Sustainable Capital Finance, based in San Jose, offers financing options for owners and developers looking to incorporate solar and other alternative energy sources into their residential or commercial properties. CEO Shiraz Madan has a background in both banking and technology. In an interview with Connect CRE, he discusses the complexities of integrating these technologies with existing real estate and the challenges of financing 100% of installations.
Q: Why are there fewer financing options available for commercial solar compared to residential?
A: There are several factors contributing to this issue:
1) The recent enactment of Net-Energy-Metering 3.0 has reduced the value of surplus solar energy sent back to the grid by aligning it with wholesale rates instead of retail rates.
2) The cost of capital for investors has increased over the past few years, making it more difficult for businesses at all levels.
3) The credit quality among potential commercial-scale counterparts has worsened due to economic stress following the pandemic.
These factors have made it harder for commercial projects to be economically viable compared to residential ones.
Q: What are some key differences between installing solar on a large scale versus on individual homes? Do clients typically opt for Power Purchase Agreements (PPAs)?
A: Residential solar is relatively uniform in terms design, diligence process, permitting requirements from one jurisdictionto another,and agreement negotiation processes.However,solar projects vary greatly when installed on larger scales – such as rooftops vs parking structures – which can create unique challenges during permittingand negotiations.Additionally,the credit analysis requiredforcommercialprojectsismore complex than thatofresidentialones.This complexity often leads clients towards PPAs rather than paying cash upfront because they offer more flexibilityin terms offinancingandnegotiationswithourcustomers.These nuances make our SCF Suite software invaluable asit streamlines pricing,drafting proposals,and managing documents necessaryfor successful project completion.
Q: Can you explain how your company’s SCF Suite works and how it helps clients customize solutions for their specific needs?
A: The SCF Suite is a cloud-based software application designed to streamline the Commercial Solar PPA process. Users can price projects in real-time, create multiple iterations, submit them for financing, and generate proposals and deal documents. It also provides a virtual data room that centralizes all necessary project documents. This tool has become an essential resource for our partners.
Q: How has the commercial solar industry evolved in recent years? What role do you see California playing as a pioneer in this industry?
A: The adoption of solar by organizations across the country – led by California – has grown significantly over the past few years despite some challenges along the way. The introduction of energy storage to combat lower valued energy credits and EV charging stations as revenue generators have helped propel this growth even further. I believe we will continue to see California leading with these technologies, followed closely by other states.
Q: With electric vehicle sales outpacing available charging stations, have you seen an increased focus on providing EV infrastructure?
A: Absolutely! There is still a significant gap between EV sales and fast-charging installations currently available.We’ve noticeda surgein demand from commercial real estate owners who wantto incorporate solar + energy storage +EV chargers into their properties.Our solution allows these customers toparticipatein arevenue sharefromthechargerswhilepayingnothingoutofpocket.
Q: Which types of businesses stand to benefit most from your company’s solutions? Has it been challengingforthesebusinessesaccessaffordablerenewableenergyinthepast?
A:The retail sector (including quick-serve restaurants), office buildings,gymnasiums,andcountry/golfclubsareamongthosewhowouldbenefitthemostfromadoptingsolar+energystorage+EVcharging.Theirlocation,durationofparkedvehicles,andhigh-energyratesmakethemidealcandidatesforthesetechnologies. In the past, it may have been challenging for these businesses to access affordable renewable energy due to high upfront costs and complex financing options. Our solutions make it easier for them to incorporate sustainable energy sources into their operations without significant financial burden.
