Feb 24, 2022 - Economy

Big money for small(ish) solar

Illustration of hundred-dollar bills as solar panels.

Aspen Power Partners is launching with $120 million in funding to support its focus on smaller scale solar developments, the company tells Axios.

Why it matters: The announcement is the latest sign of surging investor interest in distributed and community solar, especially community.

  • 2021 transactions included acquisitions of developers Pivot Energy, Dimension Renewable Energy, and Community Energy, each with a large footprint in community solar. Community Energy was bought by Fortune 500 firm AES Corporation (AES:NYSE).
  • Also last year, Arcadia announced a $100 million Series D to expand its work in community solar.
  • Aspen, which was incubated at the prominent clean-energy VC firm Energy Impact Partners, represents one of the first significant deals in the space this year.

Context: Dallas-based Aspen focuses so-called distributed solar and community solar projects.

  • Distributed solar generally describes projects less than 1 MW in capacity, such as rooftop solar panels atop homes and businesses. Community solar refers to slightly larger developments — typically about 2 MW in capacity — that may serve a neighborhood or other geographic area.
  • While larger utility-scale solar projects, as well as residential solar markets, are more “mature,” Aspen hopes to capitalize on a segment of the solar market that’s generally seen as more challenging — and therefore more nascent, in its view.
  • Lead investors include Ultra Capital and Redball Power, as well as an unidentified “global Swiss asset manager,” family offices, and high net worth individuals.

What they’re saying: “Utility-scale solar and residential solar — from a business standpoint the returns have compressed along with the maturity,” co-founder Jackson Lehr tells Axios. “So one of the things we like, from a business standpoint, for less mature segments, is that there’s an opportunity to earn higher returns.”

The big picture: Supply chain disruptions and interconnection delays last year hamstrung new installations of community solar, as well as the commercial and industrial segments of distributed solar.

  • The market research firm Wood Mackenzie in December reined in its growth projections for the sectors.
  • However, in a report earlier this month, it projected a 9% increase in the community solar market through the next five years.

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