5 Observations on the Commercial Solar Market

The growth story in solar continues to be an exciting one.
Earlier this year, SEIA announced that the U.S. had reached a

milestone of 2 million solar systems
just three years after
reaching the 1 million mark.

While the story is interesting for solar of all sizes, we find
it to be most exciting in the commercial sector. With autumn
conference season in high gear, the team at Madison Energy
Investments took time to reflect on what we are seeing in the
commercial solar market.

Commercial solar will never standardize: But it
can and should be mimicked with a local flavor. The very nature of
commercial negotiations makes standardization in any business
difficult. Once a business or organization reaches a certain size,
they naturally produce their own procurement guidelines — some
are even legally binding in the case of government entities.
Therefore, attempting to create a lowest common denominator
contract across these subjective, nuanced procurement boundaries,
and one that also financeable, is basically impossible. The latest
version of the SEIA PPA is a good start and is a helpful baseline
for negotiations. Knowledge sharing and best practices across
states is becoming more commonplace.

‘Baskin Robins’ capital: Whether or not
there are 31 different, credible investors in the commercial solar
market can be debated. Less debatable is the different flavors of
capital in the market. We are beginning to see investors mature and
better understand what they want. Certain investors are good fits
for certain types of projects depending on term, offtaker,
structure, state market and incentives.

Developers have their pick: Given the abundance
of capital in the market, developers ostensibly have their pick
when it comes to saddling up to a long-term capital partner. With
the supply and demand imbalance in favor of developers, investors
are being forced to put real value in developer pipelines, which in
some cases are no more than glorified spreadsheets. These
partnerships can be structured in a variety of ways ranging from an
all-out acquisition to a joint venture. Some recent examples
include Sol Systems with Capital Dynamics, Nautilus and Power
Energy Corporation, New Energy Equity and SmartPitch Ventures,
Safari Energy and PPL and Geronimo and National Grid. Experience
shows that developers should make sure they have a history working
with the partner prior to finalizing an agreement. Partnerships can
be expensive — both in real costs and lost opportunities —
and many of these (new) investors are accustomed to investing in
large power plants or utility scale projects and don’t have the
velocity required to succeed in the ever-evolving C&I

White dudes in suits are still everywhere: Yes,
we recognize that the three managing partners at MEI are all white
dudes (sometimes in suits). As the team grows, we are looking to
prioritize diversity and have SEIA to thanks for their Diversity,
Equity and Inclusion initiative and best practices guide. The Solar
Foundation also deserves credit for their National Solar Jobs
Census and for highlighting the need for greater diversity in
solar. While many of the best-known leaders in the industry are
women – Lynn Jurich of Sunrun, Abby Hopper with SEIA and Nancy
Pfund of DBL Investors to name a few – the numbers don’t lie.
Hopefully the industry will begin to prioritize diversity during
the hiring process with the help of SEIA, the Solar Foundation and

Retail and renewables get closer (but remain far
: The largest driver in how commercial customers
purchase electricity is whether the customer is in a regulated or
deregulated market, and more than half of the U.S. population now
resides in deregulated markets. Solar developers struggle to
understand retail energy markets; on the flip side, retail energy
providers remain myopic and focused on the short-term easy buck
found via brown power contracts. Meanwhile the most important
player in the market, the customer, wants solar that is easily
integrated into their normal energy procurement.


Richard Walsh is managing partner at Madison Energy Investments,
a platform that develops, owns and operates distributed generation
projects within the commercial and industrial and small
utility-scale sectors.

Source: FS – GreenTech Media
5 Observations on the Commercial Solar Market