Operations and maintenance (O&M) operator Zack Hobbs, in collaboration with commercial solar developer and former CPA Casey Gilley, has established a new partnership, CSS Repower. Their goal is to purchase and repower solar “fixer-upper” farms.
Hobbs, through his ownership of Carolina Solar Services, a specialist in solar O&M, has access to solar power plants in need of repowering services. However, the asset owners prefer to spend their time and capital on new projects.
“Many solar farms in North Carolina were built between 2010 to 2015 and are reaching “middle age,” which is showing up in the form of deteriorating modules or unsupported and underperforming inverters,” said Hobbs. The asset owners don’t want to deal with these troublesome assets as they are focused on new development projects.
As the fractional CFO for Carolina Solar Services, Gilley has developed spreadsheets to model the return on investment for repowering services to help asset owners financially justify their repair and upkeep actions.
“[There are] lots of challenges with repowering, mostly the 80/20 rule as it relates to tax, negative capital accounts as a result of accelerated depreciation, and engineering and renovation work (which CSS Repower and Carolina Services can perform),” said Gilley. “It’s going to be a financial engineering exercise to find good projects, something that I think I’ll be good at.”
CSS Repower targets distressed and underperforming solar assets:
- $2 million to $20 million project size
- Value-add solar farm “fixer-upper” repowering projects.
- Acquisition of underperforming assets at a discount
- Replacement of modules & inverters
- Maximization of DC capacity under existing interconnection or application to expand system size with the addition of battery storage
- Projects qualify for new tax credits as long as at least 80% of the existing equipment is replaced (80/20 rule)
- In-house operations & maintenance team to complete all electrical engineering & construction work
- Projects eligible for 30% to 50% tax credits + accelerated/bonus depreciation
- Timeline: 90 to 180 days from closing until completion (a major advantage as projects are already approved and interconnected, reducing risk and expediting transactions)
Having recently read a pv magazine article about backsheet cracking, Gilley shared his concerns: “the more I learn about solar, the less excited I am about owning sites for more than 20 years. I recently looked at a large site that now has 64% of the modules with severe backsheet cracking. This will be a challenging warranty claim with the manufacturer as the warranty only covers the modules, not lost production. For such a massive site, we’re talking big bucks in lost revenue and downtime during repair.”
Gilley added, “This goes back to not only building and designing the projects right the first time, but also having good insurance and good O&M providers for the projects and underwriting accordingly in the financial model.”
Gilley and Hobbs believe that their combined experience in financial optimization, engineering, and O&M has uniquely prepared them for this opportunity.
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