M&A for commercial solar, comprised of commercial and industrial (C&I) and community solar (CS), has been veryrobust over the past few years. Some of the biggest deals have included Brookfield Renewables (AltaGas), Goldman Sachs (SunPower, Clean Focus Yield, South Jersey Industries), Argo Infrastructure (CarVal, Onyx) and CleanCapital (BR Group Holdings). More recent platform deals have included ECP (Pivot), Blackrock (DSD + Borrego portfolio add-on) and Partners Group(Dimension Renewables).
In order to value these portfolios or platforms, it is necessary to have an opinion on power prices in the post-PPA period, as well as SREC and REC prices. Power Advisory is a leading expert in both of these areas. We have worked on many of the largest C&I/CS deals, both on the buy side and sell side. We have also worked for lenders and for asset valuation purposes.
Power Advisory has forecasted over 100 different tariff rates and community solar rates across 50 utilities in 23 states (see Figure 1 and Table 1). Such forecasts range from 20-40 years in length.
According to data from the Solar Energy Industries Association (SEIA), in 2021, about 2.2 GW of C&I/CS was installed in the US. The top 5 leading C&I states were California, New Jersey, Illinois, New York and Rhode Island(accounting for 68% of the C&I market), while the largest CS states were New York, Massachusetts, Illinois, Maine and Minnesota (accounting for 88% of the CS market). C&I accounted for about 58% of the total capacity mix, while CS accounted for the remaining 42%. Taking the market without California, the ratio would have been reversed: 55% CS vs. 45% C&I. That’s because the California market was slanted overwhelmingly in favor or C&I: 500MW C&I and 0 MW CS. Looking at just the CS market, the top two states (New York and Massachusetts) accounted for a combined 68% (530 MW). The other 32% (295MW) of the market is spread across 11 other CS states.
The 23 states that Power Advisory has covered represented 93% of the C&I/CS installed by megawatts in 2021.
While PPAs with corporates are likely to be re-contracted at the retail price level minus an incentive discount, CS projects are a bit less predictable. At a minimum, they could sell into the wholesale markets, but there is also a chance that the credits get extended at the retail rate (or at least something above the wholesale rate).
Power Advisory has forecast SREC and REC prices for all markets across the US (see Figure 2). There are currently 9 SREC markets: Massachusetts SREC 1 & 2, New Jersey, Delaware, Maryland, Washington DC, Pennsylvania, Ohio and Illinois. The primary REC markets include compliance markets ISO-New England Class 1, PJM Tier 1, and California, as well as the voluntary Green-e markets. The Green-e markets include both the Green-e National as well as regional markets (Green-e MISO, Green-e Pacific Northwest, and Green-e WECC).
Some previous client notes on SRECs and RECs include Regulatory change raises expected Maryland SREC prices modestly and RECs and SRECs Still Playing an Important Role in East Coast Renewable Energy Project Economics.
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