Developing a greenfield solar project from the very beginning of the process adds significant value and return to the project developer. That’s why there’s a rush to develop early stage solar projects. Greenfield development is basically the creation of a solar project where there had not previously been one. You find the property, submit an interconnection application and build the project. Easy, right?
Well, the reality of greenfield development is far more complex than most people understand, and it takes several steps before you can put shovels into the ground. First a full and comprehensive critical-issues analysis must be performed, with particular attention paid to the following:
- Selecting a state with a solid solar program and easy to navigate and predictable permitting process.
- Understanding the local government’s views regarding solar and their permitting process.
- Selecting sites and distribution lines that will have low-cost impact or minimal upgrades needed on the local grid.
- Securing inexpensive land leases for property that does not have trees, wetlands, or suitable habitat for threatened and/or endangered species.
In other words, it’s not as easy as it looks at first glance.
But you know what makes a greenfield development project easier to do? Engaging the right partner and acquiring financing early, before all the extra work starts. Adequate funding can be the difference between a project succeeding and failing. As a bonus, engaging financial partners early allows the partners to share the risks of the project, making it easier to get projects started and completed.
Take the Midwest as an example: The complaint heard most often from potential partners on deals is that they can’t find the proper financing to get the deal done, in part because the typical cost of capital is so high and the process so complicated.
Though each partner has specific needs, they are all searching for a financing partner that has these four characteristics:
- low cost of capital
- tax equity solution
- easy and flexible to work with
- a savvy experienced team that can navigate the complicated and risky world of solar project financing
Early money supports the toughest financing of any project: development capital. By working with a partner that supports interconnection costs, decommissioning bonds, pre notice to proceed (NTP) and NTP milestones payments, the project is more likely to get off the ground, leading to its eventual successful conclusion. It also allows the developer to be working on multiple projects at the same time.
The ideal customer is a developer with a growing portfolio of projects that are in the permitting and interconnection process but lacks low cost capital to get the projects to construction. Early money combined with construction financing and tax equity is a winning combination.
Though greenfield projects should be the easiest types of deals to get done, lack of financing often kills a project before it can be born. Finding a partner that can provide access to early money can alleviate much of that pain and lead to a successful project for everyone involved.
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