solar projects are fundamentally bankable for financial institutions; scale can be achieved through a portfolio or aggregation approach and a strong sponsor (Huot).

Risk Assessment and Mitigation are Key.

The community solar paradigm has fundamentally shifted, with the result of shorter contracts and a lessened emphasis on FICO scores (Mehta).
Customer-centered approaches and effective use of technology for onboarding contributes to success. Organizations like Arcadia have seen default rates of less than ½ of 1% (Turner).
Key areas to focus on for risk mitigation: subscription mechanisms and ability to incorporate lessons learned about the mechanics of having LMI customers (Stern).
It’s critical to ensure low barriers to access even when “vetting” customers (Turner).

The Future of Community Solar is Bright.

Investors should focus on partners with a portfolio approach for increased diversification (Huot).
Sponsor track record is key (Huot).
Ratings agencies may be the next frontier, opening up access to new financing and diversifying potential sources of capital (Stern and Huot).
Community solar is established in states like Massachusetts and New York; in addition, a number of states are emerging as new markets, including New Jersey, Illinois, Virginia and New Mexico.

Community solar is a critical tool in providing access to renewable energy and energy savings in disadvantaged communities. Incorporating strategies such as those discussed above will be key to ensuring its success.

2021 SEIA Finance and Tax Seminar: Highlights