Green Giants – Episode 32

David Felix (01:15)

Yeah, I’m happy to. So actually, when I was in high school, I read a book called All Corvettes Are Red. And it was basically a first-hand storytelling of the chief engineer for the Corvette at the time, which was obviously an important car for me as a car person at a young age. And that really piqued my interest. I decided to go into mechanical engineering in college and actually had an internship in Michigan for a big auto company, and while I was there, I actually ended up in the hospital because I couldn’t breathe. And I grew up in a place with relatively clean air, so I had never experienced that before. It was really scary, and basically, I was told that it’s because of air pollution. You know, that’s why I ended up like that. And it really opened my eyes to a major problem globally of air pollution, maybe something we don’t talk about as much these days.

It’s all climate change, which of course is something I’m very focused on and I think is the biggest issue our society faces. But also, don’t forget about the daily impacts of air pollution. The stats I think are pretty crazy. It affects about 25 million Americans, about 6 million kids, it’s the leading cause of missed school days in the country and it’s estimated to cost the US $80 billion annually and cause about 3,500 deaths a year. So, it’s still a major issue and that’s just in the US, right? And like obviously our air is relatively clean. Clean air has been around since the 70s. Developing parts of the world are much worse off. About 2,000 young kids die every day due to air pollution. So that’s more than one a minute, so it’s a major problem.

Obviously, very focused on where air pollution comes from. And lo and behold, as we in the industry all know, it’s from burning fossil fuels, right? So, I really decided to dedicate my career to reducing fossil fuel usage as quickly as possible. things we’ve learned about climate change since then, you have only gotten more intense and the challenges we face as a society in trying to phase down our primary source of fuel for our global economy. But thankfully now there’s a lot of great alternatives, which I look forward to talking to you about here. But that’s where it all started for me.

Wes Ashworth (03:25)

Yeah. Wow. What a powerful story. And I love the fact of just taking your skillset, you’re into engineering, kind of pursuing that path. And then this happens. some people, you a lot of people just wouldn’t do anything with that, but instead you’re like, let me make a difference. Let me go full force into this industry and try to be a part of the solution. So that’s absolutely incredible. And just thinking more about your career and your career path. So, it spans various areas.

You’ve spent time across project development, finance, technologies like solar, battery storage, EV charging. What have been some pivotal moments or decisions in your journey that ultimately brought you to SolaREIT.

David Felix (04:04)

Yeah, so like you said, I think it’s just kind of maybe my personality. My wife would probably tell you this also, that I’m kind of a fix-it kind of person. When I see a problem, like, I want to fix it, so, for better or worse sometimes. So ultimately, you know, that’s what that has meant, you know, along my career journey has changed. And I’ve tried to go and see where there’s the biggest opportunity for implementing real change, you know, real projects, steel in the ground. And, when I started my career in the industry about 20 years ago, it was shortly after the energy policy act of 2005 passed, increased the tax credit from 10 to 30%. Combine that with the SGIP incentive back in the day in California and solar went from being something that the green people were doing and maybe Jimmy Carter put on the White House, but it wasn’t mass adoption, right? And I think what was really missing at that time was third party finance.

I mean, think about the common example of cell phones, right? Think about what cell phones would be like if we were all spending whatever it is now, $600, $800 on a phone and not doing financing. So, it’s a similar idea that that was a really important change that entered the market about when I was entering, beginning my career. So that’s where I started was financing, owning and operating solar projects on people’s rooftops, commercial, industrial, ground mounted. And it was kind of the beginning of that PPA market for distributed customers. And I think that really helped to unlock, that was kind of the missing piece, I would say at that point is a combination of policy, obviously having technology there, panels were still very expensive at the time, but you combine all those incentives and it actually started to pencil and make sense for large financial institutions to begin investing in projects like this, that it met their return requirements. So instead of investing in another commercial building, maybe they were willing to invest in, large commercial solar project. So that was really an inflection point and something that was really, I didn’t really have a finance background, but I saw that as something that was a missing piece to really unlock the potential of distributed solar at the time.

