Community solar: Current issues

Community solar: Current issues

October 07, 2019 | By Keith Martin in Washington, DC

Audiences at community solar conferences are growing. The organizers had to add more rows to accommodate a standing room-only crowd at the annual community solar gathering in Philadelphia in July organized by the Coalition for Community Solar Access with help from SEIA and SEPA — the Solar Energy Industries Association and Smart Electric Power Alliance. A panel of community solar developers talked about new trends in how community solar projects are structured, the different business models, where they would probe on diligence before buying community solar projects and related subjects. The following is an edited transcript.

The panelists are Zaid Ashai, CEO of Nexamp, Drew Warshaw, vice president of community solar for Clearway Energy Group, Laura Pagliarulo, senior vice president of community solar and commercial sales for Clean Choice Energy, and Tom Sweeney, president of renewable energy assets for Clean Energy Collective. The moderator is Keith Martin with Norton Rose Fulbright in Washington.

New trends

MR. MARTIN: Tom Sweeney, what new trends do you see in community solar in 2019?

MR. SWEENEY: Two things are happening simultaneously.

One is around consumer protection. There is a loosening of contract terms to make subscription agreements more flexible for customers. It creates some challenges from a financing perspective. The trend toward stronger consumer protections is accelerating, particularly in places like Massachusetts and New York.

The other big theme is the higher volumes of distributed generation assets connecting to distribution systems and creating challenges. This is leading to things like cluster or area studies in places like Massachusetts.

MR. MARTIN: Laura Pagliarulo, new trends.

MS. PAGLIARULO: Some new states like Maryland and New Jersey are prioritizing low-income solar. We have been really good as an industry at offering a product to creditworthy customers, and avoiding the perceptions of higher project finance, acquisition costs and the expectation of default associated with low-income solar, but the industry now needs to turn its attention to how to make community solar work while serving low-income communities.

MR. MARTIN: Are you required to provide a certain percentage of electricity to low-income customers?


MR. MARTIN: In all states or just a few?

MS. PAGLIARULO: It is an emerging trend. Both Maryland and New Jersey, for example, have low-income requirements.

MR. MARTIN: What is the percentage?

MS. PAGLIARULO: For New Jersey, it is 51% LMI.

MR. MARTIN: LMI stands for?

MS. PAGLIARULO: Low- and moderate-income customers.

MR. MARTIN: Is that 51% of output from all of your projects in the state? Is it tested on a portfolio or project-by-project basis?

MS. PAGLIARULO: I don’t know if you want to go down this path right now [laughter], but how New Jersey works is that the state has a scoring system and has made it clear that if you want to be accepted in its very limited program, you either have to be rooftop, brownfield or LMI, essentially.

MR. MARTIN: Got it. Drew Warshaw, new trends.

MR. WARSHAW: The industry is growing quickly, but the addressable market is growing more slowly than the industry. The audience and scale of this conference versus the same conference last year are phenomenal and amazing, but the addressable market is not keeping up.

MR. MARTIN: Why is that?

MR. WARSHAW: A couple of statistics are interesting. Community solar as an industry reached the one-gigawatt scale last year. Yet it will take another three years to get to two gigawatts. The scale required to justify the number of people and level of resources and capital that are in this room is a challenge.

Think about it. You have the rooftop solar industry plateauing in New Jersey as the optimal roofs already have panels on them, making community solar the natural next step to ensure everyone has access to solar and not just people with good roofs. Add to that a Democratic legislature and a new Democratic governor coming in with ambitious renewable energy goals, and you have all the makings to scale up.

And what comes out of that? Just a 75-megawatt pilot program. Look at what other new industries have done in that state and the resources they have assembled. Look at the cannabis industry. It spent $1.2 million last year on lobbying. The offshore wind industry spent $1 million. The community solar industry spent $60,000.

MR. MARTIN: So the problem is the government is not hearing enough from you.

MR. WARSHAW: The challenge for all of us is we need to get serious about investing in new market development and improving the incumbent markets.

MR. MARTIN: Zaid Ashai, new trends.

MR. ASHAI: There is a certain maturation that has happened in the financing markets with community solar. We have reached a scale where tax equity, cash equity and debt are much more comfortable with this asset class than they were several years ago.

Another new trend is around customers. We are moving as an industry to more access and less emphasis on credit checks or FICO scores and moving away from long-term contracts. This is a win for the customers.

