A new report from Mercatus finds that investor interest in commercial solar projects has more than doubled in the last 12 months. As the large-scale utility project pipeline has slowed, investors are focusing more on the residential and commercial sectors.
Good news for commercial solar projects: According to a new report by Mercatus, an enterprise-level investment analysis and decision-making platform serving as the core “operating system” for solar energy investors, investor interest in commercial solar projects has more than doubled in the last 12 months.
The Mercatus Year-End Solar Investment Analysis is based on data from over 1,400 actual solar projects from over 50 financiers and 300 developers over the last two years, estimated to cover more than 40% of the U.S. market.
This year’s report found that exploration of solar projects is skyrocketing — accompanied by investment dollars directed to those projects.
Mercatus reports growth of more than 200% in the number of projects evaluated for investors and developers from 2012 to 2013 using their platform, and over 150% in Q4 2013 over Q4 2012 alone.
“There are many factors that make an investment attractive and improve cash flows, and as incentives change, so does the focus of investors,” said Haresh Patel, CEO of Mercatus. “Investing in solar requires staying on top of local market knowledge. The key is that the market moves fast; investors need to be nimble to succeed.”
The western states continue to form the largest market for solar in the U.S., supported by these factors:
High electricity rates in California and Hawaii, which have two of the nation’s highest averages.
Strong incentive programs like the 35% Hawaii State Tax Credit and the California Solar Initiative.
Strong solar resources in states with mid-average electricity rates like Arizona and New Mexico.
Progressive local utilities offering standardized programs to promote lower-cost development and higher cash flows.
Perhaps not as expected is the rise of the northeastern states. That area experienced gains in the last three quarters and made up 41% percent of new evaluations in Q4 2013.
“The Northeast is a strong secondary market that has moved back and forth for a variety of reasons for investors,” commented Mr. Patel. “Northeast markets are driven largely by high electricity rates and strong Solar Renewable Energy Credits (SREC) programs, which allow electricity suppliers to effectively supply a portion of their electricity from solar generators even if they don’t own the generators. SREC programs, however, are volatile and highly susceptible to market forces of supply/demand.”
Other U.S. markets typically ebb and flow based on incentives offered, but none have achieved staying power yet, according to the report.
The slowing of the large-scale utility project pipeline may be good news for the residential and commercial sectors. Investors are now turning their attention to those.
Since its 2009 inception, Mercatus has assessed over 11 GW of solar projects. The company serves 40% of the U.S. commercial and utility solar markets. Subscribers to the Mercatus platform currently represent $1.2 billion in dedicated capital deployment for commercial solar investment in 2014.