The growth story in solar continues to be an exciting one. Earlier this year, the Solar Energy Industries Association (SEIA) announced that the U.S. had reached a milestone of 2 million solar systems installed, just three years after reaching the 1-million mark.

While the story is interesting for solar of all sizes, we find it to be most exciting in the commercial sector. With autumn conference season in high gear, the team at Madison Energy Investments took time to reflect on what we are seeing in the commercial solar market.

Commercial solar will never standardize: But it can and should be mimicked with a local flavor. The very nature of commercial negotiations makes standardization in any business difficult. Once a business or organization reaches a certain size, they naturally produce their own procurement guidelines — some are even legally binding in the case of government entities. As such, attempting to create a lowest-common-denominator contract across these subjective, nuanced procurement boundaries, and one that also financeable, is basically impossible. The latest version of the SEIA power-purchase agreement is a good start and a helpful baseline for negotiations. Knowledge-sharing and the dissemination of best practices across states is becoming more commonplace.

"Baskin-Robbins" capital: Whether or not there are 31 different, credible investors in the commercial solar market can be debated. Less debatable is the different flavors of capital in the market. We are beginning to see investors mature and come to better understand what they want. Certain investors are good fits for certain types of projects depending on term, offtaker, structure, state market and incentives.

Developers have their pick: Given the abundance of capital in the market, developers ostensibly have their pick when it comes to saddling up to a long-term capital partner. With the supply-and-demand imbalance in favor of developers, investors are being forced to put real value in developer pipelines, which in some cases are no more than glorified spreadsheets. These partnerships can be structured in a variety of ways, ranging from an all-out acquisition to a joint venture. Some recent examples include Sol Systems with Capital Dynamics, Nautilus and Power Energy Corporation, New Energy Equity and SmartPitch Ventures, Safari Energy and PPL, and Geronimo and National Grid. Experience shows that developers should make sure they have a history working with the partner prior to finalizing an agreement. Partnerships can be expensive — both in real costs and lost opportunities — and many of these (new) investors are accustomed to investing in large power plants or utility-scale projects and don’t have the velocity required to succeed in the ever-evolving C&I market.

White dudes in suits are still everywhere: Yes, we recognize that the three managing partners at MEI are all white dudes (sometimes in suits). As the team grows, we are looking to prioritize diversity and have SEIA to thanks for its Diversity, Equity and Inclusion initiative and best-practices guide. The Solar Foundation also deserves credit for its National Solar Jobs Census and for highlighting the need for greater diversity in solar. While many of the best-known leaders in the industry are women — Lynn Jurich of Sunrun, Abby Ross Hopper with SEIA and Nancy Pfund of DBL Investors to name a few — the numbers don’t lie. Hopefully, the industry will begin to prioritize diversity during the hiring process with the help of SEIA, the Solar Foundation and others.

Retail and renewables get closer (but remain far apart): The largest driver in how commercial customers purchase electricity is whether the customer is in a regulated or deregulated market, and more than half of the U.S. population now resides in deregulated markets. Solar developers struggle to understand retail energy markets; on the other hand, retail energy providers remain myopic and focused on the short-term easy buck found via brown-power contracts. Meanwhile the most important player in the market, the customer, wants solar that is easily integrated into their normal energy procurement.


Richard Walsh is managing partner at Madison Energy Investments, a platform that develops, owns and operates distributed generation projects within the commercial and industrial and small utility-scale sectors.