Another trend is the big push that Laura Pagliarulo mentioned on LMI. Some of these LMI programs set laudable goals, but the way they are implemented is clunky and candidly not a functioning system for financing.

MR. MARTIN: How do you reconcile what you just said with what Drew Warshaw said? He sees a slowdown in growth. You say benefits for the customers are improving. Financing is becoming more available.

MR. ASHAI: Development by nature is lumpy. We have made some really good progress in terms of the total addressable market today. The challenge is that some of the cornerstone markets in community solar are at a standstill. Massachusetts, Minnesota and Illinois were successful, but oversubscribed, and they are waiting for future programs.

The challenge is to persuade more market participants to become members of groups like the Coalition for Community Solar Access that focus on new market development. When a cornerstone market pauses from a regulatory standpoint, it is very difficult to continue to grow unless other states are in play.

Interconnection costs

MR. MARTIN: Tom Sweeney, you told me before this panel that another new trend is “utility non-performance on interconnection.” What did you have in mind?

MR. SWEENEY: Utilities are required by law to let independent power producers connect to the grid. The challenges are cost and timing. For example, as the volume projects has increased in Massachusetts, we have seen really significant increases in the cost of interconnection. It is now common to be charged multi-million-dollar interconnection fees by the utility.

I favor putting all interconnection costs that are past the point of common coupling into rate base. This would give the utility the opportunity to make a return and not require the project to carry the cost of the distribution system upgrades. Representative Tom Golden in Massachusetts has a bill to do this.

MR. MARTIN: Are you getting support from utilities for that idea?

MR. SWEENEY: Some initial conversations suggest they
are receptive.

MR. MARTIN: Say your name and affiliation.

BOOK: Hayley Book with the Pennsylvania Public Utility Commission. It is not surprising to hear utilities are receptive to putting amounts in rate base, but how receptive have the commissions been to rating basing distribution system upgrades?

MR. SWEENEY: I don’t know. We are proposing this treatment only where the upgrades are actually necessary. That is hard to manage when it is done on a project-by-project basis. For example, in Massachusetts, I am paying for upgrades as a project developer that I know duplicate in some cases upgrades that are being made to accommodate other projects. There is no oversight.

If we move toward a rate-based mechanism, we can get oversight from the Department of Public Utilities to ensure the upgrades are necessary and appropriate and at the appropriate cost.

Business models

MR. MARTIN: Let me drill down into some details, and then we will come back to the broader picture.

SEPA said last year that community solar is largely still a premium product in many markets. On past panels, you folks said customers receive a discount compared to the retail electricity rate of about 10%. The rooftop companies offer 15%. How important is this discount to your business proposition to customers?

MR. ASHAI: I am not sure why SEPA says it is a premium product because most providers offer discounts. When we talk to customers, the first driver is savings on electricity and the second driver is going green. If you cannot offer a customer savings, it is difficult to grow in this market.

MR. WARSHAW: I agree. It is not a premium product. It is a discount product. Customers pay less for electricity without having to have the equipment on their roofs. It is the easiest way to go green.

MS. PAGLIARULO: The environmental message is really important. There must also be a discount, and there cannot be any gotcha fees. There is no cost to terminate. There is no cost if you move, you go into the military, you die. These types of things are important for the market perception of the product.

MR. MARTIN: How many of you use outside aggregators to find your customers as opposed to having your own sales forces?

MR. SWEENEY: We do direct sales to commercial, residential and government customers. We also use what I refer to as independent sales reps that may be what you are thinking of as aggregators.

MR. MARTIN: Just for the record, we had one hand go up.

There seem to be two main community solar models: one is ownership and the other is subscription. Subscriptions are the main one. Why would one use ownership, and where is it used? In the ownership model, each customer owns a particular panel or panels as opposed to subscribing to a percentage of the output.

MR. SWEENEY: The ownership model was the original model for community solar. You were essentially selling an interest in the community solar project. It is a really complicated transaction to do. It was an effort to allow customers to claim a residential solar tax credit under section 25D of the US tax code. It made projects more difficult to finance.

MR. MARTIN: Is it still used anywhere?

MR. SWEENEY: We have not done one in probably three years. There are a lot of benefits to the subscription model. It allows customers to move in and out easily.

Shorter contracts

MR. MARTIN: Let’s drill down into contracts with subscribers. On past panels, the contract terms seemed to be on the longer side — 10 or 20 years — but developers were aspiring to bring them down in length to five or fewer years. Where is the market today?

