April 12, 2023 • 26 mins
Welcome to Banking on Solar. On Today’s episode: Solar industry vet, Adam Shor, shares how the timing of building relationships can make or break solar projects.
You’ll learn how his varied background across multiple stakeholders in the solar industry gave him is superpower as a people connector and relationship builder. Adam shares lessons learned as a consultant engineering an appropriate capital stack and helping developers, investors, and lenders build the relationships needed to get more solar projects built.
If you would like to connect with today’s guest, you’ll find links to their contact info on the episodes page at https://www.bankingonsolar.media/episodes/
You can connect with me, Bart Frischknecht, on:
- Linkedin - https://www.linkedin.com/in/bart-frischknecht/
- Email - bart@bankingonsolar.media
- Or by leaving a voicemail - https://www.bankingonsolar.media/
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Adam (00:00):
There's a fine balance between a developer that's hard-headed and
a developer that is wearing a helmetthat can just handle whatever thrown
at them, but continues to be smartand act tactfully as they go forward.
Bart (00:13):
It's time for Banking on Solar.
This is your host, Bart Frischknecht.
Solar developers, investors, andlenders risk losing projects when
they bog down during financing.
Banking on Solar is the podcastcommunity where energy transition project
financing stakeholders share lessonslearned so they get more projects built.
On today's episode, you'll hearfrom Adam Shor, Solar Industry
(00:36):
consultant from Shor Power.
You'll learn more about hishistory and how he's come to have
a unique position enabling lenders,investors, and developers to get
connected and get projects done.
Now onto the show.
Thanks for joining today.
It's really great to be talkingagain and really looking
(00:57):
forward to our conversation.
It was really great to learn aboutthe work you're doing in connecting
different players in the solar industry.
I'd love for you to give the audiencejust a little bit of your background
and really how you came to be today.
Adam (01:13):
Thanks for having me, Bart.
It's a pleasure to be here andI've been in the solar industry
now for, since about 2008.
I did my master's degree in photovoltaicsand solar energy at the University of
New South Wales in Sydney, Australia.
Came back to the United States and workedfor EPRI, which is the Electric Power
(01:33):
Research Institute, doing some research onsolar and being their innovation scout for
all things solar for a couple of years.
And I got the fun benefit of beingable to go to every conference in the
United States, Europe, Canada, andAustralia, that talked about solar
and learn about it and make connect.
(01:54):
And then I got to jump into thestartup world in Menlo Park.
I worked for QBotix sellingdual access tracking robots.
I had to learn how to sellthe thing three times.
Had to sell it to the developer, had tosell it to the project financier, and
had to sell it to the EPC, so I had tolearn all three of those disciplines.
(02:14):
From there, I had the opportunity to gowork for a company called T-Rex, which
was building a risk analytics softwarefor solar asset backed securities.
And so think heavy structured finance.
And along the way, thesetwo words kept coming up.
Tax equity, tax equity, tax equity.
And
(02:35):
Since February of 2016, I've been runningmy own standalone consulting firm.
Shore Power, helping mostly c andI scale developers, but they're
starting to scale up a little bit, findthe various flavors of capital that they
for their projects and kind of teachingthem how to solve problems along the way.
Bart (02:54):
Thanks for that intro.
Super, super fascinating backgroundand Amazing amazing perspective, I'm
sure, on how all of these pieces cometogether, especially, from the utility
perspective and, and all the way downto the, to the developer perspective.
You said you're working mostlyon CNI scale project, but
they're starting to scale up.
Could you just give a sense forkind of the size of projects
(03:15):
that you're typically seeing?
Adam (03:17):
They range, on the small end in the portfolio size,
they can be sub one megawatt.
But occasionally we see projects thatare, close to a hundred megawatts.
I'd say on average the project sizeis closer to five to seven megawatts.
But you're talking about aggregatedportfolios that are a half dozen to
(03:40):
a dozen of those projects altogether.
They range from being just traditional pp a single off take projects to the more
community solar projects that are takingplace in all different states right now.
I see projects from Maineto Florida to California
(04:01):
to American Samoa.
I mean, they're, they're all over the
Bart (04:05):
I know one of the things that you do is, is help get people
connected so that the money canflow in the right direction, right?
Developers that are looking for moneyand lenders and investors that are
looking to put their money to work.
Who typically calls
you first?
What does that typically look
like?
When someone knocks on your door?
Adam (04:23):
It's whoever needs help.
A lot of times is the developers thatneed to find whatever is necessary to
build their projects, but occasionallyit's investors that are looking for a
co-investor on occasion or investorsthat are looking for deal flow.
And you know, one of the thingsabout our industry is that it's
(04:44):
still not a mature industry.
It's still very much growing andeverybody doesn't know each other.
And so candidly, it's still inefficient.
And so my aim for my business is tomake the market more efficient than
it is today by connecting folks thatBasically need what the other person has.
(05:06):
It's, it's essentially Go fish, you know?
just a simplified version.
And instead of using little cards,it's who's got, which megawatts
where, and who's got how many dollarsto match up with those megawatt.
Bart (05:18):
I can feel the pain, right?
In terms of people that haveprojects and then they're like,
well, how do I even get started?
You know, I, I.
Austin, the two people that I knew thathad financed the last project we did.
I need to meet new people.
And then on the other side, we havethis money we wanna deploy but we
need to actually find people thathave high quality projects that are
ready to deploy that we can deploy it.
Adam (05:38):
There are different skill sets in different knowledge bases, right?
Like a solar developer isa very unique skillset.
But it is very different than a projectlender or a tax equity investor.
