Largest Solar Project in Eastern US Progresses Despite Market Uncertainty

Mega-solar projects topping 500 megawatts have cropped up in many regions of the U.S., but land constraints have mostly kept such behemoths out of the Southeast — until now.
 
Two weeks ago sPower secured tax equity financing for a 620-megawatt project it first proposed in 2018. The Utah-based developer says the Spotsylvania Solar Energy Center, which will be built in phases and finished in 2021, will be the largest solar plant east of the Rockies. It's sPower's first project in Virginia, but the developer has 1.2 gigwatts planned for the state.
 
The $350 million financing package from Wells Fargo comes just weeks after Virginia Governor Ralph Northam signed legislation requiring the state to reach 100 percent carbon-free electricity by 2045.
 
The timing of sPower's announcement comes at a difficult time for the U.S. renewables industry, as developers race to beat subsidy deadlines amid a devastating pandemic. The financing is a testament to the ongoing availability of finance for many renewables projects in spite of the tumult in global financial and energy markets.
 
Last month Engie North America announced a $1.6 billion tax equity financing for a 2-gigawatt portfolio of large-scale renewables projects. This week Vivint Solar announced $50 million of tax equity for residential solar systems.
 
The protracted permitting process for the Spotsylvania project pushed its financing into the middle of the COVID-19 crisis. To assuage potential concerns from financiers, sPower had to detail how the company would cope with any coronavirus-related disruptions, said Brian Callaway, the company’s vice president of structured finance and M&A.
 
“It created a new, and fairly significant, workflow to describe all of that,” Callaway told GTM. “That takes effort and time."
“My belief is, as long as you have good projects and as long as you have fundamentally sound development practices and a plan for build and execution and supply sourcing — I think there’s capital out there,”  he said. “It won’t be there for all projects."

 
From the start, the project faced some community opposition — not an uncommon phenomenon with solar projects in the Southeast. But having gained the necessary approvals and a boost from new clean energy legislation, sPower’s next hurdle is securing debt financing, which Callaway hopes to square away over the next month or so.
 
Concerns over tax equity availability
While the tax equity market remains open for many of the biggest U.S. renewables developers, there are signs that financing is getting tighter for others. Reports have suggested that some tax equity providers may abandon the market this year.
 
"Banks are clearly nervous," said Thomas de Swardt, senior vice president at DE Shaw Renewable Investments, on a call hosted by the Solar Energy Industries Association this week.
 
While big names such as JPMorgan and Bank of America have assured developers they still have financing to offer, other lenders are pulling back or slowing investments.
 
"The tax equity market is a market in name only; it’s a very fragmented, lumpy space," said Jessie Robbins, senior director of structured finance at Sol Systems, on the SEIA call. "Generally speaking the larger players, the banks and large syndicators are continuing to honor the commitments they’ve made."
 
sPower's Callaway believes quality projects will continue to find financing. “There’s liquidity for these projects … but you need to be able to put a picture together in excruciating detail for the banks,” he said. “It’s important to be able to describe how your supply is safe, your schedule is sacrosanct, or it can absorb x-months of [construction delay] and still be okay.”
Developers that can answer those questions, he said, will be the ones who pull through the crisis with financial backing. And with states like Virginia laying down new climate-driven clean energy policies, developers are betting renewables demand will outlast the pandemic.