Developing Bankable Solar + Storage Projects
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To fund solar and energy storage projects, developers must first pass a critical test: proving the project’s bankability to lenders. Bankability is closely tied to investor confidence and the perceived risk of the project’s returns. A key phase in this process is due diligence by an independent engineer (IE), which can be a make-or-break moment for the project. If designs are not fully refined before presenting them to financiers and their IE, the project may face rejection, delays, or even failure.
To avoid such risks, engaging an owner's engineer (OE) early in the development process is a smart move. Think of it like a legal case—no attorney would go into court without a mock trial. Similarly, a developer should never expose their design to lender scrutiny without first having an OE conduct a thorough review. This pre-screening helps identify potential issues before they become costly problems during formal due diligence.
In this article, I’ll explore the most common reasons why solar and energy storage projects fail during bankability assessments and explain how early OE involvement can add real value.
**Technology Selection and Qualification**
Solar assets have long operational lifespans, often spanning decades. That means product quality and reliability are crucial to investors. Developers need to back their claims with solid data, not just promises. While cost per watt is important, cutting corners on upfront costs can lead to long-term losses. Remember, energy production loss over 30+ years can far outweigh initial savings.
Also, when evaluating new technologies or vendors, don’t be swayed by flashy claims. Lenders will require hard evidence to support performance assertions. Without data, even the most promising technology may not get funded. Be cautious of manufacturers offering outdated products at steep discounts—this could signal deeper issues.
**Performance Model Review and Validation**
The performance model is often the backbone of the financial analysis, and it’s where many projects fall short during IE reviews. Common issues include model limitations and overly optimistic assumptions.
For example, some models cannot account for all variables simultaneously. A PV system using dual-axis trackers on a south-facing slope might show high efficiency, but the model may not accurately capture both factors together. This can lead to unrealistic expectations that don’t hold up under scrutiny.
Additionally, setting realistic expectations is essential. Many teams use performance models as a design tool, iterating to optimize output. However, these optimizations may not align with the conservative approach required for bankability. Factors like soiling losses, weather variability, and uptime must be considered. These can reduce projected output significantly, impacting margins and potentially leading to funding rejections.
**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 are already significant, and any last-minute changes can be expensive. The last thing a developer wants is to lose a funding opportunity after investing time and resources.
The best way to avoid this is to involve an OE early. They can identify red flags before they become deal-breakers. At Pure Power, we help ensure that the project model exceeds the financier’s minimum requirements. This proactive approach builds in enough margin to absorb real-world challenges, like unexpected site constraints or performance variations. It gives developers peace of mind and increases the likelihood of securing financing.