How solar developers can maximize returns in times of market uncertainty

By Erik Lensch, CEO, Leyline Renewable Capital

The solar industry has become accustomed to some degree of basic uncertainty in recent decades. From fluctuations in federal tax credits to debates over net metering and module rates, there’s never a dull moment. At first glance, it might be easy to be pessimistic about the solar industry in 2022. After more than a decade of falling costs, the solar industry experienced its first year of higher prices in 2021.

But the truth is that the biggest problems developers are currently facing are temporary issues. Supply chain disruptions caused by the Coronavirus pandemic will eventually be resolved. The renewable energy sector has never been stronger in terms of public and political support. Inflationary pressures and delays will cause some projects to fail in the near term, although those with the right capital can weather the storm.

How can developers drive this storm into better times? In this article, we look at the impact this uncertainty has on developers and the options available to maximize returns.

An increase in costs and uncertainty for developers

Aside from the existential crisis for many companies in the solar industry as a result of the solar module business, the overall impact of these issues is a rise in costs and uncertainty across the entire solar value chain. Project development is taking longer than expected, impacting cash flows for large and small developers. The end result is that some developers are taking steps to sell projects earlier than expected in order to maximize profits before cash reserves are exhausted or returns are completely lost.

Unfortunately, uncertainty leads to fear, and that fear leads to panic in the industry. Here is a summary of the issues and their implications in the market for developers:

Review Developer Options

Developers actually have a variety of options when considering how to approach the current market situation. Some may consider selling assets as quickly as possible to generate cash. Others will make equity investments to generate both development and working capital to keep projects alive and get employees paid. Some may borrow debt to cover a mix of costs. The reality is that every option has pros and cons.

Option 1: Sell Assets

The first option that comes to mind during a period of uncertainty is to simply sell assets to generate money. We are aware of developers who are already actively seeking buyers, and it is likely that an abundance of supply creates a buyer’s market. This results in a lower return on investment due to both market uncertainty and the fact that projects are sold earlier than would otherwise be the case. When projects are earlier in the development process, they are simply worth less. For some developers without the capital or desire to ride the storm, this may seem like the best option.

Option 2: investment in equities

Instead of selling projects, some developers will consider investing stock in their company to generate cash reserves to survive the current market uncertainty. This capital would then carry the project assets further into the development process, creating more value and higher returns. The downside of an equity investment is a loss of control and a portion of future returns. For many entrepreneurs, this can be difficult to accept after years of hard work.

Option 3: Increase Debt

Any business can consider borrowing money to cover costs until assets are sold and revenues are received. Solar developers are no stranger to this option as it can be very useful for short periods of time. The problem is that it is not known how long the current market uncertainty will last. In addition, having debt on the balance sheet will have a direct impact on a company’s valuation for a future capital increase.

Option 4: Non-dilutive capital

There is also another option for developers in the form of non-dilutive capital. This option is in some ways a combination of equity and debt, but depends on specific projects rather than the parent company. In essence, a financier makes development or working capital available to a developer and the financier gets the proceeds back from the proceeds of the projects upon sale. In this situation, both the risk and reward for a project or portfolio are shared by both parties.

This option is particularly suitable for developers who are faced with the consequences of rising prices and project delays in the current market environment. With the right capital, developers can hold onto projects longer to maximize returns and get through the storm of major problems.


Despite the headwinds, there is still reason to be optimistic about the future of the solar industry as public and private entities strive to meet ambitious clean energy targets. Climate change is an ongoing threat and organizations around the world have renewable energy procurement targets that they must meet. The global economy is still recovering from the coronavirus pandemic to resolve inefficiencies and catch up with demand. The solar industry has faced trade disputes and existential policy challenges before and has continued to progress.

While this is good news for the long term, developers still face the consequences of increased costs and project delays. As with any market sell-off, there will be winners and losers. We believe that those with the right capital to survive the turbulence in the market will reap the benefits across the board.

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