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Why Investors Like Solar
In a recent Renewable Energy World podcast, Steven Lasey, Editor, put together a panel of Solar PV experts who discussed the reasons investors turn to Solar PV for their portfolio builders. Lets examine some of the concerns and barriers investors and developers are facing in this growing industry.
Solar PV has proven to be a low risk, high return investment for many, but the lack of education for big investors has made it somewhat difficult to get the funding. Investors are looking for as much information up front in order to hand over the dough. The red tape involved with large scale solar projects can be both a financial and time burden. Without some capital upfront these projects tend to fall through the cracks. If investors were more educated they would be less likely to hold onto the funds and more likely to cough up the dough and get the projects moving forward.
Some of the headaches that developers face in the industry involve finding secure and reliable financing and establishing the right financial model.This will reduce the hesitancy of investors who are concerned with where the incentives are coming from and if the cash will be available when the project is finished and finally ready to receive those incentives.
The renewable energy sector tends to have a cash flow issue due to the lack of upfront incentives. The projects approved for incentives can still take 6 months to a year before completion and it takes several months afterwards to receive the incentive pay. It can be difficult for a developer to float such costs over such long periods of time. With the help of investor money projects can be completed faster and incentive pay can be issued more timely.
As the credit market continues to loosen its lending requirements and more loans are issued to well qualified customers, more projects will be getting off the ground. The more projects we have in the works the more educated the investors will become, and the cycle continues.