Mercatus’ year-end analysis of commercial solar project investment and development trends revealed that exploration – and investment dollars – for solar projects is skyrocketing.
Among the report’s findings, Mercatus reports growth by more than 200% in the number of projects evaluated for investors and developers from 2012 to 2013 using their industry leading platform, and over 150% in Q4 2013 vs Q4 2012 alone.
The Mercatus Year-End Solar Investment Analysis is based on data from over 1,400 actual solar projects from over 50 financiers and 300 developers over the last two years, estimated to cover greater than 40% of the US market.
"There are many factors that make an investment attractive and improve cash flows, and as incentives change, so does the focus of investors," said Haresh Patel, CEO of Mercatus. "Investing in solar requires staying on top of local market knowledge. The key is that the market moves fast; Investors need to be nimble to succeed."
According to the quarterly report, the West continues to be the largest market for solar in the US for a variety of reasons, including high electricity rates in California and Hawaii (with two of the nation’s highest averages); strong incentive programs like the 35% Hawaii State Tax Credit and the California Solar Initiative, a state rebate program with step downs allotments; strong solar resources in states with mid-average electricity rates like Arizona and New Mexico; and progressive local utilities offering standardized programs to promote lower cost development and higher cash flows.
Other US markets typically ebb and flow based on incentives offered, but none have created staying power yet, according to the report.
As the large scale utility project pipeline growth has slowed investors are looking at residential and commercial segment. In other interesting findings, the report indicates US investors are shifting somewhat strategically toward International projects to diversify and find new markets that might yield better returns on investment, including Japan, India, the Middle East and the Caribbean.
International investments are still showing the highest Internal Rate of Return (IRR) rates at 9.2%, according to the Mercatus report, although these returns dropped 420 basis points during the past year.
