The PPA Comeback? Aspen Power eyes mid-market C&I solar reset
Despite interconnection bottlenecks and looming tax credit uncertainty, Aspen Power is feeling bullish on the commercial and industrial (C&I) solar space. In fact, according to John Lind, SVP of C&I development, it might be the perfect time to reinvest in and repower aging systems while reassessing the role of power purchase agreements (PPAs) in a saturated community solar market.
“I’m still as excited now for distributed generation C&I projects as I was back in 2010,” Lind said.
Aspen Power is a combination of Safari Energy’s development legacy with Aspen’s investment background. The firm has traditionally leaned on its real estate expertise to partner with REITs and asset owners. In this space, community solar deal structures in the middle market 1 MW to 5 MW space really took off, especially in states like New Jersey, Maryland, and Massachusetts.
“It opened up a whole asset class that previously we really struggled with and that’s industrial,” Lind says. Developers were drawn to these markets by the ability to export power from massive rooftops to the grid and rent roof space from industrial landlords. Community solar was a win-win-win.
But that sweet community solar structure has become “a victim of its own success,” Lind said, at least with a grid that isn’t designed to take advantage of it. “The grid’s overloaded. I’ve had projects that have been waiting three years for interconnection studies.”
The PPA Path Forward (ITC or not)
With limited new community solar markets emerging, Aspen Power is revisiting the potential of PPAs, especially with “owner-users” in C&I sectors who want to save money on their electric bills.
“I think PPAs have been underserved,” Lind said. “We’re executing PPAs in California that look quite good. It’s not a community solar market, but it’s still viable with the right goals and expectations.”
“This would be a pivot back to a different asset class and a different type of owner,” Lind explains, rattling off office buildings and retail centers with common areas or small manufacturers as examples of good candidates.]
Like many developers, Lind is watching Congress closely as potential changes to the federal Investment Tax Credit loom. Aspen Power has already safe-harbored several years’ worth of modules to stay flexible.
“It’s a lot of the same conversations we’ve had before,” he said. “We’re going to safe harbor what we can and keep looking for ways to mitigate risk.”
If the worst-case scenario happens and tax credits step down early, or are eliminated, projects can still pencil via state and grid incentives. Again, bringing PPAs back into the conversation.
“Maybe REC prices trend up. Maybe states step in. Maybe electricity rates increase. The industry adjusts,” Lind reminds.
In the short term, firms with diverse business models, like Aspen, could be best positioned to weather the uncertainty and target the deals that make sense in pockets around the country. “I think the effect [of ITC changes] is more on certain companies and business models in our industry than on the viability of projects per se,” Lind posits.
Acquiring and optimizing existing systems
Lind sees an additional opportunity in acquiring and repowering older systems. With Aspen’s investment backing (Aspen Power is backed by Carlyle Group, a global investment firm, which made a $350 million investment in Aspen Power Partners LLC in November 2022), he’s exploring deals where Aspen would purchase operating assets—often out of their initial ITC clawback window (typically five years)—and reinvest in their performance.
“Maybe the system isn’t operating efficiently. Maybe you need new inverters. Maybe you want to monetize the investment,” Lind said. “We’ll recondition the system, bring it to optimal efficiency, and maybe restructure the financials to increase value.”
That might include flipping a system from a discounted PPA to a rent model or adding storage to capture demand response opportunities.
“You can optimize not just the asset itself, but the deal structure,” Lind said. “You could have new incentives now that didn’t exist when the project was built.”
“The battery is going to be a bigger and bigger piece,” he continues. While Aspen likes to keep PPAs simple, there are growing opportunities to share in demand charge savings or participate in ancillary services. “There are different ways in which we could participate, and the customer can participate too.”
Regardless of the state of the ITC, the next wave of opportunity in C&I could come from what’s already out there—waiting for someone with the capital, patience, and creativity to repower and reimagine it.
