6. woodmac.comTrusted intelligence
2,171
2,638
2,239
2,386 2,490
2,869
3,425
3,269
3,565
3,922
0
1,000
2,000
3,000
4,000
5,000
6,000 2015
2016
2017
2018
2019E
2020E
2021E
2022E
2023E
2024E
Capacity(MWdc)
Only the largest residential solar financiers will safe-harbor equipment
Source: Wood Mackenzie Power & Renewables
• Only residential third-party ownership
(TPO) providers are legally able to safe-
harbor equipment, and only those with
large enough balance sheets will be able
to do so.
• The total tax equity investment opportunity
in residential solar will more closely follow
the ITC step down, with demand pull-in in
2021
Residential solar annual capacity, 2015 – 2024E
30% ITC
26% ITC
22% ITC
10% ITC
7. woodmac.comTrusted intelligence
1,061
1,707
2,255
2,069
1,795
1,934 2,011 2,024 2,103
2,288
0
500
1,000
1,500
2,000
2,500
3,000
3,500 2015
2016
2017
2018
2019E
2020E
2021E
2022E
2023E
2024E
Capacity(MWdc)Safe-harboring will be minimal in commercial solar
• Long and unpredictable project
development timelines…
• …and a fragmented competitive
landscape
• Mean that the commercial segment is
more strongly influenced by state-level
policies and incentives than the ITC
phasedown
Source: Wood Mackenzie Power & Renewables
Commercial solar annual capacity, 2015 – 2024E
30% ITC
26% ITC
22% ITC
10% ITC
8. woodmac.comTrusted intelligence
Not everyone will miss the ITC
Tax equity financing still hinders opportunities in the diverse C&I solar space
Continued C&I solar system
cost declines along with simpler
financing that expands the
addressable market is likely to
outweigh the phasedown of
the ITC.
$0.53
$0.50
$0.39
$0.31 $0.13 $0.13
$-
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
H2 2018 2019E 2020E 2021E 2022E 2023E
Non-ResidentialSystemPricingin$/w
Value of ITC Remainder of C&I System Costs
Source: Wood Mackenzie Power & Renewables
13. woodmac.comTrusted intelligence
An influx of new sponsors = a seller’s market for solar projects
Source: Wood Mackenzie Power & Renewables
• For project acquisitions, 6-9 months prior
to NTP has become the “new NTP”
• As of year-end 2018, unlevered sponsor
returns for utility solar were 6-8%
Active asset owners in the U.S. utility solar market
19
54
95
110
101
114
127
145
179
45
80
84
68
82
99
113
169
41
62 57
35
45 50
68
97
0
20
40
60
80
100
120
140
160
180
200
2010 2011 2012 2013 2014 2015 2016 2017 2018
NumberofAssetOwners
Total Sponsors Active in the Market
Sponsors that Acquired or Self Developed in that Year
New Entrant Sponsors
14. woodmac.comTrusted intelligence
Commercial solar M&A transactions show competition over pureplay developers
Investments by utility affiliates Investments by infrastructure funds or institutional investors Other
2018 20192017
Centrica acquires Vista Solar
EDF buys 50% stake in
EnterSolar
PPL acquires Safari
Energy
Stonepeak Infrastructure Partners
backs Madison Energy
Investments
Duke acquires remaining ownership
stake in REC Solar
Argo Infrastructure Partners acquires Onyx-
developed C&I portfolio
Goldman Sachs invests in Engie’s
C&I solar portfolio
CarVal Investors partners with CleanCapital on
C&I Solar Fund
Clean Focus Yield
acquires Greenskies
Global Infrastructure Partners acquires NRG Energy, rebrands
as Clearway Energy
Engie acquires SoCore Energy
Constellation
acquires PFMG
National Grid acquires
Geronimo
15. woodmac.comTrusted intelligence
A new wave of equity capital may be accepting returns that
are too low to reflect the actual risk embedded in low-
priced, shorter-term PPAs
• Increasingly more PPAs realize half or more of their returns from
residual value, after the PPA term length
• Project performance data is showing gaps between expectations and
reality
Financial risks for project sponsors as the industry matures
For more see kWh Analytics’ Solar Risk Assessment 2019 and Wood Mackenzie’s Insight – Solar project
performance gaps compound financial risk
17. woodmac.comTrusted intelligence
Now that there’s more money, the industry has more work to do
Expanding the universe of bankable projects requires focus and diligence
Slice of the market intensely fought over
Investment dollars
searching for
bankable projects
Pipeline of
solar projects
searching for
investors
18. woodmac.comTrusted intelligence
• Making projects more bankable with insurance products
◦ Production risk (kWh Analytics revenue put)
◦ Customer offtaker risk (Energetic Insurance)
• New policies that make financing for distributed solar easier
◦ Hawaii’s new Green Energy Money $aver (GEM$) program
◦ Proposal for utility consolidated billing for New Jersey’s community solar program
Financing innovations that could move the needle
19. woodmac.comTrusted intelligence
Key Takeaways: Impacts of the “wall of money”
Pricing is coming down across the capital stack, with debt making up
a larger share
M&A activity is robust - development platforms have been “picked
over”
Expanding the universe of bankable projects is key as more capital
enters the space