What yieldco finance can do for the solar industry

YieldCoFor years, the big news in solar has been coming out of research and development, from technical innovation. But in what appears to be a sign of the maturing of the industry, this year it seems that the bigger news is coming from the development of new methods of project finance that hold the promise of cutting financing costs.

The biggest of these driving forces in cutting financing costs is the yieldco. Yieldcos are essentially publicly traded holding companies which bundle assets that produce a steady and predictable flow of income, such as energy plants, that have long-term distribution agreements. The cash flow is distributed among investors in the vehicle as dividends.

Perfect for utility-scale solar PPAs

Yieldcos are almost perfectly suited to capturing the value of renewable projects. While they can face many uncertainties during bidding, permitting and development, once they are connected to the grid their cash flows are low-risk, because they typically generate a steady income from 20 or 25-year PPAs or tariffs, once in operation.

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