Most of the buzz around the fastest growing solar market for the 2013 vintage has been created by large Japanese corporates using their balance sheet to engage in a new line of business and some general construction firms looking to create solar track record. The ecosystem from the project finance perspective is still evolving and we sense the need for some underwriting guideline standardization. The lenders will eventually regroup and define this standard but just like the TruSolar initiative in the US, there is a need for and industry-driven standard for project selection, underwriting and approval. It should involve an underwriting process that rigorously tests and identifies higher yield, lower risk solar investment opportunities.

As the solar industry comes out of its own blend of recession, panel prices are down at least 20% across the board and this has translated into a lowering of the FIT however as we superimpose the technology cycle that is probably going to increase efficiency or lower prices again we foresee the need for a market driven financing ecosystem.

Some of the points that we have ascertained to be pivotal in the creation of the framework are

Panels / Panel Manufacturers: There has always been a healthy debate around cost Vs quality equation that justifies the local panels being expensive, however for a 20 year long agreement and ROI calculation we like to look at the fundamentals of the manufacturer as well. Case in Point, the not-so-blunt firm that has inspired many technology leaps but now sees a large erosion of basic capital as well as brand capital. The underwriter usually assumes a basic efficiency degrades and a backstop panel manufacturer’s warranty against this degradation as well as the overall functioning. This should technically be correlated to the overall financial health of the manufacturer. Panel selection and manufacturer selection at the underwriter level could, and should be more global in nature. There are now manufacturers with significant installed capacity and some with 4-5 year performance track record. The Government’s exercise to have panels tested and certified to be eligible for the program is a step in the right direction and will hopefully be all-inclusive.

Prefecture / Utility Counter party: While it is no longer a secret
that the political-capital-deficient utilities are all probably going to
counter the coercive policies of the government viz. the propagation and
nurturing of the renewable energy gamut of technologies and projects. We think a few of them are significantly better set up to construct innovative
evacuation infrastructure and do so as per schedule. There is also the over-arching equation of also actually having a healthy demand side within reach. Case in Point is the Hokkaido Utility (HEPCO) which has decided its limit as well as its projected demand. Cheap land and easy leasing conditions created a rush in the otherwise sparsely populated northern island. Generically speaking any utility can cite local geographic conditions, unavailability of power evacuation infrastructure, expensive scheduling of power evacuation development (usually a sister concern) firm etc to delay / offset any coercion.

Developers: Globally there are many business models that can be
followed in the renewable energy space. In Japan the first movers have been
general industry looking for a government guaranteed margin and the larger
EPC’s with access to land banks and cheap balance sheet finance. While these moves are to be lauded for the speed and tenacity, they may not lead to the creation of the project finance ecosystem. There are viable business models from IPPs, Cross-Over Real Estate funds, global green funds with little or no operating history in the solar space in Japan that can possibly create and be nurtured by the project finance ecosystem. This should and will create a wider investor base for these assets in Japan and perhaps reach-out into the rest of emerging Asia.

Akshay Toby Syal, Director at
Waterneer Technologies India Pvt. Ltd has been working with some of the
developers & lenders to design the underwriting guidelines. His full analysis
& opinion on the technicalities of the market and its nuances can be
requested via mail (akshay@waterneer.com).

Why spend billions on oil imports when you can send billions to japanese households and businesses. 
Macro-Economic benefits approaching.  

Population of Japan 127,500,000

Cost per person $75.

$9.6 billion sounds like such a big number until you put into perspective.

21 cents per day for a year to get massive amounts of solar install and get dangerous nuclear permanently shut down.

think they just want to hurry and get a lot of solar up fast. and they seem to have a great evaluation and repricing system planned.