And so in many instances, not only dothey not know each other, but at the same
time, They have to learn to be able tosort of speak the same language and speak
(05:58):
in terms that both are amenable to, andso part of it is it's not just connecting
them, but it's also helping themunderstand what the other party needs.
Now obviously each time you sort ofeducate somebody and bring them up
to speed, then there's one more partythat's more dangerous than they were
but the Inflation Reduction whichpassed last year, has had the added
(06:22):
benefit of bringing a whole slew ofnew folks into the market, which is
exactly what we need in order to beable to address the goals that we have.
And so those new players have to comeup to speed on how this stuff works.
And it's not like some club thatwe're trying to keep people out of.
We just need to upskill them sothat they can be as efficient as.
Bart (06:48):
I feel that, and as a new person in the industry, I feel like
I'm coming up that curve as well.
And that's one of the reasons for theBanking on Solar podcast is to get that
kind of information more out of the world.
As you've talked about the matchmakingthat you do and then the education
that you do, is there one principleor one basic concept that you feel
(07:08):
like we could all get better at in theindustry or that we could become more
efficient at when we're thinking abouthow do to really bankable projects?
Is there a mistake you see peoplemake frequently or something that they
could, that we could all improve on?
Adam (07:22):
I'd say start with ample time.
Okay?
Because the last thing you want todo is be rushed into finding finance.
If that happens, you're going to endup with less favorable terms, and
if you've got more time to find it.
And secondly, make sure that you giveyourself ample time to get the stuff done.
(07:43):
99% of the time, everythingtakes longer than what we would
expect or what we would like.
And sometimes, or a good chunk of thattime, it's through no fault of our own.
It's through some other contingent partythat we rely upon to get something done
and that we have no influence over.
Whether it be a shipping container that'sstuck off the coast of Long Beach that
(08:05):
has the panels that a project needsor a utility that has more important
things than it needs to do because itjust had an ice storm and it can't get
the requisite people out to interconnectthe project before December 31.
There's a whole slew of thingsthat can happen that are
(08:25):
totally outside of your control.
And so making sure that youbuild in a buffer to the extent
possible is super helpful.
And then, making sure that you'vegot the right people that you
can call if you do end up in ascenario where you got a problem.
Because what you don't wanna do is youdon't want to be in a problem downside
scenario and not have, whether it be timeor money or a contractual relationship
(08:53):
that you need in order to be able toget the project across the finish line.
I mean, everybody in this industrybenefits The more projects that are
successful, both from an industrystandpoint because it provides a
good reputation for the industry, butalso from all of the environmental
attributes that come with gettingthese projects installed on the grid.
Bart (09:13):
For sure.
Wanna just go back to one of the pointsyou made around timing and getting
started early, and that'ssomething that I've.
heard time and time again.
And I'm curious how you see the interplaybetween people that are traditionally
a very conservative group, right?
These bankers and lenders are some of themost conservative people on the planet
(09:35):
in terms of putting their money to work.
How do you navigate that relationship?
Because it's not necessarily that you showup with the project completely finalized
and then show up to the bank and say,Hey, we're ready for you to evaluate this.
Sometimes it feels like thatmight be the expectation, right?
That the bank's like, well, we, wedon't have time to even talk to you
yet because your project's not ready.
And the developer's like, well, if wedon't get this conversation started, we
(09:55):
might not ever get the project going.
Help me understand what it looks like inyour, in your experience to get started
early, and then how does that, how doesthat evolve as the project matures?
Adam (10:05):
So, most importantly, I think, and this is crucial for everything in this
industry, relationships are invaluable.
Okay?
And so, with respect to getting startedearly you want to build a collaborative
relationship with whoever your lenderor financier ultimately becomes.
And the reason for that is there'salways gonna be stuff that comes up
(10:26):
you know, the, the intention is thatit's covered by the term sheet, but
sometimes there are circumstances thatare not covered by the term sheet, and
you have to work through 'em together.
And you want a financing partnerthat's gonna work through that
in a collaborative fashion.
Rather than somebody that'sgonna be antagonistic.
(10:47):
I mean, developing solar andgetting it built and going through
construction is hard enough on its own.
You don't want someone that's goingto make it harder or try and like
crack the whip on your back becausethey need to get something done.
You need to establish a, a collaborativerelationship upfront and sort of
help set those expectations so thatif and when you find yourself in a
(11:12):
situation that is less than ideal,you can work through it together
because you've got a good partner.
And so I'd say the reason I say startearly is because you can help establish
that relationship and help create thefoundation for whatever is going to
occur over the next three to six months,sometimes much longer over that next
(11:35):
milestone associated with that project.
The other thing is that starting earlygives you the option to talk to a
whole bunch of parties and figure outwho's gonna be the best fit for you
and your project or your portfolio,and candidly, your balance sheet.
Because not every lender is comfortablewith a small balance sheet developer.
You've gotta have a certain lenderthat has a certain set of expertise
(11:58):
and a certain set of experienceto be able to say yes, all right.
I not only understand the project, whatyou're doing, but I also understand
how we can do this in a collaborativefashion to help you get to a successful
outcome, both from a project standpoint,but also from building a business.
And there are banks and lendersthat are out there in this market
that have helped build businessesin addition to building the solar
(12:21):
projects and, and that is candidlyinvaluable to the ultimate developer.
Those developers, the developersthat make a ton of money.
The developers that end up strugglingwith a project or multiple projects,
man, it would, that time is somuch better spent being able to
develop future projects rather thanjust struggling on the first one.
Bart (12:44):
Talking about struggling, I'm curious in your experience is
there a memorable project thatcomes to mind that just bogged
down or kind of got outta control?
