There are rumors that California utilities have contracted for 75 percent of the 33 percent renewable generation they are required by state law to have in 2020.

Solar finance professionals gathered for a recent Agrion Global Network for Energy panel discussion did not deny the rumor.

“In general, there has been a lot procured,” noted SunEdison’s Vice President of Utility Scale Project Finance in North America Chad Sachs. “I don’t think California is going to be as high-growth an area as other parts of the U.S.”

“Our perception is that with California utilities, there is not a lot of appetite for large-scale projects,” said Areva Solar General Manager of Operations and Development Philippe Poux. “They do the minimum they have to do, sign PPAs, do little projects and see what’s going to happen.”

“I have dealt with utilities that are not rational,” said GCL Solar Energy Director and Head of Structured Finance Jimmy Chuang, describing a contract he lost because a utility passed on his slightly more expensive project in favor of one proposed by what he considered a less qualified company.

“It’s a buyer’s market now,” said 8minutenergy Vice President of Structured Finance, Kevin Butler. Utilities’ selection processes are “something of a mystery to the bidders ... [but] if they don’t contract with the least-cost product, they’re in trouble with regulators.”

Sometimes it does seem as if utility feasibility studies misunderstand solar, agreed CleanPath Ventures Chief Financial Officer Karin Berardo. Each project is different, she noted. “That’s a challenge. It’s also an opportunity.”

“If you look at what their goals are, versus their procurement, they’re very well covered,” Sachs said. “They have very aggressively, especially in California, gone after their goals.” But, he added, “if you look at what’s actually being built, I think it’s exciting. The industry is continuing to grow. Probably a little slowly in California, but in the rest of the country and certainly internationally, whether it’s South America, India, Thailand, it’s really starting to pick up.”

Losing the 1603 cash grant provision will hurt, the panelists agreed. Until it expired at the end of last year, it allowed developers to take a cash grant instead of the 30 percent investment tax credit (ITC). None of the panelists suggested it would be reinstituted.

“The cash grant made a big difference, because without it you have to find a tax equity investor you can work with and the discussion will not be fun,” said Chuang. “At GCL we have 500 megawatts under construction,” he explained. “That’s three billion or four billion dollars in tax equity finance -- that’s a lot of money. All the banks together don’t have half enough tax equity to do that with or without the cash grant,” he said. “We cover 30 or 40 banks, and we’re talking to 70 different companies.”

“As we price deals going forward, it’s going to be one more uncertainty,” said Butler, but with the rebounding economy, corporate tax equity may fill the gap.

“The sunsetting of the cash grant certainly creates some distortion in the market,” noted Berardo. “There could be a $3 billion shortfall in tax equity this year.” And, she added, “there is a very small band of institutional investors, banks and, increasingly, insurance companies, and they’re coming in as gatekeepers on quality and deciding which projects are going to win.” In a market that already has viability concerns, she said, “I’m not sure those are the people who should be making those decisions.”

Permitting and transmission remain the biggest obstacles for large-scale solar, whether it is concentrating solar power (solar thermal) or photovoltaic (PV).

“I’m not convinced it is easier for a 200-megawatt PV project than for a 200-megawatt solar thermal project,” said Poux. “I’m coming from a supposedly very bureaucratic country where the state does everything poorly and I can tell you I haven’t seen anywhere in France or anyplace other than California saying ‘We may build another line in ten years and too bad if we can’t give you a better estimate,' and at the same time, 'Please send the checks.’” And, Poux added, “BrightSource had to stop work at Ivanpah for a few desert turtles.”

“Transmission is by far the biggest bottleneck we’re dealing with,” Butler agreed. “You need to really think through not only what’s available but the least resistant path, both on transmission and permitting.” The competition for financing makes it necessary “to be a best-in-class operator to win a bid these days.”

“We always rely on our local partners,” said Berardo. “Having the right team and the right boots on the ground is critical.”

“In China, we can build a twenty-megawatt project in 60 days,” Chaung said. Here, “Solar is hard to develop but it is even harder to make money. Solar and the vineyard business are very similar: You want to make $100 million, so you spend $200 million first.”

“Investors tend to see this as an equity investment and want a 15-percent-plus return, whereas they should see this as an infrastructure investment and expect 10 percent or 11 percent,” Poux said. “There are not many investments that once the technology is working, they secure returns and revenues for a long period of time. There is a misperception about what this type of financial asset can bring.”