MR. WARSHAW: All over the map is the honest answer. It is everything from a no-term, retail-style product with no credit check to a rooftop-style 20-year contract at the other end of the spectrum, and then everything in between. For example, there are 20-year contracts with cancel-anytime provisions.

MR. MARTIN: Presumably all of you face the same pressure from the financial community to move to longer terms. How are the projects with the very short terms — the retail product — getting financed?

MR. ASHAI: We started three and half years ago trying to drive the market toward no term and no credit checks and the idea that there can be no red-lining in community solar.

Community solar cannot be just for wealthy households. We are getting the financiers to view our platform as the credit behind the financing. They need to feel confident that our platform will hit the milestones, will hit the revenue targets and will manage attrition of customers effectively.

They do not need to look at the customer. It was a slog. We started this three and a half years ago. We started with regional banks, then we went to multi-national infrastructure lenders, and we were able to get the community there. I think that is going to be important for the rest of the industry. We have been a bit of a leading edge compared to our peers on this, but we really think fundamentally for community solar to grow and not have bad headlines on the front page with customers, it is important to move to that model.

MS. PAGLIARULO: Customers overwhelmingly want shorter-term contracts with little or no termination fees.

But a lot of the project financers, and all of the long-term asset owners that are in this room, still want a contract with teeth. Nexamp is in a different position with a financer who is comfortable with it, but its model is still not very common.

MR. MARTIN: Zaid, are you talking about tax equity, debt, true equity? Which?

MR. ASHAI: All three.

Addressing Laura’s point, financiers that were used to residential rooftop financings took a long time to get there. Their framework for assessing risk was fundamentally different. What we found is that lenders who were not already locked into a framework for financing residential rooftop solar could get there.

We did a comparison with projects that were financed with credit checks, that were not our projects from the beginning, versus no credit checks, and there was no difference in attrition rate. We have been able to show this data to the financial markets. As these data sets grow, we hope that there will be a lot more buy-in to this.

MR. MARTIN: It sounds a little like the challenge facing the community choice aggregators in California. Their problem was that they have potentially fickle customer bases. They have to persuade lenders and tax equity investors that the revenue stream is predictable. What they ended up doing is to create a set of shadow metrics that provide an early warning that something may be amiss. If the economics start to erode, then a cash sweep kicks in to pay down the financing. Is that how yours works?

MR. ASHAI: No, we do not do a sweep. Without getting too much into the details, we have a really nice historical data set for the past three years. We know our turnover rates. We underwrite that turnover rate, and it has been effective so far.


MR. MARTIN: Switching gears to subscription terms, is there typically a fixed price for the entire contract term or does it increase?

MR. ASHAI: It is a fixed discount.

MR. MARTIN: Against the retail rate, against a potentially moving target?

MR. ASHAI: Whatever the retail rate is.

MR. MARTIN: How large is the discount?

MR. ASHAI: It is 15% in Massachusetts.

MS. PAGLIARULO: We like to offer an indexed product. We focus on clarity in whatever we are promising customers. The base discount is 5%, and 15% is probably the high end in markets that can support that.

MR. MARTIN: Is it a fixed percentage discount that moves with the retail rate?


MR. SWEENEY: Our product is pretty similar. You have a discount in whatever credit rate the utility is applying to the power that is produced. That is the most common. The floors have gone away in most cases. It is pretty typical to see 10% as the savings. Sometimes, you see something a little bit higher. Less than that is very difficult to make work from a customer standpoint. You have to offer enough savings to make it worthwhile to participate.

MR. MARTIN: Is there a tipping point where the discount is so large that word of mouth brings in other customers? If so, what is it?

MS. PAGLIARULO: When we structure our products, we start at 5%, but the key is the other attributes. Various factors play a role. One is the target demographic in the particular area. Another is the penetration level in that area. The greater the savings, the greater the attraction for customers and the more customers come in by word of mouth, but the customers we talk to are interested in more than just savings.

MR. WARSHAW: An interesting dynamic is developing that we have not seen in the last four years, and that is real head-to-head competition. Our biggest competition to date has not been from people who say you are offering only a 10% discount, and Nexamp is at 15%, so I am going to go with Nexamp. Our biggest competition has been lack of knowledge and the need to educate customers about how community solar works. Shopping among different service providers will increase as the industry starts to reach scale.

MR. MARTIN: How easy is it to cancel a contract and does it vary by commercial and residential customer?

