Financing smaller solar and wind projects is often difficult for all parties involved.

Transaction costs can be similar for small and large deals, but the payoff is lower for projects of under a few megawatts in size. As a result, “This space has been chronically underserved,” according to Greg Rosen, Chief Investment Officer at Mosaic. 

Nonetheless, a number of developers and investors have found ways to finance smaller wind and solar projects worth less than $25 million. At ACORE’s Renewable Energy Finance Forum-West, these developers offered advice and encouragement to colleagues exploring similar transactions. Their first suggestion? Identify the right partners.

“As a first-time wind developer, we weren't about to go out and try to finance a 50-megawatt or 100-megawatt wind project.  Most everybody in the industry would say 'Show me the other 50- or 100-megawatt wind projects you've done before,’” said John Pimentel, President of Foundation Wind Power. “We took a small step into the marketplace with 1- to 5-megawatt projects, and we relied on a couple of key partners in that process.”

Foundation worked with U.S. Bank, which believed it could build a business serving smaller projects, and Seminole Financial Services, a lender that focuses on construction lending, a frequent roadblock for developers. 

“We think there is a middle market that has a lot of opportunity. We see the yields are much, much better. We’ve figured out a way to aggregate deals. Instead of getting in...on one large deal, we took the opposite approach. If we did...smaller deals, we’d have a better chance to grow the business,” said Darren Van't Hof, Director of Renewable Energy at U.S. Bank. “It is relatively uncrowded from an investor standpoint. The larger tax equity investors are not interested in deals of less than $30 million to $40 million.”

“For the larger banks, it is not cost-effective for them to do smaller deals. They have large teams that they’ve built up over a period of time and invested a lot of money in,” said Chris Diaz, Senior Vice President for Renewable Energy at Seminole Financial Services. “Small boutique lenders have smaller teams. It is easy for us to do smaller deals because we can contain costs.”