Last week U.S. Bancorp and SunRun created a new, $150 million tax-equity fund to support Sunrun’s third-party ownership (TPO) options. Under the options homeowners in SunRun’s services areas can get a solar photovoltaic system for their home with no up-front costs.
While SunRun and other TPO companies have have worked with companies to create such funds in the past, this is likely the largest such fund announced since the expiration of the 1603 Treasury Grant Program, which allowed project developers access to the Investment Tax Credit (ITC) when projects were completed rather than over a series of years.
Still, the loss of the program isn’t likely to dramatically impact such future investments, according to US Bank’s Director of Renewable Energy Investments Darren Van't Hof. “The loss of the 1603 renewable grant program has had a minimal impact on our investing. I expect the biggest impact will be felt by smaller-scale developers, who will be under strain to partner with aggregators who have greater access to capital,” he said.
It helps that US Bank has a history of such investments over the years, renewable energy is just the latest addition. “We've served as an active tax credit investor for nearly 20 years,” Hof said. “While we've only been active in the renewable energy space for the last three years or so, we've been successful because we've been able to leverage our expertise in other areas of tax credit investing, underwriting and asset management. Since 2008, we've committed more than $700 million of tax equity in support of renewable energy projects and have made solar energy available to over 20,000 homeowners across the nation–and growing.”
It’s also helpful that the funds that U.S. Bank has developed with solar TPO companies are performing well. “Sunrun has a proven track record of residential solar development and funds are performing as expected or better,” Hof said.
Eventually a company like SunRun may be able to create a replenishing fund, but for now, the tax-equity funds are most likely to remain a key ingredient for such TPO arrangements, which include power-purchase agreements and solar leases. “Each investment fund has compliance attributes which makes it cleaner to close it off and start anew,” Hof said.
U.S. Bank will likely continue to invest in such funds, according to Hof. “Although we invest in a variety of solar projects from large utility-scale installations to distributed commercial systems—and have also financed several wind developments—an important part of our business has been creating residential solar funds with partners like Sunrun. This will continue to be the case this year,” he said.
picture courtesy of SunRun