The answer to your dev capital dilemma? You might be standing on it.
If you’re like a lot of solar and battery storage developers, you’d probably sleep better at night if you didn’t have to constantly worry about securing development capital. It’s expensive, difficult to obtain, and you always need more of it. Even when you do find a bank or other lender to extend a dev capital loan, the accompanying interest rates – often as high as 18% – reflect their high perceived project risk.
These challenges leave many developers stuck in a vicious cycle of funding new projects with the proceeds from those they’ve already sold. This approach, while widespread, results in a razor-thin margin of error: If the sale of a project is delayed, the extended timeline for realizing revenues (which can be used as dev capital for the next project) can put a developer’s pipeline at risk.
Is there a way to break the cycle, finding a more reliable, less expensive source of dev capital to fuel the project pipeline? There is – if you know where to look.
Unlocking new capital, opportunities, and flexibility from solar and battery storage land
A growing number of developers are financing their solar and battery storage land and purchase options to generate the dev capital they need to sustain momentum across their projects – and to fund new ones. Working with financial partners who truly understand the long-term value of solar and not just the appraised value of solar land, developers are unlocking capital at a much lower rate, faster. That means if you have old sites that you acquired in order to make a project work or have a purchase option that needs to be exercised soon, this approach could unlock additional capital you could begin using immediately.
Here’s how it works. Imagine you have multiple solar or battery storage projects in play, in different phases of development – one has reached financial Notice to Proceed (interconnection agreements have been obtained, discretionary permits issued, construction financing secured, etc.) and another is pre-NTP, with funding needed for an interconnection deposit. For the project that is pre-NTP, traditional dev capital is proving difficult and expensive to secure. By working through a nontraditional channel like SolaREIT to finance the land under the project that has achieved NTP, you can secure money that can be used as dev capital for any of the earlier-stage projects in your pipeline. This can be done by:
Selling the land (if you already own it) or the purchase option,
Selling the lease (i.e.: sell an easement), or
Obtaining a solar land loan against the lease value
In each of these cases, SolaREIT values the solar lease stream, rather than the appraised value of the land, typically providing the developer with a significant spread above the original land purchase price, which they can pocket.
Compare that to traditional project financing, where you would need to wait until project completion to earn a full dev fee that can be recycled into new projects. Financing the land with SolaREIT allows you to free up additional unrestricted capital at NTP. Developers use this innovative funding approach to:
Make payments on solar panels
Acquire additional sites/buy more land
Make lease or option payments for other sites
Pay interconnection deposits
Fund engineering
The process for monetizing your lease or land is fast – most close within 30-45 days. Plus, it comes without strings attached – once developers secure the money, there are no ongoing obligations for reporting and compliance, no clawback, and no constraints on how it can be used.
How Norbut Solar Farms does it
A case in point is Norbut Solar Farms, a leading solar developer in New York. Utilizing SolaREIT-financed solar loans, Norbut Solar Farms has successfully established a steady stream of flexible funding. This financing mechanism is based on the value of the solar lease rather than the appraised land value, typically resulting in a loan amount that exceeds both the land's purchase and appraised values. This innovative approach has enabled Norbut Solar Farms to not only cover the cost of the land but also generate surplus capital for further development and construction. The streamlined process provided by SolaREIT ensures that the funds are usually available within 30-45 days, a significant improvement over traditional financing timelines.
The multiplier effect
When a single solar lease is financed through SolaREIT to generate lower-cost, no-strings dev capital, its value multiplies by allowing a developer to simultaneously advance development on several projects. And when additional post-NTP projects are financed, their cumulative impact on total megawatts can be transformative. If you’ve ever thought “it’s time to get creative” in the face of funding challenges, this is what creative looks like – using a low-risk, competitive model that delivers maximum flexibility to developers.