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US Commercial Solar Project Acquisitions Observe Substantial Price Variation From 2018 to 2021

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As ESG investing continues to grow, US commercial solar projects continue to be a magnet for investors. Today’s commercial solar project buyers and sellers are facing the opposite dynamics of rising power prices and higher interest rates.

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These results are from the Commercial Solar PV Project Acquisition Trends report, released today by Wood Mackenzie and Open Energy Group (OEG), a technology-driven market for project finance and sales of renewable energy assets.

This report provides insight and clarity about project transaction trends within the US commercial-solar industry. It uses OEG’s unique, proprietary data regarding final pricing and timelines of US commercial solar transactions.

Michelle Davis, principal the author of the report, stated that “prices for completed commercial-scale solar projects (at their Commercial Operation Date (COD),) have varied significantly in recent years with the median price at $2.21/watt between 2018 and 2021.” Our analysis shows a wide range of commercial solar project pricing from $1/watt up to $4/watt. This is indicative of the variability and diversity in the commercial segment.

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Michael Blomquist (co-founder and COO at OEG) said, “Over the past three years, transaction timelines for Commercial Solar Projects have lengthened with commercial Solar Transactions now taking on average eight months.”

The pandemic was a clear cause of delays. However, development timelines were slowing down before COVID-19 arrived on the market. Open Energy Marketplace has tried to speed up the process of matching projects with the best financing. Blomquist said that the pandemic is over and recent transactions have had shorter financing times even in more complex markets.

Additionally, OEG’s transaction costs and Wood Mackenzie’s solar system cost data showed that implied developer fees range from $0.20 to $0.60/watt. This reflects margins of 18-31%. Davis stated that while our research shows healthy margins in the commercial solar industry, there is a lot of variability between projects depending on project characteristics. This is because markets that offer higher incentives such as New Jersey, New York, and Massachusetts are at the top of the range.

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This report also shows that capital providers are looking to make ESG investments have never been more in demand. The industry faces several immediate challenges. Rising interest rates and higher equipment prices are both putting pressure on the margins of project buyers and sellers. However, rising power prices could provide some breathing room for projects.

“Regardless of what, the US commercial solar market activity has not slowed down.” Davis concluded that the insights contained in this report could serve as benchmarks for high-level commercial solar industry activity, which is characterized by a lack transparency and standardization.

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