Interview: Financial Models and Sample Documents for Commercial Solar Projects

I recently spoke with Chris Lord and Keith Cronin about some of the financial modeling tools and sample  documents that they frequently use to teach solar professionals working on commercial projects. Chris and Keith, who co-teach our Solar Executive MBA course, first talked about the financial modeling tools, how they came to use them, and how they can be applied to different contexts. They then spoke about the importance of having the knowledge and ability to confidently navigate the often complicated process of price agreements, developing legal contracts, and permitting. You can listen to the entire interview below. For an overview, read the summary of the questions and answers below.

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Q – Where do the models come from?

Developed over several years in the business by Chris and Keith. Both have used them in everyday work and projects. Most financial modeling tools they utilize are consistent in use across much of the industry around the world.

Q – What sorts of situation and contexts can they be applied to? Are there examples of cases where these have been used around the world?

They actually use these models on all sorts of projects in most states. While the regulations and conditions vary state by state and by geographic location, these models are consistent enough to be used on every type of project, yet flexible enough to be able to adapt for individual cases.

Q – What assumptions do the financial models take into consideration?

Before using Excel models, working through a “development plan” helps people remove the assumptions from their project, so the by the time the Excel models are applied, most assumptions and risks are minimized. The method of “cross talent modeling” allows people to see projects from all points of view, from the developer to private equity to provide a comprehensive view.

Q – How do the financial models help with determining and managing risk?

From the investment side, the models allow the sensitivity of the models to changes to be tested. You can use the models and the development plan to test each assumption and reduce the risk factor.

Q – How did you come to use these (how did you determine which documents to use)?

Come from multiple places – past deals that they could share the blank documents from, available public places. Although specific paperwork varies by municipality, working through these documents provides a framework to work through your own project. They gave the example of working through the sample PPA and although the requirements for a PPA are different in Hawaii and Washington, DC, they allow people to learn a framework for determining if a PPA is financeable or not.

Q – Have you seen cases where not having exposure to these documents has held back or even harmed a project?

As consultants, both Chris and Keith have seen many examples of projects in need of work regarding mistakes or miscalculations on documents and models. Chris gave example of a recent project that he was asked to help with that had been set back almost six weeks because

Q – To what extent, in your experience, are these documents different on a state by state or a country basis?

The EPC contract is not as location-sensitive as Site Lease or PPA. The PPA and Site Lease tend to be much more specific and different per municipality. Not all states or utility districts permit PPAs. For example, in California PPAs are permitted, but some utilities, such as LADWP, do not allow PPAs in their service territory.

If you would like to learn more about solar financing and PPAs, you can download these free tools:

• Guide to Mastering Commercial Solar Finance
• “Solar Success Principles” Chapter 10
• Solar Land Analysis Tool

These related free courses may also be of interest:

• Commercial Solar PPAs 101
• Free Lecture: Commercial Solar Design And 2014 NEC Code Changes

For the most in-depth learning, you can enroll in the Solar Executive MBA, taught by Chris and Keith.