Not necessarily at the start, butby the end, looking back you felt
like, oh, this was actually like aslow motion train wreck or something
that could have could have gonebetter in different circumstances.
Adam (13:03):
Well, There's been lots of circumstances like that.
I mean, some of them are real fastmotion train wrecks that happen right in
front of your eyes and get over quickly.
And candidly those are better because youget to spend your time on other stuff.
The slow motion train wrecks arereally inefficient and drain you.
Can be scenarios where a projecthas been started and then there's a
(13:25):
problem with obtaining the constructionfinancing midway through, or a
developer intends to self-financethe construction and then they run
outta money and the project's 80%.
But now you you can't access therevenue and you have a much less
sellable asset when the project is at80% completed from a build standpoint.
(13:47):
So having to go back and retroactivelyfix a financing scenario like that
Is a massive, but you can do it.
It's a train wreck that you haveto sort of unwind and, and put the,
the cars back on the tracks, per se.
Other scenarios I've seen where youcan have a project that was slated
(14:11):
to be a 2018 project and courtesyof County Planning Commission
approvals becomes a 2021 project.
Through no fault of the developer,the developer's doing everything
they can to move the project through.
And everything along the way, you gotyour construction finance, your tax
equity, your permanent financing linedup, but you've got some development
(14:34):
permit that somebody is holding backin the hopes of you'll give up and that
developer just has to see it through.
There's a, a sort of a fine balancebetween a developer that's hard-headed
and a developer that is wearing a helmetthat can just handle whatever thrown
at them, but continues to be smartand act tactfully as they go forward.
(14:55):
And I would say that that isboth a lesson for the developers
that are doing this today.
Be smart about how you develop yourassets, but at the same time, with the
Inflation Reduction Act, bringing allthese new parties into the space, there's
gonna be opportunities where do a lot ofthings right, but do something wrong, and
(15:16):
it creates a scenario for somebody elseto step in and sort of pick up the pieces,
and that's gonna create opportunities.
I've also had scenarios wheresomebody thought they had the money
and then at the end they didn't forone reason or another, And then you
gotta go back to the drawing board.
Most recently there are folkshad the money and then the bank
that had the money disappeared.
(15:36):
And that is a real problem.
What do you do there?
That's just inefficiency because it's notthe fault of the the bankers themselves,
and there's a ton of legal dollars thathave gone in to create that partnership.
But now there's uncertainty that's beeninjected, and so you may legitimately
(15:58):
need to go find a new counterpartybecause we don't know what we don't
know in terms of what's gonna happen tothose institutions or the, the remnants
of those institutions on a go forward.
Bart (16:10):
Super fascinating.
I'm sure there are a lot of not justthe people you're talking to, but a
lot more that are scrambling rightnow to pick up some of those pieces.
I'd love for in your mind, get onespecific deal in your head could be
recent, could be from a few years ago, butin very broad brushstrokes, walk through
the capital stack of that deal, how itcame together in terms of the pieces.
(16:33):
So maybe give a general sense, ofoverall context of the deal, size
of the deal, and then maybe how thatcapital stack came together in the end.
Adam (16:41):
The most general in terms of the best example of the the typical
project, the project will moreor less be at the final stages of
development, may have achieved ntp.
They've got a workingrelationship with a lender.
In terms of who they want tobe their permanent lender.
(17:02):
Okay.
And that permanent lender's gonnaprovide something like five to
$10 million for the project.
But they find me and they say, okay,well we need to find the tax equity.
Well, solar has this weird thing upuntil transferability passed that you
had, you had to find the constructionfinancing to get to the perm.
(17:26):
financing But in order to getthe construction financing,
you had to have the tax equity.
And so you had to have the lastpiece of the puzzle before you could
access the first piece of the puzzle.
And so folks would come to me witha a permanent lender in mind and
they'd say, help with respect tothese other pieces, and in my, in
(17:50):
the perfect world, the constructionlender can be the tax equity investor.
Actually, in the perfect world, theconstruction lender, becomes the
permanent lender, which also issimultaneously the tax investor.
But that's not always the case.
That's more of a raritythan anything else.
And so the permanent lenders identified,then we have to find the construction
(18:12):
lender, but the construction lenderconversation is sort of in tandem
with the tax equity investor.
And you gotta understand from a tax equitystandpoint that a project of that scale,
you're not gonna be able to go to the JPMorgans of the Wells Fargos of the world
to get four to $6 million of tax equity.
Not because they don't have it,but because materially unappealing
(18:34):
to them, four to 6 million doesn'teven scratch the itch for them.
If they're paying billions of dollarsin taxes, they need opportunities
that are gonna match up andactually reduce their tax bill and
reduce their effective tax rate.
And you have to think in the backof your mind that there's only a
select group of people that any ofthese institutions that do these
tax equity deals to get them done.
(18:55):
And so they have to be judiciousaround which opportunities they choose.
So you have to right size taxinvestor with the opportunity.
And so in that scenario, there'sa conversation to be had with
several different regional banksthat have tax liabilities in
the five to 20 million range.
And then at the same time, some of thoseregional banks may have an interest
(19:17):
in the construction financing too.
And so In that scenario that we're
talking about where the permanentloan is identified, the ideal
outcome would be a regional bank.
Think, you know, Minnesota or Indianakind of geographies that has a, call it
(19:38):
a, 20 billion, or excuse me, 20 milliontax liability that is interested in
making a 4 million tax equity investmentthat also has an interest in doing a
construction financing in that scenario.
You have the permanent
financing identified.
the construction lenderis also the tax investor.
