The levelized cost of solar photovoltaic (PV) electricity is lower than conventional sources in a growing number of markets in the U.S. Yet many projects cannot get off the ground because of limited access to funding. Given the stable, long-term cash-flow profiles of existing power purchase agreements (PPA), solar developers are pursuing the use of solar asset-backed securities (ABS) to alleviate this problem. SolarCity has already issued the first solar ABS in the U.S., a $54.4-million deal that closed last November. More issuance could spawn a large and efficient market, with strong returns for investors and cheaper, more available funding for developers.
But many developers are too small to go it alone. We found that the key to a viable securitization market for solar is aggregating assets and that is possible only through standardization, which would facilitate data collection and help make up for the sector’s short track record. Aggregation would facilitate securitization, which significantly cuts financing costs, helps the smaller firms with the toughest financing challenges, and extends the asset class’s geographic reach.