Continued growth in the popularity of solar yieldcos is raising questions around how well the model can work outside of the US. Recent weeks have seen announcements relating to two new yieldcos in Canada plus one in Taiwan.
NASDAQ-listed Canadian Solar unveiled a yieldco plan to investors on May 18 and Atlantic Wind and Solar, which trades on OTC Markets, announced a vehicle called Power 1 on May 29. Taiwan’s New Solar Power Corporation published plans of Asia’s first yieldcos on May 21.
Meanwhile, however, a comparison of existing yieldcos in Europe and America is leading some observers to question whether non-US yieldcos will be able to fare as well as their stateside counterparts.
“In the US the utility-scale segment's market share has increased year-on-year from 6% in 2008 to 61% in 2014, when 3.8 GW of projects larger than 1 MW were built,” said Pietro Radoia, solar insight analyst at Bloomberg New Energy Finance and a speaker at YieldCon 2015 in July.
“Next year we expect 5.4 GW of such projects to come online in the US alone. Obviously this offers a better pipeline for whoever wants to aggregate and refinance on a large scale.”
The sheer scale of the US market explains how yieldcos there can be an order of magnitude larger than elsewhere. American yieldco behemoths include NRG Yield, with a portfolio of almost 2.9 GW, or TerraForm Power, with 1.5 GW.
In contrast, the largest yieldcos elsewhere, such as Innergex of Canada or The Renewables Infrastructure Group (TRIG) of the UK, can only muster portfolios of 687 and 446 MW, respectively.
Across Europe, said Radoia: “The market is more fragmented than the US one, meaning that smaller portfolios are more evenly distributed amongst more owners. You don't have few utilities owning very large portfolio of assets to refinance on public markets.”
This is particularly the case in the solar sector, where portfolios of more than 100 MW tend to be owned by financial investors rather than project developers.
“These investors slowly built up these portfolios and are now happy to enjoy the benefits of their projects as they are lucrative assets, unless hit by retroactive measures,” Radoia pointed out. “Keeping them on balance sheet makes more sense to them.”
In the US, in contrast, project developers such as SunEdison are looking to capture market share in the downstream segment.
“Project developers' priority was to keep their volume of installations constant and yieldcos are the perfect tool as they provide cheap equity in big volumes,” noted Radoia. “This is what really enabled the uptake of yieldcos in the US.”
Does that mean yieldcos are less likely to succeed outside of the US? Not really, said Radoia. The proof is that the model has taken off in the UK, too, albeit with smaller portfolio sizes.
In addition to TRIG, other significant British yieldcos include the Bluefield Solar Income Fund and Foresight Solar Fund Limited.
In fact, said Radoia, there could be a number of European markets that could suited to yieldco development, starting with the UK and Germany and “maybe to a certain extent France.”
A wider move to rooftop solar in Europe may somewhat curtail prospects for yieldco growth, he said.
But with at least eight yieldcos already operating in European markets (and potentially more to come), plus growing activity in Canada and Asia, it is clear the yieldco phenomenon is not just a US thing.