One of the most significant stories in the energy transition is the move by big capital into solar, wind and energy storage. Over the last few years we’ve seen particularly keen interest in large-scale solar and wind projects, with the result that developers can no longer keep pace with the interest from the “wall of money” looking to buy solar.
Distributed, behind-the-meter solar is another story. The sector has come a long way since billionaire David Tepper’s Appaloosa Management derailed SunEdison’s acquisition of Vivint Solar three years ago, amid what may have been a shareholder rebellion over the decision to mix utility-scale and rooftop solar assets. But while rooftop solar companies continue to successfully securitize pools of rooftop solar leases and PPAs, the sector still has not seen the kind of interest that large-scale solar has, and the commercial and industrial (C&I) sector has particularly lagged.
But C&I solar is poised to get a fresh injection of capital, with Capital Dynamics announcing yesterday that it has formed a joint venture with developer Sol Systems. The Swiss asset manager attributes the move into DG solar to demand in the sector, estimating that 2/3 of Fortune 100 companies have set renewable energy targets.
Today, large commercial, municipal and educational customers are increasingly deciding from where and how they source their electricity, thereby fundamentally transforming energy infrastructure in the United States and abroad.
The new partnership, Sol Customer Solutions, aims to develop around 100 MW of solar annually for businesses, local governments and universities.
Deep pools of capital
With this move Capital Dynamics is bringing big, patient money to the C&I sector, as alluded to in a press statement.
Sol Customer Solutions is a partnership focused on providing large pools of institutional capital direct exposure to the distributed generation (DG) market, a segment that offers some of the most competitive and compelling renewable energy solutions for commercial, municipal, and educational customers.
The asset manager also notes that it has developed “deep and sustained partnerships with institutional investors globally, including some of the largest sovereign wealth and pension fund clients in the world”. This is no idle boast, as past investors in its clean energy funds include a subsidiary of the Abu Dhabi Investment Authority, and the less sexy but massive California State Teachers’ Retirement System.
From development to DG
Capital Dynamics is already something of a leader in investing in solar. The company’s Clean Energy Infrastructure team currently manages an estimated 4.7 GW of power generation across more than 100 projects, as part of $5.9 billion in assets. It is not clear what share of that is solar, but Capital Dynamics acquired 946 MWac of solar projects a year ago when it bought 8point3 Energy Partners from SunPower and First Solar.
This is also not its first association with a developer, as Capital Dynamics has funded projects which 8mintueenergy is building. But this move into distributed generation is a novel development, and may show a way to bring other big institutional investors into behind-the-meter solar.
Finally, it is a validation of its partner, Sol Systems. Capital Dynamics describes what Sol Systems has built as “a premier development platform”, and Sol Systems has financed and/or developed more than 850 MW of solar assets since its founding 11 years ago.
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