Page 23 - North American Clean Energy March April 2018 Issue

in system sizes and costs 60-80 percent of the current market's. is means that solar project developers should position themselves for smaller projects, as those will better serve the needs of the new market equilibrium between nance and customer demand. is will be
the best opportunity for growth, as the in ows and out ows of new and old tax equity investors create price discovery opportunities in the market.
Projects with tax credits will be the most attractive investments for offsetting tax liabilities. Tax bene ts of depreciation and tax credits are fundamentally di erent in how they translate to tax bene ts. Noting the di erences and the subsequent tax reform changes, tax credits will be even more valuable for corporations due to the decrease in corporate tax rate. is means that, dollar for dollar, solar will provide better value for investors than other comparably priced infrastructure projects under the new tax plan.
Fair Market Value will increase in
all revenue-generating assets. Broad decline in corporate tax rates is a boon to revenue. ird-party owned solar, which is the most popular vehicle for nancing solar projects, are long-term revenue generating assets that will appreciate in after-tax value. Passively generated income and long-term energy contracts will appreciate signi cantly in fair market value, by 14 percent or more.
Solar prices will continue to decline 10-15 percent per year, citing improving manufacturing technology and efficiency improvements. While
a 15 percent-per-year cost decrease
is more heavily cited in the industry
and indicative of the past decade of solar PV technological development, silicon solar wafer cells are closing in
on the theoretical maximum (Shockley- Queisser limit) for a single junction solar cell. Signi cant cost-e ciency gains of solar cells are still expected to increase year-over-year until reaching 29 percent, but only at a rate of 10 percent.
Solar profit margins will increase 25 percent year-over-year, citing combination of cost decline and revenue increase. is is an important macroeconomic boost and reminder for solar businesses given the shock and scare of the recent tari and tax reforms. Two major macro-economic trends are positive for the solar industry, technology and revenue. Both contribute
to lower costs, greater performance and higher after tax revenue that will help steer the industry for at least another decade. If you are in solar, now is not the time to jump ship.
Total solar capacity deployed will experience short-term downward pressure.
It’s not without doubt that the tax reforms and tari s present headwinds for the industry. Business relationships will re-shu e as they always do until the right o er meets the right price. Other factors such as higher operating margins and increased competition will o set, and might even overcome forecasted downturn.
Matt Ji is a Financial Analyst and Asset Manager for O3 Energy. He evaluates the company’s project pipeline for economic feasibility, and performs due diligence. He assists O3 Energy clients and partners with any nancial and technical inquiries. He has extensive research experience in meteorology and arti cial neural networks and holds a Master’s degree in Renewable Energy Management from the University of Freiburg (Albert-Ludwigs Universitaet Freiburg). He also holds a Bachelor’s degree in Petroleum Engineering from the Colorado School of Mines with minors in Economics and Public Policy, and is a registered Engineer-in-Training in the State of Colorado. Mr. Ji is a member of O3’s editorial team for articles relating to solar industry nance, trends, and predictions.
O|3 Energy | o3energy.com
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