A US start-up called SCS Renewables is aiming to improve solar project financing rates with a new brokerage platform for the sector. What can it do for CSP, though?
By Jason Deign
Listen to Tim Keating on solar project financing rates and you would think getting funds is a game of pin the tail on the donkey. “It has been estimated that 90% of solar projects fail due to finance and evaluation issues,” he says.
Furthermore he estimates only about 5% of banks are willing to put money into solar projects because they still regarding them as a new concept… and hence a risky investment. But now he is hoping to change the odds.
In April Keating left his job as vice president of marketing and field operations at the leading concentrated PV company Skyline Solar to join SCS Renewables, “a young company with a new product just coming out of stealth mode.”
The product is essentially a matchmaking service for solar projects and financiers. “Think of it as a Match.com or LendingTree for solar projects,” Keating says. “This makes it easier to find money, rating each matchee so you get good matches.”
At the heart of the concept is a scoring system that makes it easier for potential backers to see whether a project meets all the main criteria for investment, and highlights to developers any areas where they still need to do some work in order to secure cash.
The scoring system has been devised using current criteria for successful investments which many inside the industry are unaware of, says Keating. “A few people have figured it out and a lot of developers and investors only have parts of the puzzle,” he notes.
Developers, who can access the SCS Renewables platform for free, have to go through the scoring process when they enter the details of their projects. They can either elect to deal with any shortcomings themselves, or enlist SCS Renewables advisers to help.
As part of the service, adds chief executive Haresh Patel, a former vice president of the thin-film PV maker HelioVolt: “We also provide a one-page executive summary, which can take three to six weeks out of the process of finding funds.”
SCS Renewables claims to have signed up USD$2 billion from current finance partners, as well as around 300MW of solar projects.
Given the background and experience of the founders, the company’s primary focus is initially on start-up projects in the US, although the management team has its sights set on the international market and on developing its platform to cater for secondary sales as well.
Patel also sees SCS Renewables in time moving beyond just solar projects and into other renewable energy sectors. “We have a very strong team behind the platform, with solar and wind and legal experience,” he says.
For now, though, there is no doubt that any instrument that can improve solar project financing rates will be welcome, and perhaps nowhere more so than in the US CSP market, where appetite for new projects appears to have fallen off a cliff this year.
However, while a platform like that being provided by SCS Renewables will be handy for small-scale PV developers, it remains to be seen whether a tick-box exercise can win over backers in CSP, where projects tend to much larger and (from an investor’s point of view, at least) riskier.
“It seems they are primarily targeting smaller-scale applications; PV, basically,” states Andrew Stiel, a solar analyst with Bloomberg New Energy Finance.
“With solar thermal projects you are talking about a less mature technology, huge areas of land, large-scale construction and potentially higher environmental risk.
“For these reasons you are more likely to have a project-specific due diligence process than a standardised approach like you can with PV.”
That does not necessarily mean the matchmaking platform is irrelevant to all CSP projects, of course. Companies such as Sopogy and Aora have demonstrated that CSP can function on a scale familiar to PV investors.
Keating believes the main area where a matchmaking platform can benefit CSP developers is by helping to reduce the fear factor associated with investing in solar thermal. “In the CSP space there is a mix of technology risk and project risk,” he says.
“We can help to mitigate the risk.”
Some of the methods SCS Renewables might employ could include, for example, adopting a technology portfolio approach, so riskier bets such as CSP are balanced with safer investments such as PV within a single project.
But for larger projects, it is still probably the case that the service will only deliver limited benefits in CSP.
For its flagship developments the industry will therefore have to continue to rely on the deep connections between big industrial concerns and big banking concerns in order to bring plans to fruition.
And the best way to ensure a wider range of investors is comfortable with backing CSP will be to continue to deliver more and more operational plants. It could be a lengthy process.
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