Securitization of residential solar photovoltaic assets: Costs, risks and uncertainty

Abstract

Limited access to low-cost financing is an impediment to high-velocity technological diffusion and high grid penetration of solar photovoltaic (PV) technology. Securitization of solar assets provides a potential solution to this problem. This paper assesses the viability of solar asset-backed securities (ABS) as a lower cost financing mechanism and identifies policies that could facilitate implementation of securitization. First, traditional solar financing is examined to provide a baseline for cost comparisons. Next, the securitization process is modeled. The model enables identification of several junctures at which risk, and uncertainty influences costs. Next, parameter values are assigned and used to generate cost estimates. Results show that, under reasonable assumptions, securitization of solar power purchase agreements (PPA) can significantly reduce project financing costs, suggesting securitization is a viable mechanism for improving the financing of PV projects. The clear impediment to the successful launch of a solar ABS is measuring and understanding the riskiness of underlying assets. This study identifies three classes of policy intervention that lower the cost of ABS by reducing risk or by improving the measurement of risk: i) standardization of contracts and the contracting process, ii) improved access to contract and equipment performance data, and iii) geographic diversification.

Total U.S. cost evaluation of low-weight tension-based photovoltaic flat-roof mounted racking

“…This same open source disclosure of the testing results will also be adhered to for the hardware designs themselves following an open-source hardware methodology (Buitenhuis and Pearce, 2012). This system will need to compared to the other new low-weight commercial rooftop racking systems Holton, 2014) and an up-to-date economic analysis including financing will need to be performed (Singh and Singh, 2010;Talavera et al, 2010;Branker et al, 2011a,b;Bazilian et al, 2013;Swift, 2013;Alafita and Pearce, 2014;Ondraczek et al, 2015). In addition to evaluating the effectiveness of the X-wire system with commercial rooftops, the system could also be applicable in rural areas and developing countries where electricity is either very expensive or non-existent, where rapid prototypers (King et al, 2014) could be used for the manufacture of the racking systems and could further be powered by the PV of which it manufactured.…”

Spreading the rooftop revolution: What policies enable solar-as-a-service?

“…Although some writers mention the solar TPO business model (e.g., Alafita and Pearce, 2014;Friebe et al, 2013;Huijben and Verbong, 2013) and analyze its value for consumers (e.g., Davidson et al, 2015;Kulatilaka et al, 2014;Liu et al, 2014;Rai and Sigrin, 2013), no analysis of the model from the perspective of TPO providers and with a focus on policy actions has been carried out to the knowledge of this author. Drury et al (2012) suggested the value of enabling policies for solar TPO in the quote above but provided few policy suggestions.…”

Multivariate analysis of solar city economics: impact of energy prices, policy, finance, and cost on urban photovoltaic power plant implementation

“…The emerging financial instrument could be a promising vehicle for solar city strategies: incorporating public debt in the financing structure offers attractive benefits such as improvements in financing terms, risk mitigation, and access to a broader capital pool . Overall, such strategies could achieve a lower cost of capital, less risk, and reduce project costs . It is estimated that a reduction in the levelized cost of energy (LCOE) of 8–16% occurs when a portion of a project or portfolio's typical capital stack is replaced with public capital vehicles …”