MR. WARSHAW: Yes and yes. It is usually easier for a residential customer to cancel, and less easy for a commercial customer.

I was talking to one person yesterday who works with C&I solar companies. He said the trend in that market is for shorter contract terms and cancel-anytime provisions.

Community solar offers in theory the flexibility to plug someone in and out. To realize that potential, we have to persuade the financial community to underwrite the credit of the entity that will be responsible for replacing customers who cancel. It has to see we are offering a commodity at a discount. The question is whether there will be a market for it.

Investors are getting more sophisticated. Are they getting so sophisticated as they are willing to let anchor customers taking 50% of the output cancel at any time? I don’t think so, at least for not money at scale, but that day will come.

MR. MARTIN: State attorneys general are placing limits on termination fees. What are typical limits, and where have such limits been imposed?

MS. PAGLIARULO: Two states come to mind. New York has a cap of $200. The cap was imposed by the public service commission rather than the attorney general. This is a fungible product. The idea that you are going to hold someone to a community-solar contract for 20 years is just not realistic.

The other state is Minnesota. The attorney general was concerned about liquidated damage clauses. There was a push for greater transparency for consumers.

MR. MARTIN: An issue has cropped up in Massachusetts where the attorney general has been concerned about sales pitches to low-income people and the elderly. Update us on whether this is a problem more widely than Massachusetts.

MR. WARSHAW: A number of customers in Massachusetts felt that sales tactics by some suppliers were misleading. The last thing we want as an industry is deceptive sales practices. The industry needs to police itself or others will understandably step in.

We can’t have smaller providers saying they will offer a discount for one year and then change the terms in years two and three. If we start doing this, it will sink the entire industry. We need to make certain that we are sensible, transparent and fair to customers.

FICO scores

MR. MARTIN: Zaid Ashai, you said you are moving to more of a retail model. Do you require the customers to be creditworthy and have a certain FICO score if they are individuals?


We are confident that if we can lead the market on pricing, there is no reason for the customer to leave. This is borne out in our data.

Our customer turnover is primarily because the customer has passed away or moved. This is critical. You can reduce the discount to 5%, but then you have a much higher customer acquisition cost to replace customers who leave. The smaller discount does not bring in more revenue after acquisition costs are factored in. There is a balance. And, for us, the higher discount gives us more flexibility to do without FICO scores and long-term contracts.

MR. MARTIN: Are any the rest of you moving away from requiring that customers be creditworthy?

MS. PAGLIARULO: We would love that. It is certainly what the consumers want. FICO is not a great indicator of whether someone will pay his or her small community solar bill. There are other types of scores that are far better indicators, like a TEC score used by utilities.

But unfortunately, that is not where we are right now. The financiers have been willing to let FICO scores drift down from 700 to 650, but they are not willing to do without any score.

MR. SWEENEY: The way to get away from FICO scores is to move to consolidated billing. All the debits are consolidated onto the utility bill. The customer makes a single payment. The utility becomes your counterparty for payment. There is no FICO underwriting issue. It becomes possible to support high volumes of low- and moderate-income subscribers because the utility has the ability to handle large payment volumes.

MR. MARTIN: You don’t have a FICO issue because people generally pay their utility bills.


Consolidated billing

MR. SWEENEY: That is the single most important change that we have to make happen over the next couple of years. It will be the enabler of real growth.

MS. PAGLIARULO: The community solar bills are currently unbundled, and it is not a great customer experience, but consolidating billing without what the industry calls purchase of receivables or POR means that asset owners are not guaranteed to be paid. Consolidated billing without POR is less of an advantage for asset owners than having the separate billing we have now.

We can see today who is paying and who is not paying. We know how customer receivables are aging. POR is like an insurance product. It means that the utility will pay us as the asset owner before taking money itself.

MR. MARTIN: Tom Sweeney, Laura makes a good point.

MR. SWEENEY: If the utility is doing consolidated billing, then you want it to use purchase of receivables. The utility should use rate-ready or bill-ready solutions. That is a common practice today in deregulated markets like New York and Massachusetts. The utilities have to offer that.

I am going to suggest that there is a different solution which is what we run in South Carolina today. It is what National Grid proposed in New York, Rhode Island and Massachusetts. Rather than posting individual credits and debits, the utility should post the net credit to the customer. If the customer received a $50 bill credit for the month from solar generation and it owes $45 as its debit, then the utility should post a $5 credit. There is no POR issue. There is no bad-debt issue. There is no question about whether the utility is being paid an appropriate amount by the consumer. That is how it works in South Carolina.