Wes Ashworth (06:15)

Yeah, and digging more into that, so SolaREIT’s approach and market differentiation, sort of the business model and focusing on financing real estate specifically for solar and storage projects rather than the traditional long-term debt and tax equity. How does this model benefit project developers? What misunderstandings about land financing do you wish more people understood?

David Felix (06:37)

Yeah, it’s a great question. Actually, if it’s okay, maybe I’ll kind of walk through a little bit more of kind of getting to SolaREIT because it’s been a journey. So, I started behind the meter solar, eventually the industry grew into utility scale solar PV. But through that process, there was still kind of the big missing piece of what we were going to do with vehicle emissions, right? And at the time, this is a long time ago now, there was no clear solution, right? It was hybrids, fuel cells, the hydrogen highway, right? I don’t really remember, and we don’t talk about that as much anymore. Then Tesla entered the scene, and I think as soon as they introduced the Model S, that was. for me, more of an obvious kind of engineering solution at the time that you combine, which I think is maybe underappreciated at this point.

You combine the 18650-lithium-ion cell, which is something that no one had attempted to build an EV using a commercially available commoditized lithium-ion cell. And I think the genius at the time, I think a lot of credit goes to JB Straubel, the, you one of the founders and CTO of Tesla, for seeing the potential of that architecture, a battery cell that had been commercialized by Sony, more than 20 years before for camcorders and then using the laptops and, and power tools that, you could use this, high energy density, relatively low cost cell, and then start asking questions, how many of these could you fit in a large vehicle? How much range could that vehicle have if you had over 7,000 of those cells in it? And what happens if you take this DC fast charging technology that Nissan had helped to pioneer in Japan and say, well, maybe we can do better than 50 KW, maybe you can go up to 150. And I think those two engineering innovations are really, again, kind of looking for what unlocks the market. I think that was it.

You know, of course, you need to add fuel to that fire. You need the capital and the vision. I think Elon gets a lot of credit for that, but I think the technology and seeing the potential, thinking about what would a no compromise electric vehicle look like. And obviously people like to look at the screen and other things about the cars. But I think the reason why we’re in this place we are now, where EVs have really kind of taken over for new vehicles in most vehicle segments is because of those innovations that Tesla pioneered 12 years ago when the Model S hit the market. And I don’t know if that gets enough, kind of attention. There’s a lot of EVs now available, but I think those were kind of an inflection point in the industry. So that’s really why, from a career standpoint, why I went to be a part of that journey of building out the supercharger network for Tesla.

Getting back to SolaREIT, I think what I see is the potential for companies in the solar and battery storage industry right now are how do we move faster? What are the barriers that are still present in these markets? It’s pretty clear now, I think, that solar battery storage and EV charging is kind of the trifecta of the clean energy economy.

That kind of answers most of the major questions. Of course, it doesn’t answer the tail scenarios. And yes, there’s obviously still a role for geothermal, for wind, for other technologies. But I think the lion’s share of where the solutions lie. And again, going back to what is the quickest way to reduce fossil fuel usage for air pollution, for climate change, for all these reasons, solar, battery storage, EV charging, and electric vehicles. Getting back to SolaREIT, the model that we have is really to unlock capital and to be able to help accelerate the deployment and development of solar and battery storage projects in the United States. And I think this is where, getting back to my mindset of like, what are the barriers to more rapid cleaning up of our economy, I think that’s the scale that we’re at now, that the technology is there. The policy has been there in the past. Obviously, we can talk about where the future policy may lie with the new administration. But I think that now the point that we’re at in the industry now is what do we need to really put the pedal to the metal, if you will, on accelerating the clean energy transition.

Wes Ashworth (10:53)

So, can you compare and contrast a little bit the model that SolaREIT uses in terms of financing these projects, how that compares to more traditional models and just some of the differentiators there and what you’re doing that’s unique?

