The U.S. government (through Section 1603) provides 30% of the investment in a solar project – in cash – within 45 days of installation. There is no maximum or minimum size of the project, nor does it matter if they are ground or rooftop projects. So long as the project connects and delivers power through a meter, they qualify for Section 1603. The full cost of a project is eligible, including but not limited to construction cost, land acquisition or lease and panel purchase. As an example, if a project is $10 Million, $3 Million will be provided within 45 days.
– Section 1603 expires on December 31, 2011, whereby the 30% cash program will revert to the ITC tax credit of equal value, but spread over a five year period. In essence, Section 1603 does not radically alter the IRR of a project, but it does provide an immediate return to the investor, rather than wait a full five years to capture the 30%.
– In addition to the Federal program, each state has different incentives and regulations, whereby one state can be vastly different than another. This is where the ability to create significant value exists. For example, in Massachusetts and New Jersey (two states with the most aggressive incentives, IRRs can reach 24% to 28%, while in neighboring Connecticut and Pennsylvania, respectively, the IRRs are 10% to 14%.
– Potential to have a secure pipeline of more than 125 MW of late stage U.S. solar projects, operational by the end of 2011
-Potential to a secure pipeline of more than 175 MW of early to mid stage U.S. solar projects, operational by the end of 2012
– For Phase I of the Solar Fund, the focus will be on the late stage projects so as to capitalize on Section 1603.
Looking to set up a fund and investors and would be keen to hear from interested parties.