Developing Bankable Solar + Storage Projects
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To fund solar and energy storage projects, developers must first clear a lender’s bankability hurdle. In this context, bankability is closely tied to investor confidence and the perceived risk associated with project returns. A key phase in this process is due diligence conducted by an independent engineer (IE), which acts as a critical gatekeeper—potentially determining whether a project moves forward or gets rejected. Projects that go into lender reviews before their designs are fully refined often face harsh scrutiny and may fail to secure financing.
Engaging an owner’s engineer (OE) early in the development process is the best way to avoid costly delays, rework, and potentially fatal IE findings. Think of it like preparing for a legal case: a skilled lawyer wouldn’t step into court without first running through a mock trial. Similarly, a smart developer shouldn’t expose their design to lender review without first having an OE conduct a thorough pre-assessment.
In this article, I’ll explore the most common reasons why project designs fall short during bankability assessments and highlight how early OE involvement can add real value.
**Technology Selection and Qualification**
Solar assets have lifespans measured in decades, making product quality and reliability crucial for investors. Developers must back their claims about performance and durability with solid data. It's not just about cost per watt—it's about long-term value.
**Look beyond first costs**
While initial costs matter, cutting corners on quality can lead to long-term losses. For example, a lower upfront price might seem attractive, but if the technology fails, it could reduce energy output for 30+ years. Lenders need to be confident that the chosen technologies will hold up over time. Be cautious of manufacturers offering outdated tech at discounted prices—they may be in decline.
**Prove it or lose it**
During an IE review, vague claims won’t cut it. Even if a new technology promises impressive gains, lenders require concrete data to support those claims. Without proven performance metrics, the project won’t get funded. Trust is important, but verification is essential.
**Performance Model Review and Validation**
In my experience, the performance model is often the root cause of issues during IE reviews. These problems usually stem from model limitations or overly optimistic assumptions.
**Work within the limits of the model**
Not all aspects of a project can be modeled accurately. For instance, a PV system with dual-axis trackers on a south-facing slope can be modeled, but combining both features might exceed the capabilities of the software. Some real-world benefits can't be reliably quantified, which can create financial uncertainty.
**Set realistic expectations**
Stakeholders often treat the design and performance model as interchangeable tools. However, during bankability reviews, lenders look at factors outside the optimized design, such as soiling losses, weather variability, and uptime. These elements can significantly impact projected output. A small percentage point drop in production could push a project below its financial threshold.
**Engaging an OE Mitigates Risk and Ensures Margins**
Lenders typically bring in an IE late in the process, sometimes as late as the 30% design stage. By then, engineering costs have already accumulated, and any last-minute changes could derail the project entirely. No developer wants to walk away empty-handed after investing significant time and resources.
The best strategy is to involve an Owner’s Engineer early. An OE can identify red flags before they become deal-breakers and ensure that the project model exceeds the lender’s minimum requirements. This proactive approach builds in margin, protecting the project against real-world challenges like unexpected site constraints. At Pure Power, we help developers navigate these risks and ensure their projects are bankable from the start.