MR. MARTIN: Zaid Ashai, as you move to the retail model and try to persuade financiers that there is a stable revenue stream, how many years are you able to show them?

MR. ASHAI: We are able to show four years of data. We took a large community solar portfolio out to market for third-party financing, and we got six really strong term sheets.

There are ways to mitigate risk using weight lists. You don’t lose bill credits necessarily in certain regulatory frameworks.

Picking up on Tom and Laura’s discussion, the challenge today, outside of financing, is the customer experience because, in most markets, customers are getting two bills. It is easy to tell a customer he can go green and get 15% savings on electricity, and then four months later, the customer gets two bills and there is an education process. There is a cost to us to support that. The utilities are also not very good at reconciling bills, or doing bills on time, and this has become a big pain point for the industry. It can be a messy process.

MR. MARTIN: Are you more with Laura or Tom on this? Do you want to send your own bill or do you want the utility to send a consolidated bill?

MR. ASHAI: I am skeptical about the ability of National Grid to do it right. There is a fundamental issue. Utilities do not have customers; they have ratepayers. National Grid’s proposal is also to do customer acquisition, and one has to wonder how utilities are going to do customer acquisition for community solar companies operating in their service territories. I think it is a tall order for them to do consolidated billing and customer acquisition. They tell us it may take years to put in the sort of back-end systems needed to do consolidated billing that most tech companies can install within months.

MR. SWEENEY: Let’s change the discussion a bit. I suspect we would all agree that having the customer receive a single electricity bill so that he can see the true cost is a good thing. The question is how to get it done. You say you don’t trust the utility to do it well and I agree with that, but I want a single invoice for my customer if possible.

MR. ASHAI: I agree with you. I prefer an EDI interface with the utility billing systems.

MR. MARTIN: What is an EDI interface?

MR. ASHAI: It basically allows us to access the billing system in a secure manner and create a consolidated bill.

MR. MARTIN: So the bill would come from you rather than from the utility.


MS. PAGLIARULO: Like the Texas model.

MR. MARTIN: Is that realistic? Doesn’t the customer buy its electricity at the end of the day from the utility?

“Gentailer” Model

MR. ASHAI: There is a fundamental issue that we are all tip toeing around. It all comes down to the future of the grid. We are third-party developers. We are trying to get access to customers. Utilities look at us and exclaim, “Oh my God, we are losing our ratepayers!” What does the new energy framework look like? It has to be decentralized.

We need a “gentailer” model. We are generators and also retailers. The utilities do not share that vision, and they are not compensated on that vision. The utilities are compensated on cost to capital. If they can deploy capital, they get paid for that. We are always going to bump heads on this, whether it is interconnection and whether it is billing. There are two different visions colliding.

MR. MARTIN: Some utilities are experimenting with their own community solar programs. How do their offerings differ from what you offer?

MR. WARSHAW: There are a couple different models. The most notable one was the program that Florida Power & Light announced. The industry has not been keen on it because it does not leave room for any outside developers. It is hard to tell whether it will be a true community solar program or a green program that charges a premium price for renewable power. The most common utility program is one that offers renewable energy at a premium price.

MR. MARTIN: The Florida Power & Light program is a 1,490-megawatt program. Is that the size of the program or the capacity of a series of solar projects that the utility plans to build to offer solar electricity to its customers?

MS. PAGLIARULO: The program.

MR. MARTIN: In what sense is it community solar?

MS. PAGLIARULO: It is great that the utilities want to develop more solar in their service territories, but there has to be competition. When we compete against each other in a state, we get to a place where the customer gets the best product and the market gets elevated as a whole. When you have only utility programs, it is not community solar as it is defined in other states.

MR. MARTIN: What is the subscription rate by the time you go to financing. Is it 100%? 95%? What does the market require? How fully subscribed does the project have to be?

MR. ASHAI: It depends on the maturity of the project. When you are in construction, the investors look for a minimum amount of revenue, and if you are in a state that has a lot non-PPA revenue like upfront incentives, it will look different. That said, investors seem to be comfortable at the start of construction if the project is 25% subscribed. Once you are in a position to operate, you need to be closer to 95% or 100%.

MR. MARTIN: So 25% to get construction debt and 95% for tax equity to fund. Let’s fit in a few audience questions.