And so they know when they can injecttheir money and still achieve IRS at
(20:02):
risk rules guidance and, providedeverybody does what they're supposed
to, that solution can work out well.
And so that would be kind of the bestanswer that I can give in a, in a non mba.
Bart (20:14):
That's great.
And I think that's fascinating.
It'll be interesting for people to listenwith, with their own ears in terms of
the backgrounds they're coming from,because I think as, just like you said,
as the projects are at different size andscale, there's different opportunities for
different people to play and in the sizethat you're talking about, that ability
to find someone that can partner acrossmultiple buckets of the financing becomes
(20:37):
really, really valuable and really useful.
Adam (20:40):
Yeah.
The only people that don't likethat is the attorneys because the
attorneys miss out on diligenceopportunities in that scenario.
But if I can say anything to anyonethat's listening to this, like if
you are out looking for financing,it is materially important for your,
the time that you spend to rightsize the opportunity for the entity
(21:01):
you're trying to get in touch with.
Approaching a big bank with afive to 10 million transaction
is a waste of both of your time.
Not because they can't do it, but becauseit doesn't make sense for them to do.
And so it therefore doesn't makesense for you to be talking to them.
You want to be talking to partieswhere the scale of the transaction
(21:23):
you're working on makes sense for thecounterparty to do, and, and that is
where your time is gonna be best..
Bart (21:30):
I wanna switch into the lightning mode part of this conversation.
I'll ask you just a few questions andif you can give your top of mind answer
in 30 seconds or less on each of these.
So one question I'm always curiousabout is what beliefs do you
feel like you hold about solar?
Or it could be something else inlife, but something that you feel
like you might see differently thana bunch of other people in the world.
Adam (21:51):
I think that when an appraiser does the appraisal on these assets
and budgets, a 35 year life.
I mean, it seems almost egregioushow valuable these assets could be.
And candidly, I think thatthey're worth more than that.
And the reason for that is that as webuild out the grid today, the thing that
(22:12):
that Solar project has, that's hard toreally quantify in terms of value, is
the interconnection point to the grid.
The grid is gonna come to rely upon someform of generation at that location, and
so even if the asset only has a certainvalue up to that 35 year life, the the
actual connection point to the grid is, inmy opinion, of seemly valuable because it
(22:38):
provides you the opportunity to just rinseand repeat over and over and over again.
Bart (22:43):
What emerging trends do you see that could be affecting your personal
livelihood and business related to solar?
Adam (22:49):
Domestic manufacturing, I hope happens with Gusto.
I think that it would be phenomenalto onshore some of the products that
we make and that would really expeditethe ability to access hardware that
we need for these projects, and nothave to deal with supply chain issues.
Secondarily, transferability hasthe potential to be either a a
(23:12):
really massive thing that unlocksa tremendous amount of new capital.
Or, it could just be sort of an .And thedevil's very much in the details there.
We all wait with baited breath on thetransferability guidance from the Treasury
Department, and so we'll see what happens.
Bart (23:28):
That leads into the next question.
What do you feel like are the biggestbottlenecks for the industry right now?
Adam (23:33):
Candidly, I think that we're gonna run out of tax capacity for
projects that are in development.
In, call it 18 months, the existinginvestors are not gonna be sufficient
to, to meet the, the growing need,especially because we have new forms
of generation and, storage, likeanaerobic digesters and, and geothermal
(23:53):
and, and battery storage that notnow can get access to tax credits.
I think also the carbon capture stuff.
I mean, if and when that stufftakes off, it's going to really
soak up a ton of tax capacity.
And so we need to continuallyencourage new players into the space.
And then at the same timewe need more people, right?
(24:14):
Like we have all of these huge goalsthat we want to meet from an industry
standpoint and from a societal standpoint.
And candidly, the number of peoplethat we Is gonna be insufficient to
do that unless we all stop sleeping.
Cause there's a lot of work to do.
Bart (24:33):
Yeah, for sure.
All right.
Thinking work and non-work related,what does a successful day in
the life of Adam shore look like?
Adam (24:41):
Good food.
Hanging out with my family and my dogs.
Finishing the, the day occasionallywith A nice sip of something,
some good form of bourbon or rye.
And along the way, talking topeople that I do business with,
but that are also my friends.
A lot of the folks thatI do business with are.
You know, either start as my friendsor become my friends along the way.
(25:03):
And so I'm very lucky inthat I love what I do.
And I get to talk to peoplethat I consider to be my friends
and help them do good business.
And then I think, you know, the cherryon top would be if I get to talk to
somebody that I've not met before in theindustry and, and figure out if there's
a way that we can work together, notfrom just like a business development
standpoint, but if there's somebodythat has the ability to do something.
(25:26):
Particularly on the financingside of things that I'm unaware
of and I learn about, then thatmakes for a really good day.
Bart (25:34):
That does sound like a great day.
How should people get in touch withyou if their ears are ringing or
if something comes to mind, what'sthe best way for them to reach
out and, and get ahold of you?
Adam (25:43):
A lot of folks get in touch through people that they know.
One of the things that.
I like to be good at in this industryis knowing a lot of folks, and so
generally speaking, if someone istrying to get in touch with me.
they probably are one or twodegrees of connection away from me.
They can email me, they can call me.
(26:04):
Whatever works.
Communication is my
.Bart: All right.
So you heard it here.
Adam is open and, and readyto, to meet new folks.
Well, Adam, thanks.
This has been a great conversation andwe're gonna leave it there for today.
For everyone out there, pleasesubscribe and leave a review on your
favorite podcast platform so thatothers can find this show and we can
get more people banking on solar.