David Felix (11:06)

Yeah, since we focus strictly on the real estate, just on the land under solar and battery storage projects, that really allows us to be laser focused on what is just critically important for ensuring that projects are going to get built and are operational. So, it allows our process, our documentation, our underwriting due diligence, to be extremely efficient and quick and basically what we’re doing is confirming diligence items that developers would need to do anyway for their tax equity and debt financing and also if they’re just going to be selling the project. The things that they’re doing anyway for those processes are, we’re going to be reviewing that same information and generally aren’t asking developers to go kind of above and beyond what they’d be doing normally. So, it really allows developers to monetize the land in a way that they wouldn’t have otherwise been able to. And the fact that the land itself is not eligible for receiving the tax credit, it’s not, you know, can’t count it in your ITC basis.

It basically, it is a kind of a perfect match where there wasn’t really a good source of capital for financing the land specifically. And that’s really, you know, that our company was born out of realizing that need, seeing that need firsthand as project developers ourselves, as the founders were.

Wes Ashworth (12:32)

Yeah, so thinking about that, with developers moving from leasing to outright land purchases, can you elaborate on the advantages on this approach and why you advocate for it and get into that a bit more?

David Felix (12:42)

Yeah, that’s a great question. You know, some of the developers that we’ve been working with for years, you we’ve seen some of their strategies completely flip from, originally leading with a preference for leasing to now leading with offering to acquire land from landowners. And the reason is that they have more control, there’s less risk, there’s more capital in it for them. So, I think in the past, purchase options have been maybe frowned upon because you’re kind of setting yourself up for this big capital infusion that you’re going to need to just take down the land. So, in working with us, developers know that they have a source of capital that will be there when they’re ready to execute on purchase options. So, if they have a landowner who’s willing to sell their land, we’ve seen that that is becoming a preferred approach for various reasons, you know, that’s not always the case.

A lot of landowners don’t want to sell, can’t sell. We have land financing options where the landowner can retain ownership of the land that I think are still very beneficial for the developer. and for the landowner, but when there is an opportunity for acquiring the land, like I said, we’re seeing developers that we’ve been working with for a long time who’ve completely done a 180 on their land acquisition strategy.

Wes Ashworth (13:51)

Yeah, any specific challenges you’ve seen when developers are making that shift from leasing to more focusing on the owning and financing piece of that?

David Felix (14:03)

It’s a good question. I think the biggest challenge is still, comes back to, you’re still beholden to what the landowners want to do. Anybody that’s been developing for projects has run into scenarios where you’ve got a bunch of siblings fighting over what’s going to happen with the land. It’s been in the family for many generations. We’re not selling it. So, I think it’s still, you still are really at the whim of what the landowner ultimately wants to and is able to do. But what we do here at SolaREIT is give project developers a suite of options that they can put in front of landowners to give them maybe more scenarios that they can explore with landowners. So maybe they weren’t initially excited about the idea of selling the land, but through time and seeing other options, it may become a more valuable option for the landowners.

We also can buy out a lease revenue stream, so if the landowner wants to retain ownership, basically we can write them a big check upfront. We would then receive the ongoing lease payments over time, but that landowner can then have that big capital infusion early on, not wait around for their lease payments for a long period of time. And then they still own the land. So, it’s kind of a win-win for landowners. So that’s an example of something that we kind of have a product that will work regardless of what the landowner preferences are. There’s value to be unlocked in the land in working with us, regardless of what that landowner’s preference may be.

Wes Ashworth (15:32)

Yeah, super interesting. And switching over a little bit to battery storage projects. So, financing for standalone battery storage is still somewhat unique in the market. Can you discuss how SolaREIT is enabling this and what potential you see for battery storage in the renewable energy landscape?

David Felix (15:46)

Yeah, well, we see a lot of potential in battery storage. Like I said, I think it’s an important part of the trifecta of solar and EV. Obviously, the intermittency, there’s a lot of things that solar, as great as it is, can’t do when putting it head-to-head with a firm fossil generation. So, I think that’s become obvious. Last stat I saw was 80% of the new capacity in last year’s interconnection queue was solar and storage. I think a large component of that is storage, as far as the shape of that curve growing over time, but it is relatively new still. I think there are some challenges I think that storage faces with some traditional financiers. And again, since we are able to just focus on the land, what we really care about is there a constructable asset that is ready to build on top of the land?

