The article below is an excerpt from the discussion board of our last Solar Executive MBA cohort. Student A and Student B are interested in learning more about:

  • The importance of commissioning on larger solar systems
  • The potential volatility of SRECs and how to account for changes and potential sunsets
  • Areas that it would be advantageous to engage “third-party verifications”
  • Insurance wraps

Keith Cronin and Chris Lord have deep expertise at the highest levels of solar business and are committed to being hands-on leaders for students as they work through the Solar Executive MBA. In the article below, Keith and Chris elaborate on the students’ questions and share their knowledge.

How important is commissioning on larger solar systems? It would seem that system checks including output verification would be pretty important. Is this done by the installing contractor, or is third-party commissioning utilized? Also, can you discuss the potential volatility of SRECs? Depending on the state, they can be a big part of the income stream, but how do you account for changes and potential sunsets? Thanks.

It (commissioning on larger solar systems) is very important for a few reasons:

  1. 3rd party offers objectivity that sometimes can be blurry for the installing contractor depending upon their workload or other tangible things like trying to get paid and potentially not having the budget to do things the way the plans were originally created.
  2. Obviously trust, track record, experience and a warranty on the shoulders of the EPC can also play into the decision tree.
  3. Economic accountability could also be put into place to ensure compliance and a long service life of the system.
  4. Lastly, there are insurance wraps, which most definitely would require 3rd party verification.

SRECs have been and continue to be volatile in places like NJ. It seems that NJ’s casinos have shut down recently, but the SREC market seems to have picked up the slack.

Translation: it’s risky.

But, with the continuous driving down of installed costs, access to cheap capital markets, perhaps this has displaced some of the risk.

You are right that volatility is an important issue and often a barrier to financing. For modeling and project viability, you must take conservative views, and then during the development cycle focus on locking down the best price you can get in a contract with the strongest counter party for the longest term. It is not a satisfactory answer, but unfortunately the reality. Let’s talk more about this in our Friday call.

Keith, with regard to a)”third-party verifications” (a/o independent reviewers), b) “insurance wraps”, would you please elaborate on these? I/(the class) may find it informative if you were to identify specific areas of advantage. Areas, that it would be advantageous (a/o required) to engage “third-party” “verification”. This could assist us in staying ahead of the issue curve. Thanks!


  1. Engineering firms that specifically are independent and offer verification services. They don’t work for you; i.e., employed in your office. Their function is to be providing reports on the system. Often they work with insurance entities as well. Finally, they are also requested by lenders on large projects for final sign off on payments.
  2. Insurance wraps: builders’ risk is one example. Like a taco, they wrap the whole project in the event of things like flood, fire, mother nature, vandalism, etc.

Invariably, all projects come with risks. Identifying the downside and measuring the cost to cover the risks can be negotiated to a certain extent. Deciding what you want to cover sometimes is pushed down by the finance community to manage their investments.

Overall, by having 3rd parties involved, it makes our industry stronger, as we raise the bar on standards.

Chris, in the upcoming assignments and video classes, will you be covering SPE “membership agreement(s)” and “bi-laws” in depth? I would like to gather additional knowledge there, as well?

The form of Membership Agreement should be a very simple, standard form document for the initial formation because this will typically be a single-member SPE. So, this is not a place you want to spend a lot of time or money at the early stage of a project.

At financial close – if you are entering one of the three financial structures we discuss – or at any other time that you are going to admit a new investor as a Member of the ProjectCo, the counsel to the tax equity or investor will provide a replacement Membership Agreement or offer amendments to the Agreement to pick up the new rights and processes required by the financial structure or the investor. In all cases, these documents are highly customized, negotiated and proprietary.

Interested in learning with Chris and Keith? Enroll for the next round of Solar Executive MBA Training. Class starts Monday, May 18th and there is still time to access a $500 discount!

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