Audience questions

MR. LORD: Jeff Lord, Clean Energy Collective. You are senior executives who are shaping this industry. If there were a genie sitting in the corner and you get one wish, what would you choose to make this industry sustainable in the future?

MR. ASHAI: I would take uniformity in the regulatory and statutory framework for a lower incentive. Less money in the system, I think.

One of our biggest challenges as an industry is sustainability. You see markets go boom and bust. One of the fundamental reasons is the incentives are seen as too big up front, and then the policymakers overcorrect. They swing the other way, and the market dies. Let’s use best practices. We don’t need more pilot programs. There are enough of community solar projects already deployed.

MS. LAYMON: My name is Krystal Laymon, and I am with the US Department of Energy. Someone talked earlier about customer benefits beyond just the electricity price discount, especially when it comes to low- and moderate-income communities.

MS. PAGLIARULO: We are at our core environmental marketers. What we find when talking to potential customers is that the environmental attributes of the product are very important.

Beyond that, there are providers with hidden elements of their contracts. Someone mentioned the example of one price in year one and then it switches to a variable rate and high or not very transparent fees. Examples are a fee if you change your subscription size, which happens frequently, or if you use more or less electricity than expected on an annual basis. Some contracts have additional costs that are not as visible as they need to be to customers.

MR. ASHAI: Community solar should be seen as not just the product offering, but also the project. When we build in an LMI community, there is also an economic benefit to the community.

MR. GIMBERLING: Brian Gimberling with Core Development Group. I have two questions. What percentage weighting between residential and commercial subscribers is optimal for raising financing, and how much resistance are you getting from utilities to signing up their existing customers?

MR. MARTIN: You are a dead ringer for the actor, Matt McConaughey. [Laughter]

MR. SWEENEY: The answers vary by market. In Massachusetts, we still have projects where 50% of the offtake is to an anchor subscriber that is a rated commercial or government entity. The remaining subscribers could be a mix of residential or small C&I customers taking 25 kilowatts or less.

New York has had an all-residential program until recent changes in its program. Now we see the opportunity to add larger commercial and industrial customers. That market will change pretty significantly.

In South Carolina, the majority of the offtake in the big project we did there was school districts and churches because that is what was mandated. The rest was residential with 5% of the offtake going to low- and moderate-income subscribers.

MR. SEHLINGER: Nick Sehlinger, Energy Capital Partners. This is for Zaid Ashai. You have short-term offtake contracts. How do you get comfortable when building a new project that a new market entrant will not come in and undercut you on price?

MR. ASHAI: Great question. Our business model is vertically integrated. We do the development, equipment procurement, construction and asset management. We think this model makes us better able to manage the costs and makes it very difficult for a new entrant to beat us on cost.

MR. PILON: Daryl Pilon with Standard Solar. How common are PILOT arrangements and do they end up being more burdensome than helpful?

MR. MARTIN: PILOT stands for payment in lieu of taxes. It is a negotiated property tax amount. PILOT agreements often last for 10 years.

MR. WARSHAW: There is a tradeoff. A PILOT agreement gives you certainty by locking down an expense and makes it easier to finance the project. The tradeoff is that certainty versus a situation where the local jurisdiction may be holding you hostage with a high PILOT expense. It is better for financing to lock down as many costs as possible. The fewer variable cost and revenue streams, the easier the project will be to finance.

Where to probe

MR. MARTIN: We are down to the last question. Suppose you are in the market to buy development projects from other developers. Where do you probe for potential problems?

MR. ASHAI: It is all the typical issues: site, wetlands, PILOT issues, interconnection costs. On the customer side, we want to make sure we are in a load zone where there are enough customers and that is not over saturated with projects.

MR. WARSHAW: I would say forget the project and focus on your ability to execute. These assets are trading at extremely high valuations before they become actual community solar assets. They are just a site lease, an interconnection agreement and permits.

What makes a community solar asset are the things that the investor or the platform will bring to it — the customers and the ability to manage those customers over time. You need to be certain that you can deliver that value that justifies that purchase price.

MS. PAGLIARULO: I would say hands down, the offtake, which is your revenue stream. I would probe really deeply into how customers were signed up. Have they paid the first bill? That’s huge. The racking, the panels, the wires, everything else is the same across projects. You are relying on the subscribers to pay you. I would probe into how they were sold.

MR. SWEENEY: I agree. [Laughter].