As solar continues to be a growing industry, bankers and traders and everyone in the world of high finance is playing catch up.
The solar industry has been around since the 1970s, but the exponential growth in the last two to five years has created tremendous demand for financing from hungry energy developers.
As various groups work toward developing a system to judge the bankability of individual solar projects ranging in size from simple residential rooftop installations to massive utility-scale solar plants designed to replace significant coal-fired facilities, institutions have been cautiously lending to projects they vet on their own. The cost to borrow money for solar development is high because there is no industry standard. And the rate of closure is a dim 3 to 5 percent, according to information from energy finance firm Mercatus.
Groups like Mosaic in California have turned to the cloud with notable success. The company is financing solar projects with money from regular investors who can see a good return on their investment while offering relatively low-interest financing to solar developers – about 4 percent.
Mercatus announced this week that it’s attempting to revolutionize the world of solar financing.
The company is a leading energy finance provider and boasts that it serves more than 40 percent of the United States commercial and utility-scale solar market. That industry knowledge and background puts the company in a position to do what other lenders and investors have been waiting someone to do – create an industry standard and criteria to judge the bankability of solar projects by.
The company launched a system this week that will issue the equivalent of a FICO score to individual solar projects. The credit worthiness of each project will be judged by a proprietary set of eight criteria that provide a holistic assessment of each project’s economic and risk profile. The idea behind the FICO score is to expedite decision-making and make it easier for lenders and investors to judge projects. Mercatus officials said they expect the new system to result in drastically reduced borrowing costs for solar project developers.
"As Wall Street begins to eye the industry as an emerging asset class, a sophisticated solution for end to end origination and syndication management is needed to help the industry reach its full potential," Haresh Patel, CEO of Mercatus in a statement. "Our comprehensive solution slashes financing costs of energy projects by up to 50 percent and provides a bridge for more than $35 trillion of institutional investment into energy infrastructure projects."