Since it’s really just the land, we’re really able to narrow in on just the most critical aspects of the due diligence process and to be able to say this is a source of capital that storage developers can unlock when there may be more headwinds for some of the traditional sources of financing that they’ve used on solar projects in the past. I think this has become a really key financing solution for some of the largest battery storage developers in the country is being able to unlock the capital that’s sitting on the land under these projects.

Wes Ashworth (17:13)

Yeah, and shifting gears a little bit just to just some industry insights, emerging trends and thinking about market volatility and strategies and it comes up all the time. So, I think we’ve talked about the community solar, other energy projects, face constant market shifts. Like how do you stay adaptable to changes like policy fluctuations and what advice would you offer to developers in this rapidly evolving environment?

David Felix (17:37)

Yeah. I mean, anyone who’s been in this industry for a while will know that there’s always ups and downs, right? There’s always state markets that are really going well. And then eventually they make it shut down. And then another market opens up. I kind of think of it as like the musical chairs of solar markets, right? So, California community solar, maybe it’s not going great, but New Mexico just opened a community solar program. So, I think the important aspects work for us, and this is why we work with really developers of all shapes and sizes and projects of all sizes as well. Really, the only thing we don’t do is behind the meter, smaller residential type of projects. But we’re very active in community solar, all the way up to extremely large utility scale solar and storage projects, so I think it’s important for project developers to really think about all the options that they have when it comes to markets that they’re participating in and when it comes to how they’re choosing to finance their companies and their projects.

So, working with partners that have experience, the individuals on the team that have worked in these markets and that have the track record and understanding of how these markets have developed over time, I think is really important. I was just looking at it actually since the Energy Policy Act passed in 2005, the Solar Investment Tax Credit has needed to be extended six times. I remember each of those six times where it’s got to get the project commissioned before the end of the year, ruining everyone in the industry’s holiday breaks. It wasn’t until the IRA, a couple of years ago, when we got a 10-year extension where we maybe got to take a sigh of relief, a breath that we had that much runway on it.

I think now we’re maybe back in the mode of seeing some uncertainty in the future as far as what’s going to happen with the IRA with the new administration. So, I think, again, it goes back to the basics of having some diversification in the markets that you’re working in as a developer and also making sure that you are pulling every lever that you have available to you when it comes to financing your projects. And if you can monetize the land under either operating projects or projects you have in development, it’s a good option that really doesn’t take a lot of added time or complexity when compared to other sources of financing.

Wes Ashworth (20:09)

Yeah, great insight there. And you segue kind of perfectly into the next topic of thinking about just post-election, incoming administration, it has the potential to shift policy priorities in renewable energy. I think overall, the sentiment is still positive as a whole, and overall, as I’m talking to the industry and thinking about that. But how do you see these changes just fostering or hindering innovation in the solar and energy storage sectors, and specifically how it influences SolaREIT’s future projects and partnerships?

David Felix (20:41)

No, I would agree with you. I mean, I think that’s kind of the common feeling in the industry right now. I think the term of, there might be some small changes, but it’s not going to get completely wiped out, I think probably resonates with most people right now. I think ultimately, at least how I feel is nobody really knows for sure. We’re still only a few weeks after the election and it’s a little bit until the new administration comes in. But I think there is a general optimism around there not being drastic, significant negative impacts to the industry. Definitely a big question mark around tariff risk and how that may impact project economics. I think it ultimately goes back to what happened looking at prior presidents.

I think some projects that may have been on the margin during the last administration where there’s some tariff impacts, maybe some of those projects had to be canceled or delayed. Obviously, COVID had an impact on project schedules and other shipping things across the border, lots of impacts. So, I think there are some headwinds, maybe some uncertainty around it, but I think the developers who are well positioned have strong projects, have accounted for some tariff risk, and kind of mitigated where they can, I think we’ll do fine. But I think, are there going to be some negative impacts on the margins and projects that maybe were questionable anyway? Yes, I think that’s probably a fair assessment, but I think the trajectory for the industry is still very positive.