(26:25):
If you have an interesting guest idea orsomeone else you'd like to see on the
show, Please leave a voicemailmessage at bankingonsolar.media or send
me a note at bart@bankingonsolar.media.
You can also find me on LinkedIn.
Now is the time for Banking on Solar.
There's money to be madeand the planet to save.
Until next time, I'm Bart Frischknecht, and this is Banking on Solar
There's a fine balance between a developer that's hard-headed and
a developer that is wearing a helmetthat can just handle whatever thrown
at them, but continues to be smartand act tactfully as they go forward.
Bart (00:13):
It's time for Banking on Solar.
This is your host, Bart Frischknecht.
Solar developers, investors, andlenders risk losing projects when
they bog down during financing.
Banking on Solar is the podcastcommunity where energy transition project
financing stakeholders share lessonslearned so they get more projects built.
On today's episode, you'll hearfrom Adam Shor, Solar Industry
(00:36):
consultant from Shor Power.
You'll learn more about hishistory and how he's come to have
a unique position enabling lenders,investors, and developers to get
connected and get projects done.
Now onto the show.
Thanks for joining today.
It's really great to be talkingagain and really looking
(00:57):
forward to our conversation.
It was really great to learn aboutthe work you're doing in connecting
different players in the solar industry.
I'd love for you to give the audiencejust a little bit of your background
and really how you came to be today.
Adam (01:13):
Thanks for having me, Bart.
It's a pleasure to be here andI've been in the solar industry
now for, since about 2008.
I did my master's degree in photovoltaicsand solar energy at the University of
New South Wales in Sydney, Australia.
Came back to the United States and workedfor EPRI, which is the Electric Power
(01:33):
Research Institute, doing some research onsolar and being their innovation scout for
all things solar for a couple of years.
And I got the fun benefit of beingable to go to every conference in the
United States, Europe, Canada, andAustralia, that talked about solar
and learn about it and make connect.
(01:54):
And then I got to jump into thestartup world in Menlo Park.
I worked for QBotix sellingdual access tracking robots.
I had to learn how to sellthe thing three times.
Had to sell it to the developer, had tosell it to the project financier, and
had to sell it to the EPC, so I had tolearn all three of those disciplines.
(02:14):
From there, I had the opportunity to gowork for a company called T-Rex, which
was building a risk analytics softwarefor solar asset backed securities.
And so think heavy structured finance.
And along the way, thesetwo words kept coming up.
Tax equity, tax equity, tax equity.
And
(02:35):
Since February of 2016, I've been runningmy own standalone consulting firm.
Shore Power, helping mostly c andI scale developers, but they're
starting to scale up a little bit, findthe various flavors of capital that they
for their projects and kind of teachingthem how to solve problems along the way.
Bart (02:54):
Thanks for that intro.
Super, super fascinating backgroundand Amazing amazing perspective, I'm
sure, on how all of these pieces cometogether, especially, from the utility
perspective and, and all the way downto the, to the developer perspective.
You said you're working mostlyon CNI scale project, but
they're starting to scale up.
Could you just give a sense forkind of the size of projects
(03:15):
that you're typically seeing?
Adam (03:17):
They range, on the small end in the portfolio size,
they can be sub one megawatt.
But occasionally we see projects thatare, close to a hundred megawatts.
I'd say on average the project sizeis closer to five to seven megawatts.
But you're talking about aggregatedportfolios that are a half dozen to
(03:40):
a dozen of those projects altogether.
They range from being just traditional pp a single off take projects to the more
community solar projects that are takingplace in all different states right now.
I see projects from Maineto Florida to California
(04:01):
to American Samoa.
I mean, they're, they're all over the
Bart (04:05):
I know one of the things that you do is, is help get people
connected so that the money canflow in the right direction, right?
Developers that are looking for moneyand lenders and investors that are
looking to put their money to work.
Who typically calls
you first?
What does that typically look
like?
When someone knocks on your door?
Adam (04:23):
It's whoever needs help.
A lot of times is the developers thatneed to find whatever is necessary to
build their projects, but occasionallyit's investors that are looking for a
co-investor on occasion or investorsthat are looking for deal flow.
And you know, one of the thingsabout our industry is that it's
(04:44):
still not a mature industry.
It's still very much growing andeverybody doesn't know each other.
And so candidly, it's still inefficient.
And so my aim for my business is tomake the market more efficient than
it is today by connecting folks thatBasically need what the other person has.
(05:06):
It's, it's essentially Go fish, you know?
just a simplified version.
And instead of using little cards,it's who's got, which megawatts
where, and who's got how many dollarsto match up with those megawatt.
Bart (05:18):
I can feel the pain, right?
In terms of people that haveprojects and then they're like,
well, how do I even get started?
You know, I, I.
Austin, the two people that I knew thathad financed the last project we did.
I need to meet new people.
And then on the other side, we havethis money we wanna deploy but we
need to actually find people thathave high quality projects that are
ready to deploy that we can deploy it.
Adam (05:38):
There are different skill sets in different knowledge bases, right?
Like a solar developer isa very unique skillset.
But it is very different than a projectlender or a tax equity investor.
And so in many instances, not only dothey not know each other, but at the same
time, They have to learn to be able tosort of speak the same language and speak
(05:58):
in terms that both are amenable to, andso part of it is it's not just connecting
them, but it's also helping themunderstand what the other party needs.
Now obviously each time you sort ofeducate somebody and bring them up
to speed, then there's one more partythat's more dangerous than they were
but the Inflation Reduction whichpassed last year, has had the added
(06:22):
benefit of bringing a whole slew ofnew folks into the market, which is
exactly what we need in order to beable to address the goals that we have.
