Technical FAQs 4

How does solar project financing work?

Solar projects leverage project finance, using cashflows to repay loans and distribute risks, making renewable energy developments more feasible. Over the past few decades, the landscape of renewable energy project financing has evolved significantly.

What is a solar project?

Given the breadth of the current renewable energy landscape, this primer focuses on a hypothetical solar generation facility (“Solar Project”) as the primary case study with discussions of other renewable energy projects (wind power and biofuel projects in particular) as appropriate.

Can a solar project be financed without a long-term PPA?

While the wind power market has matured significantly in the past five years, leading to the successful project financing of “merchant” projects in the absence of long-term PPAs, Solar Projects are generally not yet able to be project financed in such a manner.

Can a developer buy a solar energy project?

Typically, an entity (‘Owner”) would acquire a solar energy project from a developer at fair market value. The project would include not only the tangible solar assets but also the contract rights to sell the energy to the off-taker or homeowner (or lease the solar equipment to the off-taker/homeowner).

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