These standards will reduce and reliably price financing risk, lower the cost of capital and broadly increase the availability of commercial lending for solar projects, helping market participants more accurately forecast asset performance throughout the lifespan of a solar project.
The truSolar™ Working Group was established today as a collaborative consortium of 16 market leaders in the solar industry dedicated to addressing a broad array of project risks through the development of uniform standards that will facilitate lower transaction and capital costs, and improve project finance liquidity within the commercial and industrial solar segment. The founding members of truSolar™, led by Distributed Sun and DuPont Photovoltaic Solutions, are among the leaders in solar project asset management, development, financing, manufacturing, insurance and ratings agencies. Founding member companies include ABB, Assurant, Inc., Mosaic, PanelClaw, SMA America, Standard & Poor's, Booz Allen Hamilton, Rocky Mountain Institute and U.S. National Labs NREL and Sandia.
Less than 5 percent of the country's 6,500 banks and lending institutions are actively involved in financing solar projects due to ongoing concerns about, and misunderstanding, industry risks. Despite a robust market for solar installations, lenders struggle to efficiently underwrite loans in this field. In response to this problem, members of the truSolar™ Working Group are convening to develop uniform standards for solar project screening, rating and underwriting. These standards will reduce and reliably price financing risk, lower the cost of capital and broadly increase the availability of commercial lending for solar projects, helping market participants more accurately forecast asset performance throughout the lifespan of a solar project. "truSolar™ promises a market-driven solution to accelerate growth within the commercial solar segment, where common practices throughout the value-chain and adopted by development and finance can bridge the market more quickly toward securitization and solar becoming a significant asset class," said Chase Weir, chief executive officer - Distributed Sun. "We're excited to collaborate with such an extraordinary group of individuals and organizations on something so important to the solar industry."
The consortium will engage industry leaders representing key component and counterparty risk factors that best inform an industry standard screen through which a wide range of business methods, analysis tools, and related products and services from varying companies, can be applied. The initiative has been designed to foster best practices and help educate the marketplace on performance, credit and deal term risks, and encourage more reliable decision systems that tie into an industry-adopted credit screen. Industry members will provide expert, technical advice and development support. The truSolar™ working group will be administered by an independent organization, serving as the primary facilitator and credit screen developer, with financial institutions being announced by the end of this month. Distributed Sun will beta test these new practices to establish a proven, de facto commercial standard. The framework will be transferred to a standards body in 2014 and made available as open-source to the entire industry.
Members of the truSolar™ Working Group anticipate benefits to the industry:
"The truSolar™ working group is focused on developing credit evaluation tools and standards to address the challenge of increasing the supply of funding at appropriate risk premiums to the commercial solar segment," said Steve Dreyer, managing director - Standard & Poor's. "The truSolar™ group has identified what we believe to be the key issues of concern for lenders."
"Accurately forecasting the levelized cost of solar energy requires reliable components and precise performance data integrated into decision-making frameworks like truSolar™," added Henry Dziuba, president -SMA America.
"Predictable cash flows rely upon overall system and asset performance," agrees Costa Nicolaou, CEO, PanelClaw North America. "truSolar™ is the sum that can be greater than its parts, and a timely business innovation for a rapidly maturing solar marketplace."
"Like our peers, Assurant is committed to ensuring the continued growth of the solar industry. The adoption of uniform industry standards will help us achieve that goal by making it easier for banks to finance more projects," said Jeanne Schwartz, vice president of new venture commercialization - Assurant.
"This work is a natural complement to our efforts with the Department of Energy and the national laboratories in finance innovation," says Greg Rosen, chief investment officer - Mosaic. "truSolar™ is vital to lending reliably against solar asset cash flows and to the industry."
"With truSolar™ we hope to drive higher adoption rates of solar PV by delivering the benefits of a smart Grid to both the consumer and the utility," adds Bob Stojanovic, director of Solar Power NA at ABB.
truSolar™ members are uniquely positioned to impact marketplace adoption. With market leaders and leading innovators in smart-grids, smart cities, development platforms, business intelligence tools, big data, document standardization, crowdfunding and more, the initiative has the potential to accelerate distributed generation broadly and globally.
truSolar™ is an industry-driven standard for project selection, underwriting and approval. It involves an underwriting process that rigorously tests and identifies higher yield, lower risk solar investment opportunities. The system works to reduce project failure before, during and after construction, and increases the bankability of the industry's solar pipeline. truSolar™ is designed to mitigate events of default and business interruption from power off-takers with unrated – less than investment grade – credit. By scoring project performance, site profile and counterparty risk criteria with sophisticated rating tools, truSolar™ provides a framework to lower capital costs and support trade credit insurance for power-purchase-agreement revenues. The truSolar™ Working Group is dedicated to developing the truSolar™ standard, representing nearly $100B in global annual revenues, more than 600 years of institutional experience, and the industry's best-practice, applied business knowledge throughout the value-chain.