Tax Equity Unicorns – New Fund Invests $150 million From A Fortune 500 To SunRun

Large tax equity announcements usually include US Bank, State Street, Goldman Sachs, or Bank of America and not a boutique advisory firm. These tax equity providers are syndicating pools of investments into the solar market. But it seems that things are changing with a new $150 million investment for a Sunrun fund by a new firm, Tax Equity Advisors (TEA). The biggest difference is that the capital is coming from an unnamed Fortune 500 corporation, making a direct investment into tax equity for solar. In other words, tax equity supply may have just gotten the early adopter, the unicorn that solar developers have been seeking for years.

SolarWakeup spoke to Jonathan Silver, the managing director for Tax Equity Advisors about the investment and what’s next for the firm. Silver told us that TEA has been working with Fortune 500 companies for over a year, an education process that meant going through many levels of understanding then approvals. Silver said, “We formed TEA to bring the opportunity of solar tax equity to corporate America. Corporations are interested in the returns solar represent but it needed to be easier for them to get the scale they need.” Corporations look at tax equity to offset their estimated liabilities, so sculpting the right investment size was a key part of the process.

The $150 million first investment is just the start. The Fortune 500 that TEA is managing the investment for is looking to deploy another $250 million, of which $150 million is already allocated. In response to why a single corporation was deploying $400 million, Silver said, “Seeing an opportunity to deploy significant tax advantaged capital at attractive returns without needing to build an investment management team was a key value proposition.” The boutique advisory group is managing the investment over the span of the partnership with the sponsor, handling the compliance for the years after the initial investment is made.

Last week’s announcement with Sunrun was for $150 million for the tax equity portion of the fund, meaning that Sunrun will be able to deploy at least a total of $300 million worth of solar projects. The projects are split between 2016 and 2017 placed in service and could continue a new trend away from the banks, that have long cornered the market for solar tax equity especially in the above $50 million bracket.

So what’s next for the firm? Silver told us that they are talking with other corporations with differing amounts of investment needs. Through managed accounts, TEA is matching the right investment with the right investor. With TEA in the market offering a new supply, solar can be hopeful that other corporations could be looking to deploy tax equity into a market that also offers positive publicity for their brand. In a tax code filled with opportunities to invest in the economy, growing the solar market is a worthy cause for corporations that meet the hurdles of the double bottom line.

By Yann Brandt, December 11th, 2016

Wall Street and Main Street Voted. Clean Energy Won.

Wall Street and Main Street Voted. Clean Energy Won.

By Jonathan Silver, Special To Solar Wakeup

US Capitol

“Wall Street and Main Street have voted. They voted for a clean energy economy. As any good investor knows, you back your winners.”

When Congress returns after Labor Day, it will pick up the debate over the clean energy provisions (like extending the production tax credit, clean energy depreciation benefits and alternative fuel tax credits) in the tax extenders package. But, as in so many areas, Washington is behind the curve.

The debate is over. Clean energy won.

What Americans want is clear. Despite the histrionics on Capitol Hill, the disdain of the fossil fuel industry and the misplaced focus by the media on the politics of the fight, clean energy is on its way to becoming the dominant form of power generation in this country.

The trend is unmistakable. According to Bloomberg New Energy Finance, wind, solar, geothermal, biofuel and hydro now generate 13% of the energy we use. Nuclear adds another 19%. Almost a third of all our domestic power now comes from carbon-free and renewable sources.

Since 2007, US coal consumption, driven largely by the lower cost of natural gas, has fallen by more than 20%. New EPA regulations, based on the social, or true, cost of carbon, will further reduce the use of coal. This, too, will increase the use of renewables.

Natural gas, is, itself, becoming more expensive relative to renewables. The cost of fracked gas is already increasing as regulatory protocols are established and infrastructure and transport costs increase. Just ask New England homeowners, where natural gas prices spiked six times higher than normal last winter.

At the same time, the cost of renewables continues to fall. Solar panel costs have fallen by more than 70% in the last 5 years and panel efficiencies are increasing. New panel composites, wind turbine designs, and battery storage chemistries are reducing manufacturing costs quickly. Installation costs are also dropping.

As costs come down and concerns around energy security increase, public support for renewable energy has grown. A recent poll by Yale University found that 87% of Americans believe Congress should make developing sources of clean energy a priority and 68% think we should regulate carbon dioxide as a pollutant. Similarly, a Gallup poll found that more than 70% of all Americans thought the US should put more emphasis on solar and wind energy production. By contrast, only 31% believe we should focus more resources on coal.

The data is even more pronounced by cohort. A League of Conservation Voters poll found that more than 80% of American youth support an aggressive climate change agenda, with its strong implications for clean energy. A National Council of La Raza poll found that 90% of Latinos favor clean energy over fossil fuel and 83% say that coal and oil are “a thing of the past”. Both groups will play a major role in energy decision-making in the future.

Consumers are speaking with their wallets. There is a 6-month backlog for the Tesla S and the Chevy Volt. With higher CAFE standards pushing manufacturers towards hybrids and EVs, today nearly every car manufacturer in the world offers some form of hybrid or electric vehicle and the US market for hybrid vehicles, the largest in the world, is doubling every 3-4 years.

Why? With no gas bills and lower maintenance, the total cost of ownership of an electric vehicle is now about 1/3 lower than the price of a traditional car. Vehicle range issues are now mostly a matter of perception. Most of the EV’s on the road today can travel more than 100 miles on a single charge, but 99% of all trips in cars are less than 70 miles and 15% are less than 1 mile.

There are also more charging stations than many realize. Recargo, a company providing data on public charging stations, covers over 20,000 locations in the US and Canada. Even Disney World has electric charging stations!

Energy conservation has also gone mainstream. Over 53 million smart meters have been deployed. Building owners increasingly use sophisticated energy management tools to cut costs. Last year, Google bought Nest, a smart home technology company, for more than $3 billion and OPower, a public company which provides consumers with energy use data has a market cap of over $700 million.

The financial markets have taken notice. In 2013, the NEX, a global index of publicly traded clean energy companies, was up almost 54% while the S&P rose 30%. Yieldcos from NRG, Pattern Energy and others have had successful IPOs. Municipal “green” bond offerings are oversubscribed and investors have put hundreds of millions of dollars into residential solar roof-top loan administrators like Renewable Funding and Renovate America.

Wall Street and Main Street have voted. They voted for a clean energy economy. As any good investor knows, you back your winners. Washington would do well to listen to the voters and continue to support this important and rapidly growing sector.

Mr. Silver is one of the country’s leading investors in the clean and renewable energy sector. Most recently, Mr. Silver served as a Senior Distinguished Fellow in Energy at Third Way, a leading think tank. He is the former Executor Director of the DOE’s Loan Programs Office and led the Obama Administration’s $40 billion dollar investment program in alternative energy, financing a wide range of solar, wind, geothermal, biofuels, fossil and nuclear energy projects. He also headed the government’s investment program in advanced automotive technology making significant investments in transmission and electric vehicle manufacturers including Ford, the Nissan Leaf and Tesla Motors.

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