Developing Bankable Solar + Storage Projects

To fund solar and energy storage projects, developers must first overcome a critical hurdle: proving their project is "bankable." Bankability is essentially about investor confidence and the perceived risk of a project's returns. One of the most crucial stages in this process is due diligence conducted by an independent engineer (IE). This phase can make or break a project, especially if it’s rushed or poorly prepared. If a project moves forward to a financier and the lender’s IE before its design is fully refined, it risks being scrutinized and ultimately rejected. To avoid this, developers should engage an owner’s engineer (OE) early in the process to pre-screen designs. This step is like a mock trial for a legal case—just as a lawyer wouldn’t go into court without preparing, a developer shouldn’t face an IE review without prior vetting. In this article, I’ll explore the most common reasons why project designs fail during bankability assessments and explain how early OE involvement can prevent costly delays and rework. **Technology Selection and Qualification** Solar assets are designed to last for decades, which means product quality and reliability are key concerns for investors. Developers must back their claims with solid data. While cost per watt is an important metric, cutting corners on upfront costs can lead to long-term losses. Remember, the loss of energy production over 30+ years can be far more costly than a small initial savings. It’s also important to carefully evaluate new technologies. Lenders won’t accept vague promises of performance gains—they need concrete data. Be cautious of manufacturers offering outdated products at steep discounts, as this could signal deeper issues. **Performance Model Review and Validation** One of the most frequent issues during IE reviews is the performance model. These models are often based on assumptions that don’t hold up under scrutiny. For example, while a model might account for dual-axis trackers or a south-facing slope, it can't always factor in both at once. This limitation can lead to unrealistic expectations and financial shortfalls. Additionally, lenders consider variables outside the design optimization, such as soiling losses, weather variability, and system downtime. These factors can significantly reduce projected output, making even a marginally viable project unattractive to financiers. **Engaging an OE Mitigates Risk and Ensures Margins** Lenders typically bring in an IE near the end of the design phase, often at the 30% stage. At this point, developers may not have incurred major costs, but engineering expenses are already high. If a project fails at this stage, it can result in significant financial loss and wasted effort. The best strategy is to involve an Owner’s Engineer early. They can identify potential red flags and ensure the project model exceeds the financier’s minimum requirements. This proactive approach helps build in enough margin to absorb real-world challenges, like unexpected site constraints or performance variations. By doing so, developers increase their chances of securing funding and protecting their project’s financial health.

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