September 8, 2023
How to Predict When You’ll Get Paid from a Commercial-Grade Solar Investment
How can you know how much money you will make–and when you will make money– from your investment in solar? This blog post aims to assist you in comprehending the methodology of predicting the precise timing and manner of your payments as an investor. with a utility-scale solar investment, Payments arrive at project milestones To …
How can you know how much money you will make–and when you will make money– from your investment in solar? This blog post aims to assist you in comprehending the methodology of predicting the precise timing and manner of your payments as an investor.
with a utility-scale solar investment, Payments arrive at project milestones
To comprehend your payment structure from your solar investment, you must initially grasp the payment mechanism of the solar fund.
Every solar investment project undergoes various stages, with payments disbursed at each milestone. The achievement of these milestones can vary based on the project, sometimes taking years or even decades during the construction process.
Here at Shasta Power, we do solar investing differently. We sell the project before construction begins. This means that the very latest we (and therefore you, as the investor) receive cash back is five or six years after the initial investment.
For this blog post, let’s imagine that you invested $100,000 into our Summit Power Fund. We’ll figure out when and how much you will get paid at each project milestone. To simplify this example, we’ll pretend there is only one project in the fund. In reality, investors in our fund own an entire portfolio of projects, and the payments for each project would be partial amounts of the numbers we will look at.
Milestone 1: Signed Sale Agreement (0% ROI)
At this first project milestone, usually one or two years into the project, an Independent Power Producer (IPP) buys the project from Shasta Power. We’ve completed site analysis and selection, and have submitted the project into the utility queue.
We receive 80%-100% equity back at this sale, or $80-$100k per $100k. This transaction is usually simply a reimbursement of all the costs. It is unlikely that there will be any profit at this stage besides the relief and confidence of breaking even at the very first milestone.
Milestone 2: Signed Interconnection Agreement (20-30% ROI)
This milestone is not always included in the Sale Agreement. However, if it is, we receive 20%-30% profit, usually in the first year or two. This will give you $25-$35k back per $100k invested.
Milestone 3: Execution of Power Purchase Agreement (20-30% ROI)
The details of Milestone 3 look very similar to Milestone 2. It will happen in the first 1-3 years. The profit is paid once as the sale price per megawatt, bringing 20%-30% of the profit. This will give you $25-$35k per $100k invested.
Milestone 4: Construction Notice to Proceed (50% ROI)
The most profitable stage of the project is the one you will have to wait for the longest. Five or six years into the project is the Construction Notice to Proceed. You will receive the final 50% of the profit, or $50k per $100k invested.
the Total you can expect to earn from a solar investment
If you have invested $100,000 for 5-6 years, you can expect approximately 30% return per year. The schedule varies widely, however, because of the hundreds of variables.
Here’s an estimated example of what it would look like for you:
- Year 1-2: $80K equity, $0 profit
- Year 2-3: $20k equity, $25K-$35K profit
- Year 3-4: $0 equity, $25K-$35K profit
- Year 5-6: $0 equity, $35k-$45K-$50K profit
On your 5-6 year $100,000 investment, you could passively earn $95,000-$120,000. If you increase the investment to $1,000,000 over the same period of time, you could passively earn as much as $1,200,000!
make a direct solar investment through Shasta Power
If you’re ready to learn more about how you can invest in the powerful world of renewable energy, we’re here for you. Click here to watch a free webinar from Shasta Power partners Max and John about how you can impact the earth and your own financial future.
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