With the Fed set to raise interest rates soon and the looming expiration of the current solar investment tax credit (ITC), many are questioning what will happen next in solar, but these seemingly negative changes to the industry could actually unlock a new solar investment boom in America.
The cost of capital has long been the bellwether of solar investment. Where the numbers add up — and the cost of capital falls within acceptable risk tolerances for the deal to deliver required returns — projects have gone ahead. This has traditionally been very straightforward for large-scale projects driven by utility companies and Fortune 500 businesses — and also for residential homeowners. Their financing was possible because the transaction structures for both these segments have reliable and readily accessible public debt ratings that satisfy Wall Street’s risk mitigation and evaluation criteria.
With so may changes happening with the economy and the upcoming ITC cut it is easy to think that solar may be on the downward spiral, but on closer inspection this is not the case.