BAKU, Azerbaijan, Oct.16
By Leman Zeynalova – Trend:
The solar industry will require $7 billion to $8 billion of tax capacity from external investors in 2020, Trend reports citing Wood Mackenzie.
“But the competition to secure that investment is tighter than ever. Tax equity for solar projects has gotten a lot of attention this year. When the coronavirus pandemic first hit, there was widespread concern that an economic downturn would result in less tax equity available for solar projects. The biggest investors in the space, such as JPMorgan, Bank of America, or USBank, would have less tax liability to dedicate to solar investments.
“But the full story is more nuanced. Less tax equity available for projects is certainly a concern. But heightened competition for tax equity and a growing solar industry are the more critical drivers. As the end of 2020 has approached, solar developers are reporting that less available tax equity from major investors is slowing down deals. Of course, the total tax liabilities of the major solar tax equity investors dwarf the $7-8 billion required by all the solar projects coming online this year. But these investors typically allocate a certain amount of tax equity to any given investment. And under the current economic climate of 2020, that allocation is experiencing more pressure than ever.
“Utility solar is forecast to grow by 66 percent this year compared to 2019. Investors are reporting that more deals are coming across their desks than ever before. In our conversations, one even characterized it as like “drinking from a firehose.” Despite the rush today, solar tax equity will become less important for solar project financing starting in 2022. The economic climate this year has also limited the number of new investors entering the market, with Franklin Park the only new investor this year, according to kWh Analytics’ Lendscape tool. If it weren’t for the pandemic, more investors might have entered the market, following the trend of the last several years,” said Wood Mackenzie.
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