SCS Renewables is a just-unstealthed startup set on tackling the costs of financing a solar project with an online solar finance brokerage platform for project investors and banks.
Industry and the DOE are scrubbing cost from PV modules, balance of system, inverters, and soft costs like permitting. And the finance piece -- which can be a surprisingly large contributor to system cost and the piece which makes or breaks the project -- is also being examined by the DOE, as well as by SCS Renewables.
SCS already has funding sources in excess of $2 billion and 298 megawatts of solar projects seeking finance on its project brokerage platform. The SCS finance platform promises savings of $0.10-$0.30 per watt from lower transaction costs and improved market efficiencies. Here's a list of projects already brokered by the firm.
I spoke with Tim Keating of SCS, who said, "The project development process is broken," adding, "Project finance is where projects go to die." In fact, roughly 90 percent of proposed solar projects don't get done. And among those that do, the costs of financing itself is an obstacle to the success of the project.
According to Keating, there are too many middlemen and the industry sorely needs a deal scoring system and standards for the process.
The CEO of the firm, Haresh Patel, said that the "platform is designed to increase the sector’s dismal closure rates and expand the pool of capital available to finance commercial and utility-scale solar projects." Patel said that projects are not happening because "the developers and the investors are in a three-year time warp" and are operating in a vacuum.
Patel notes that "the ultimate customer is the bank" and that "we are more of a platform to the financing side." The CEO adds that SCS can "tell the developers what the rules are for the game" and to serve "almost as an incubator to strengthen projects and increase the odds of getting financed."
So, the SCS platform has the potential to create a standardized and vetted project library with an assigned score for each solar project.
The firm is coming out of stealth after two years of development with eight employees and Jigar Shah as an advisor.
“Project development processes lack standards and are currently decoupled from the investor’s criteria," said Patel.
Patel also noted that there was "a major paradigm shift" in the world of solar financing with European banks moving out and Japanese and Chinese banks moving in with the new money competing against incumbents like Wells Fargo.
SCS' goal is to increase the number of quality projects available while decreasing time wasted evaluating unattractive projects. The SCS platform might also open the door to new investor types and new capital markets and reduce the cost of capital.
Felix Mormann and Dan Reicher of Stanford’s Steyer-Taylor Center for Energy Policy and Finance, writing in a recent NYT op-ed, noted that publicly tradable financing sources available to traditional energy projects -- real estate investment trusts (REITs) and master limited partnerships (MLPs) -- could be made accessible to renewable energy projects. With some help from Washington, they write, these sources could "be extended to renewable energy projects to lower their cost and make America’s energy future cleaner, cheaper -- and more democratic." REITs and MLPs provide capital at a lower cost than financing sources now available to renewables.
The DOE's SunShot Program is also addressing better tools for financing solar projects.