In this video, Noel Lafayette from SHR Energy discusses in step-by-step detail what a commercial solar developer needs do to sell a project to a solar fund. If you’re curious, I interviewed Noel in the beginning of 2014. The article is titled, “Advice from a $20MM Solar Investor.”

This article is the second part of a three-part series based on recordings from an event I hosted on trends in commercial solar finance at the Massachusetts Clean Energy Center in November. The first part was How Real Estate Owners Deal with Solar PPA Pricing Risk. If you’re new to solar commercial PPAs and need to learn the lingo to get the most out of this video, sign up for our Free Course: Commercial PPAs 101 before watching this video and reading the article.

What’s the Process for a Developer to Sell a Deal to a Solar Fund?


In this section, Noel discusses what you need to know about a commercial project before approaching a solar fund, how to approach a fund, and the pros and cons of dealing with Wall Street capital.

Here are the key components that you must have before approaching a solar fund:

  1. Site control
  2. PPA documents or an operating lease, depending on the deal you’re signing
  3. Three years of audited financials or a credit rating
  4. An EPC contract if you’re an EPC

In the video, Noel provides a examples of numbers and the type of information you need to present to get the interest of a solar fund. He also walks through a step-by-step process. The process is outlined below. Be sure to watch the video to get the finer points he makes about each step.

Step 1. Making Initial Contact

When you first call the fund, you need to have your ‘back of the napkin’ numbers ready. Here’s an example of the characteristics of a deal that Noel laid out that would interest most funds.

  • 400 kW DC system
  • Sold the power company for 8.75 at 2% for a 20-year deal with a 25-year option
  • All-in build price is $2.10/watt
  • Insurance is $0.025/watt
  • O+M is 1.5 cents with an inverter reserve at 7 years
  • Post-tax IRR is 8.75%
  • The host has crystal clear credit with three years of audited financials.

Step 2. Fund Reply

The fund will come back and say something like, “I can give you $0.20/watt free and clear on top of $2.17/watt.”

Step 3. Your Response and LOI

You will say yes or no to the proposed deal terms. If you say yes, they’ll send you an LOI with that number on it.

Step 4. Exclusive Due Diligence Process

When you sign it, you’ll go into an exclusive 30-day due diligence process; that means the project comes off the market for that period. During that time, the fund will send you their due diligence checklist and you’ll need to provide them with all of the necessary information.

Step 5. Getting Due Diligence Documents 

Noel said that it’s absolutely critical that you see the due diligence list BEFORE you sign the LOI and agree on a price per watt. You’ll need to double check all of the items because there might be items listed that don’t make any sense. This is because of how new many of the funds are. Here’s a few items Noel has seen:

  • Back-up power required for monitoring
  • A separate weather station built at the site
  • The investors wanting to meet the host

Lastly, Noel talks about why the due diligence process can be a double-edged sword for commercial solar projects. He mentioned that it’s often the case that the funds with the most stringent due diligence process will also close the fastest and for the highest price.

Further 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 Mid-Market Commercial Solar Projects.