And so those new players have to comeup to speed on how this stuff works.
And it's not like some club thatwe're trying to keep people out of.
We just need to upskill them sothat they can be as efficient as.
Bart (06:48):
I feel that, and as a new person in the industry, I feel like
I'm coming up that curve as well.
And that's one of the reasons for theBanking on Solar podcast is to get that
kind of information more out of the world.
As you've talked about the matchmakingthat you do and then the education
that you do, is there one principleor one basic concept that you feel
(07:08):
like we could all get better at in theindustry or that we could become more
efficient at when we're thinking abouthow do to really bankable projects?
Is there a mistake you see peoplemake frequently or something that they
could, that we could all improve on?
Adam (07:22):
I'd say start with ample time.
Okay?
Because the last thing you want todo is be rushed into finding finance.
If that happens, you're going to endup with less favorable terms, and
if you've got more time to find it.
And secondly, make sure that you giveyourself ample time to get the stuff done.
(07:43):
99% of the time, everythingtakes longer than what we would
expect or what we would like.
And sometimes, or a good chunk of thattime, it's through no fault of our own.
It's through some other contingent partythat we rely upon to get something done
and that we have no influence over.
Whether it be a shipping container that'sstuck off the coast of Long Beach that
(08:05):
has the panels that a project needsor a utility that has more important
things than it needs to do because itjust had an ice storm and it can't get
the requisite people out to interconnectthe project before December 31.
There's a whole slew of thingsthat can happen that are
(08:25):
totally outside of your control.
And so making sure that youbuild in a buffer to the extent
possible is super helpful.
And then, making sure that you'vegot the right people that you
can call if you do end up in ascenario where you got a problem.
Because what you don't wanna do is youdon't want to be in a problem downside
scenario and not have, whether it be timeor money or a contractual relationship
(08:53):
that you need in order to be able toget the project across the finish line.
I mean, everybody in this industrybenefits The more projects that are
successful, both from an industrystandpoint because it provides a
good reputation for the industry, butalso from all of the environmental
attributes that come with gettingthese projects installed on the grid.
Bart (09:13):
For sure.
Wanna just go back to one of the pointsyou made around timing and getting
started early, and that'ssomething that I've.
heard time and time again.
And I'm curious how you see the interplaybetween people that are traditionally
a very conservative group, right?
These bankers and lenders are some of themost conservative people on the planet
(09:35):
in terms of putting their money to work.
How do you navigate that relationship?
Because it's not necessarily that you showup with the project completely finalized
and then show up to the bank and say,Hey, we're ready for you to evaluate this.
Sometimes it feels like thatmight be the expectation, right?
That the bank's like, well, we, wedon't have time to even talk to you
yet because your project's not ready.
And the developer's like, well, if wedon't get this conversation started, we
(09:55):
might not ever get the project going.
Help me understand what it looks like inyour, in your experience to get started
early, and then how does that, how doesthat evolve as the project matures?
Adam (10:05):
So, most importantly, I think, and this is crucial for everything in this
industry, relationships are invaluable.
Okay?
And so, with respect to getting startedearly you want to build a collaborative
relationship with whoever your lenderor financier ultimately becomes.
And the reason for that is there'salways gonna be stuff that comes up
(10:26):
you know, the, the intention is thatit's covered by the term sheet, but
sometimes there are circumstances thatare not covered by the term sheet, and
you have to work through 'em together.
And you want a financing partnerthat's gonna work through that
in a collaborative fashion.
Rather than somebody that'sgonna be antagonistic.
(10:47):
I mean, developing solar andgetting it built and going through
construction is hard enough on its own.
You don't want someone that's goingto make it harder or try and like
crack the whip on your back becausethey need to get something done.
You need to establish a, a collaborativerelationship upfront and sort of
help set those expectations so thatif and when you find yourself in a
(11:12):
situation that is less than ideal,you can work through it together
because you've got a good partner.
And so I'd say the reason I say startearly is because you can help establish
that relationship and help create thefoundation for whatever is going to
occur over the next three to six months,sometimes much longer over that next
(11:35):
milestone associated with that project.
The other thing is that starting earlygives you the option to talk to a
whole bunch of parties and figure outwho's gonna be the best fit for you
and your project or your portfolio,and candidly, your balance sheet.
Because not every lender is comfortablewith a small balance sheet developer.
You've gotta have a certain lenderthat has a certain set of expertise
(11:58):
and a certain set of experienceto be able to say yes, all right.
I not only understand the project, whatyou're doing, but I also understand
how we can do this in a collaborativefashion to help you get to a successful
outcome, both from a project standpoint,but also from building a business.
And there are banks and lendersthat are out there in this market
that have helped build businessesin addition to building the solar
(12:21):
projects and, and that is candidlyinvaluable to the ultimate developer.
Those developers, the developersthat make a ton of money.
The developers that end up strugglingwith a project or multiple projects,
man, it would, that time is somuch better spent being able to
develop future projects rather thanjust struggling on the first one.
Bart (12:44):
Talking about struggling, I'm curious in your experience is
there a memorable project thatcomes to mind that just bogged
down or kind of got outta control?
Not necessarily at the start, butby the end, looking back you felt
like, oh, this was actually like aslow motion train wreck or something
that could have could have gonebetter in different circumstances.
Adam (13:03):
Well, There's been lots of circumstances like that.
I mean, some of them are real fastmotion train wrecks that happen right in
front of your eyes and get over quickly.
And candidly those are better because youget to spend your time on other stuff.
