EDF Renewable Energy has signed a contract with Canadian Solar for the supply of 1,800 MW of solar modules in North America, ahead of the first step-down in the U.S. solar investment tax credit at the end of this year.
Wind and solar developers are rushing to safe harbor equipment by making purchases, signing loans or meeting thresholds to prove construction has commenced on projects, which project finance bankers expect to translate into a bumper year for renewable energy loans in 2020.
EDF’s module supply agreement (MSA) covers panels for projects in Mexico and Canada as well as the U.S. and spans multiple years, so cannot be attributed solely to the ITC phase-out, but Shawn Qu, Canadian Solar’s ceo, referred specifically to the deadline in his company’s announcement of the deal.
"As the US market recovers from the uncertainties brought by Section 201 tariffs and rushes to meet the step-down of the Investment Tax Credit deadline, we are seeing a significant rebound of demand in the US solar market which impacts module supply across the entire region,” he said.
In order for equipment supplied by Canadian Solar to be grandfathered for the ITC, EDF will have to pay for it this year and take delivery and title within 3.5 months of payment, says Laurae Rossi, partner at Winston & Strawn in Los Angeles. “The MSA is a start, but they actually have to buy the panels and take title to them,” she said via email.
The panels must also be placed into service by the end of 2023.
Many developers are said to be seeking to qualify solar modules and inverters for the ITC through quasi-project finance structures often referred to as “panel loans” (PFR, 4/12). The equipment must be earmarked for a specific project or projects and represent at least 5% of the total cost for this structure to work, says a project finance banker.
Whether EDF plans to use such a loan to finance the purchase of any of the Canadian Solar modules could not immediately be established. Spokespeople for EDF in San Diego declined to comment.
“EDF would get a panel loan if they need the liquidity to pay for the panels,” says Rossi. “They may also pay for them with a corporate line of credit.”
EDF lists six North American solar projects on its website with expected commercial operation dates between 2019 and 2022, all of them in the U.S. They are:
· the 111.2 MW Valentine Solar project in Kern County, Calif., which is due to be online in December;
· the 150 MW Desert Harvest Solar project in Riverside County, Calif., which is expected to be online in 2020;
· the 500 MW Palen Solar project, also in Riverside County, Calif., which is expected to be online in 2020;
· the 175 MW Morris Ridge Solar project in Livingston County, N.Y., which is expected to be online in 2022;
· the 80 MW Moraine Solar project in Allegany and Steuben counties, N.Y., which is expected to be online in 2022; and
· the 119 MW Tracy Solar project in Jefferson County, N.Y., which may include 20 MW/80 MWh of battery storage, and is expected to be online in 2022.