How Commercial Real Estate Owners Deal with Solar PPA Pricing Risk

In the 10-minute video above, Darien Crimmin, VP of Energy and Sustainability for WinnDevelopment, describes how he looks at the pricing risk of signing solar PPAs from the perspective of a large property owner. WinnDevelopment has a $2.5 billion real-estate portfolio across 23 states and Darien is responsible for determining if solar is built on their properties or not.

If you’re a solar developer, you will gain a better perspective of how property owners view the risk of PPA pricing. You’ll also learn how to set a PPA price to reduce risk for property owners. Hopefully, this will help you close more deals.

A Quick Background

Two weeks ago, I hosted an event called “Going Beyond ‘It Depends’ – Trends on Commercial Solar Finance”. The Massachusetts Clean Energy Center hosted the event. We had two great speakers and about 25 solar professionals from around Massachusetts attended. We have private equity folks, developers, consultants, bankers, and EPCs.

The purpose of the event was to bring together a group of experienced solar folks to have a candid conversation about what needs to happen to close commercial deals in today’s market.

There are so many factors that go into developing commercial solar that often when someone is asked a question about the process the answer is simply, ‘it depends’. I wanted to go beyond this answer and provide the proper setting and access to experts that could answer with the nuance and specifics that it deserves.

We recorded this event and are going to share some of the best sections with you.

If you’re new to commercial solar development and need some background information on PPAs, sign up for our Free Course: Commercial Solar PPAs 101.

This article is part of a three-part series. Here are the other two articles:

1. How Wall Street Capital is Standardizing Solar Due Diligence
2. Step by Step Guide of How to Sell your Commercial Projects to Investors

How Property Owners Look at Solar PPA Risk

Here’s what he discussed:

• The risk of a fixed escalator in a commercial PPA. Why Darien strongly dislikes fixed escalators.
• How attractive a PPA price is if it’s set to a “percent discount” of the utility rates. Darien perceives this as a win for property owners, and he’ll explain why.
• The benefit of setting a low and fixed PPA price that decreases utility rate pricing volatility for the host.
• How to balance utility rate volatility and the likelihood that utility rates will decline with the need for a solar PPA pricing floor.

Additional Reading and Resources on Commercial Solar PPAs

If you want to read more about commercial PPA finance, we have a number of free resources available to you.

1. Free Course: Commercial PPAs 101
2. Free Tool: Calculating Solar Leverage
3. Archive of All Solar Finance Articles
4. Linkedin Group: Best Practices for Financing Commercial Solar Projects