The slow motion train wrecks arereally inefficient and drain you.
Can be scenarios where a projecthas been started and then there's a
(13:25):
problem with obtaining the constructionfinancing midway through, or a
developer intends to self-financethe construction and then they run
outta money and the project's 80%.
But now you you can't access therevenue and you have a much less
sellable asset when the project is at80% completed from a build standpoint.
(13:47):
So having to go back and retroactivelyfix a financing scenario like that
Is a massive, but you can do it.
It's a train wreck that you haveto sort of unwind and, and put the,
the cars back on the tracks, per se.
Other scenarios I've seen where youcan have a project that was slated
(14:11):
to be a 2018 project and courtesyof County Planning Commission
approvals becomes a 2021 project.
Through no fault of the developer,the developer's doing everything
they can to move the project through.
And everything along the way, you gotyour construction finance, your tax
equity, your permanent financing linedup, but you've got some development
(14:34):
permit that somebody is holding backin the hopes of you'll give up and that
developer just has to see it through.
There's a, a sort of a fine balancebetween a developer that's hard-headed
and a developer that is wearing a helmetthat can just handle whatever thrown
at them, but continues to be smartand act tactfully as they go forward.
(14:55):
And I would say that that isboth a lesson for the developers
that are doing this today.
Be smart about how you develop yourassets, but at the same time, with the
Inflation Reduction Act, bringing allthese new parties into the space, there's
gonna be opportunities where do a lot ofthings right, but do something wrong, and
(15:16):
it creates a scenario for somebody elseto step in and sort of pick up the pieces,
and that's gonna create opportunities.
I've also had scenarios wheresomebody thought they had the money
and then at the end they didn't forone reason or another, And then you
gotta go back to the drawing board.
Most recently there are folkshad the money and then the bank
that had the money disappeared.
(15:36):
And that is a real problem.
What do you do there?
That's just inefficiency because it's notthe fault of the the bankers themselves,
and there's a ton of legal dollars thathave gone in to create that partnership.
But now there's uncertainty that's beeninjected, and so you may legitimately
(15:58):
need to go find a new counterpartybecause we don't know what we don't
know in terms of what's gonna happen tothose institutions or the, the remnants
of those institutions on a go forward.
Bart (16:10):
Super fascinating.
I'm sure there are a lot of not justthe people you're talking to, but a
lot more that are scrambling rightnow to pick up some of those pieces.
I'd love for in your mind, get onespecific deal in your head could be
recent, could be from a few years ago, butin very broad brushstrokes, walk through
the capital stack of that deal, how itcame together in terms of the pieces.
(16:33):
So maybe give a general sense, ofoverall context of the deal, size
of the deal, and then maybe how thatcapital stack came together in the end.
Adam (16:41):
The most general in terms of the best example of the the typical
project, the project will moreor less be at the final stages of
development, may have achieved ntp.
They've got a workingrelationship with a lender.
In terms of who they want tobe their permanent lender.
(17:02):
Okay.
And that permanent lender's gonnaprovide something like five to
$10 million for the project.
But they find me and they say, okay,well we need to find the tax equity.
Well, solar has this weird thing upuntil transferability passed that you
had, you had to find the constructionfinancing to get to the perm.
(17:26):
financing But in order to getthe construction financing,
you had to have the tax equity.
And so you had to have the lastpiece of the puzzle before you could
access the first piece of the puzzle.
And so folks would come to me witha a permanent lender in mind and
they'd say, help with respect tothese other pieces, and in my, in
(17:50):
the perfect world, the constructionlender can be the tax equity investor.
Actually, in the perfect world, theconstruction lender, becomes the
permanent lender, which also issimultaneously the tax investor.
But that's not always the case.
That's more of a raritythan anything else.
And so the permanent lenders identified,then we have to find the construction
(18:12):
lender, but the construction lenderconversation is sort of in tandem
with the tax equity investor.
And you gotta understand from a tax equitystandpoint that a project of that scale,
you're not gonna be able to go to the JPMorgans of the Wells Fargos of the world
to get four to $6 million of tax equity.
Not because they don't have it,but because materially unappealing
(18:34):
to them, four to 6 million doesn'teven scratch the itch for them.
If they're paying billions of dollarsin taxes, they need opportunities
that are gonna match up andactually reduce their tax bill and
reduce their effective tax rate.
And you have to think in the backof your mind that there's only a
select group of people that any ofthese institutions that do these
tax equity deals to get them done.
(18:55):
And so they have to be judiciousaround which opportunities they choose.
So you have to right size taxinvestor with the opportunity.
And so in that scenario, there'sa conversation to be had with
several different regional banksthat have tax liabilities in
the five to 20 million range.
And then at the same time, some of thoseregional banks may have an interest
(19:17):
in the construction financing too.
And so In that scenario that we're
talking about where the permanentloan is identified, the ideal
outcome would be a regional bank.
Think, you know, Minnesota or Indianakind of geographies that has a, call it
(19:38):
a, 20 billion, or excuse me, 20 milliontax liability that is interested in
making a 4 million tax equity investmentthat also has an interest in doing a
construction financing in that scenario.
You have the permanent
financing identified.
the construction lenderis also the tax investor.
And so they know when they can injecttheir money and still achieve IRS at
(20:02):
risk rules guidance and, providedeverybody does what they're supposed
to, that solution can work out well.
And so that would be kind of the bestanswer that I can give in a, in a non mba.
Bart (20:14):
That's great.
And I think that's fascinating.
