Solar Power Project Financing

(7/8/13)

Tim Larrison from Yingli Green Energy Americas discusses the process behind financing solar power projects.

Harnessing the sun’s energy to power our world is no easy feat; however, financing the solar industry has proven to be an even more difficult challenge. On March 25th, Tim Larrison, Head of Finance at Yingli Green Energy Americas, spoke at the Finance and Sustainability Colloquium on the mechanisms of financing solar power projects.

Larrison, who holds an MBA in Finance from the London Business School and a Masters in Regional Planning from Cornell University, has twenty years of experience in corporate and project finance in the energy, water, and telecommunication sectors. With extensive experience financing the renewable energy sector, Larrison joined Yingli Green Energy Americas in 2011.

Founded by Liansheng Miao in 1998, Yingli is a leading solar energy company and one of the world's largest vertically integrated photovoltaic manufacturers. At Yingli Larrison shifted his focus to financing the solar power industry, one which he believes has a tremendous potential for growth.

In his presentation Larrison underscored the complexities of financing projects in three distinct areas of solar power consumption – residential, non-residential, and utility. The process of evaluating the consumer’s credit quality is easiest for the residential sector, where FICO scores provide a snapshot of the bank’s risk. Given the relatively low risk in financing these projects, banks have begun to offer solar project financing to qualified homeowners at mortgage signing. The key to making solar power part of the home is securitization of solar energy. Just as the securitization of home mortgages led to a boom in the market, securitization of solar would no doubt lead to a boom in solar development.

The corporate sector, on the other hand, presents a different challenge. Unlike the residential sector, which can be assessed through individualized FICO scores, the corporate sector lacks an efficient way to standardize their contracts and credit reviews. Nevertheless, the potential payoff from the corporate sector fuels the need for “creative financials solutions,” Larrison emphasized.

As of 2012, businesses, non-profit organizations and government organizations installed over 24,000 individual solar energy facilities, representing more than 2,300 megawatts of electricity. Businesses with large rooftops and warehouse facilities are especially interested in installing solar panels to cut electricity costs. Larrison emphasized that the real financial innovation comes down to simplifying the financial process for non-residential distributed solar sector. The future of solar power shines brightly, and at the helm of this industry are innovative entrepreneurs.

Based on write ups provided by Hyungjin Choi, Mark Engstrom, Jaime Martinez, and Patrick Starr.

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