Solar ABS: Understanding Market Potential

Abstract

This article is a summary of the comments made by seven members of a panel titled “Solar ABS: Understanding Market Potential,” held on Tuesday, February 10 at the ABS Vegas 2015 conference. The panel was organized to present varying industry-expert perspectives from solar development firms, securities issuers, investors, attorneys, accountants, and rating agencies on their outlook for a more vibrant and robust securitization market in solar asset-backed securities (ABS). The year 2014 was a banner year with substantial installed capacity growth and the second securitized debt issuance from SolarCity. Electricity-generating solar assets are becoming competitive to mainstream energy generation and attracting interest from institutional investors as an investible asset class. Solar panel prices and soft costs are widely expected to continue to decrease, as firms advance in raw material sourcing and gain better controls over their supply chains and as engineering efficiencies continue to improve. The solar industry now has the benefit of analyzing and observing project portfolios with six to seven years of consistent performance data. The rating agencies continue their work in developing the appropriate rating methodologies and stress-case scenarios for solar securities. The risks can be broadly divided into two categories: technical performance of the solar generation assets and default and renegotiation of contracts with off-takers. Although much attention has been paid to residential solar systems, solar developers have also been penetrating the commercial and industrial market at a remarkable rate.