It'll be interesting for people to listenwith, with their own ears in terms of
the backgrounds they're coming from,because I think as, just like you said,
as the projects are at different size andscale, there's different opportunities for
different people to play and in the sizethat you're talking about, that ability
to find someone that can partner acrossmultiple buckets of the financing becomes
(20:37):
really, really valuable and really useful.
Adam (20:40):
Yeah.
The only people that don't likethat is the attorneys because the
attorneys miss out on diligenceopportunities in that scenario.
But if I can say anything to anyonethat's listening to this, like if
you are out looking for financing,it is materially important for your,
the time that you spend to rightsize the opportunity for the entity
(21:01):
you're trying to get in touch with.
Approaching a big bank with afive to 10 million transaction
is a waste of both of your time.
Not because they can't do it, but becauseit doesn't make sense for them to do.
And so it therefore doesn't makesense for you to be talking to them.
You want to be talking to partieswhere the scale of the transaction
(21:23):
you're working on makes sense for thecounterparty to do, and, and that is
where your time is gonna be best..
Bart (21:30):
I wanna switch into the lightning mode part of this conversation.
I'll ask you just a few questions andif you can give your top of mind answer
in 30 seconds or less on each of these.
So one question I'm always curiousabout is what beliefs do you
feel like you hold about solar?
Or it could be something else inlife, but something that you feel
like you might see differently thana bunch of other people in the world.
Adam (21:51):
I think that when an appraiser does the appraisal on these assets
and budgets, a 35 year life.
I mean, it seems almost egregioushow valuable these assets could be.
And candidly, I think thatthey're worth more than that.
And the reason for that is that as webuild out the grid today, the thing that
(22:12):
that Solar project has, that's hard toreally quantify in terms of value, is
the interconnection point to the grid.
The grid is gonna come to rely upon someform of generation at that location, and
so even if the asset only has a certainvalue up to that 35 year life, the the
actual connection point to the grid is, inmy opinion, of seemly valuable because it
(22:38):
provides you the opportunity to just rinseand repeat over and over and over again.
Bart (22:43):
What emerging trends do you see that could be affecting your personal
livelihood and business related to solar?
Adam (22:49):
Domestic manufacturing, I hope happens with Gusto.
I think that it would be phenomenalto onshore some of the products that
we make and that would really expeditethe ability to access hardware that
we need for these projects, and nothave to deal with supply chain issues.
Secondarily, transferability hasthe potential to be either a a
(23:12):
really massive thing that unlocksa tremendous amount of new capital.
Or, it could just be sort of an .And thedevil's very much in the details there.
We all wait with baited breath on thetransferability guidance from the Treasury
Department, and so we'll see what happens.
Bart (23:28):
That leads into the next question.
What do you feel like are the biggestbottlenecks for the industry right now?
Adam (23:33):
Candidly, I think that we're gonna run out of tax capacity for
projects that are in development.
In, call it 18 months, the existinginvestors are not gonna be sufficient
to, to meet the, the growing need,especially because we have new forms
of generation and, storage, likeanaerobic digesters and, and geothermal
(23:53):
and, and battery storage that notnow can get access to tax credits.
I think also the carbon capture stuff.
I mean, if and when that stufftakes off, it's going to really
soak up a ton of tax capacity.
And so we need to continuallyencourage new players into the space.
And then at the same timewe need more people, right?
(24:14):
Like we have all of these huge goalsthat we want to meet from an industry
standpoint and from a societal standpoint.
And candidly, the number of peoplethat we Is gonna be insufficient to
do that unless we all stop sleeping.
Cause there's a lot of work to do.
Bart (24:33):
Yeah, for sure.
All right.
Thinking work and non-work related,what does a successful day in
the life of Adam shore look like?
Adam (24:41):
Good food.
Hanging out with my family and my dogs.
Finishing the, the day occasionallywith A nice sip of something,
some good form of bourbon or rye.
And along the way, talking topeople that I do business with,
but that are also my friends.
A lot of the folks thatI do business with are.
You know, either start as my friendsor become my friends along the way.
(25:03):
And so I'm very lucky inthat I love what I do.
And I get to talk to peoplethat I consider to be my friends
and help them do good business.
And then I think, you know, the cherryon top would be if I get to talk to
somebody that I've not met before in theindustry and, and figure out if there's
a way that we can work together, notfrom just like a business development
standpoint, but if there's somebodythat has the ability to do something.
(25:26):
Particularly on the financingside of things that I'm unaware
of and I learn about, then thatmakes for a really good day.
Bart (25:34):
That does sound like a great day.
How should people get in touch withyou if their ears are ringing or
if something comes to mind, what'sthe best way for them to reach
out and, and get ahold of you?
Adam (25:43):
A lot of folks get in touch through people that they know.
One of the things that.
I like to be good at in this industryis knowing a lot of folks, and so
generally speaking, if someone istrying to get in touch with me.
they probably are one or twodegrees of connection away from me.
They can email me, they can call me.
(26:04):
Whatever works.
Communication is my
.Bart: All right.
So you heard it here.
Adam is open and, and readyto, to meet new folks.
Well, Adam, thanks.
This has been a great conversation andwe're gonna leave it there for today.
For everyone out there, pleasesubscribe and leave a review on your
favorite podcast platform so thatothers can find this show and we can
get more people banking on solar.
(26:25):
If you have an interesting guest idea orsomeone else you'd like to see on the
show, Please leave a voicemailmessage at bankingonsolar.media or send
me a note at bart@bankingonsolar.media.
You can also find me on LinkedIn.
Now is the time for Banking on Solar.
There's money to be madeand the planet to save.
Until next time, I'm Bart Frischknecht, and this is Banking on Solar
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