Manhattan-based Energy Services Company Will Hit Reset on Stressed Solar Investments
NEW YORK, NY (October 21, 2013) — GP Renewables & Trading (www.gprenew.com), a multifaceted energy services company, today announced its plan to acquire up to $15 million in operating commercial solar photovoltaic projects from system owners who took advantage of the 1603 Payments for Specified Energy Property in Lieu of Tax Credits before its expiration at the end of 2011. Its focus is projects in New Jersey and Maryland where the owners are struggling to recoup their investment.
“There are thousands of system owners in New Jersey and Maryland who have been negatively impacted by sharp SREC price declines and are now caught up managing complex activities to maintain the value of their investment,” said Gabriel Phillips, CEO of GP Renewables & Trading. “GP Renewables will purchase these commercial-scale solar projects, specifically in New Jersey and Maryland.”
An incentives system, the Solar Renewable Energy Credit (SREC) program, helped encouraged thousands of solar installations in New Jersey and Maryland. Now, both states are experiencing a slowdown in SREC-related projects, and existing system owners are finding themselves below earlier levels of profitability.
At the time they were introduced, the high value of SRECs was driven by aggressive state and local policy measures and penalty prices intended to spur solar development. In its earlier days, the program caused what many now refer to as the “solar gold rush.”
“Faulty assumptions led many installers and investors to ignore the need for hedging their investments with SREC futures contracts,” added Phillips. “Projects were built predicated on 3 – 4 year payoffs, but the new reality is a 10 – 15 year period.”
GP Renewables & Trading will acquire the investors’ equipment and sell the power back to the investor at a discounted rate through a Power Purchase Agreement. This allows current owners to recover an upfront payment on their solar investments along with locking in a discounted power price into the 10 to 20 year horizon.
The purchase plan, however, constitutes a limited window for system owners. The federal 50% bonus depreciation for renewables under the “Modified Accelerated Cost Recovery System” in the Internal Revenue code is set to expire at the end of the year, at which point the value of purchasing a solar installation is likely to drop. At that point, according to Phillips, GP Renewables & Trading may not be able to offer as favorable prices to system owners.