Maybe this is little bit bent in the curve, but I think we’re all still going in a really strong direction. I was just looking at it, I think we’re going to install, as an industry, 50 gigawatts of solar this year is what I was looking at. Every year continues to be significant growth, I think we’re going to continue to grow as an industry and adapt to the changes that are coming.

Wes Ashworth (22:34)

Yeah, no, I agree completely. And shifting over a little bit just to focus on decentralization. What role do you see decentralization playing in solar energy and storage? How solar repositioned within this broader trend?

David Felix (22:47)

Yeah, I think that’s a critical piece, one of the things we haven’t talked about yet is just the significant impact on delays for transmission and interconnection for distributed projects, you know, solar and battery storage. I think decentralization is a really important part of the solution there. Obviously, with the massive uptick in growth in data centers driven by AI, I think it’s, the traditional timelines for transmission projects taking decades is not compatible with the time schedule that these data centers and other new load, just broader electrification. it’s going to be critical to look at the full potential of solar and battery storage and EV charging to help to meet these future needs. When I say EV charging, I think about vehicle to grid applications where you have these many gigawatt hours of batteries rolling around during the day that are going to be stationary at certain periods of time. Those could be important grid assets in the future.

So, I think it all needs to work together cohesively to help solve this growing energy demand that we’re seeing. And decentralization, I think, is an important part of that. I think SolaREIT is really in a good position to support developers who are again developing any type of project. Again, community solar projects down to fairly small sizes, even small battery storage projects. These all serve an important role and will be continuing to serve an important role in the energy ecosystem in the future. We can just be viewed as a partner for developers who are working in these markets to be able to monetize their land and to allow them to focus on financing the projects, bringing the projects online.

We’re kind of a, I like to say on a good day, land is just boring, right? It’s just something that developers need to deal with, right? It’s like, well, gonna get my site control, gonna lock it up for as long as I can, go finish developing the project and get it built. On a bad day, land can be a pain in the neck. So, we’re there to help really provide more optionality and solutions for developers so they can focus on, especially smaller shops. They can really benefit in leveraging the land that can really impact and support their overall financing needs and ability to develop and continue focusing on developing new projects.

We ask a lot of developers in this country, right? They wear a lot of the risk in this energy transition. Like, as you said, there’s a lot of uncertainty in political landscape, markets coming and going, long time scales, like interconnection cues. There’s a lot of risk. And we offer kind of a stabilizing force, for developers to be able to leverage something that they may not be aware they are able to leverage the land under the feet and under their projects, right? That there’s some solvency there and ability to be able to use that capital for other development needs as they’re continuing to grow their companies and their projects.

Wes Ashworth (25:50)

Yeah, sure. And thinking about just other pains in the necks for developers that you hit on there. And you’ve already touched on a couple, but what are some of the biggest challenges developers face today, especially concerning land acquisition and financing? And then specifically, how does SolaREIT help alleviate those pain points?

David Felix (26:04)

Yeah, I mean, the first one that comes to mind for me, firsthand experience developing projects was always interconnection queues. I think that problem has only gotten worse, unfortunately. Queue reform, interconnection queues getting totally jammed across the country. So, I think that is definitely one of the biggest pain points. Obviously, permitting can be a pain in certain areas, certain types of projects, selecting the best sites. I think it can also be challenging. Again, a lot of the good sites for these types of projects have been taken in a lot of the active markets. I think what we’re able to do again is since we’re able to work with all types of developers and all types of projects, being able to monetize those projects in a different way, being able to not focus on securing additional sources of capital, dilutive capital in some cases.

This is going to be a really good option for developers to be able to continue diversifying into new markets, new types of projects. So, it helps them to stretch their budgets further without having a huge lift. That would be necessary for some types of financing.

Wes Ashworth (27:16)

Yeah, thinking about it too, just their pain points. Have you noticed any trends in how developer challenges have evolved over the past few years? Like is it the same things five years ago as it is today that’s keeping them up at night? Has it evolved dramatically? Like what have you seen there?

David Felix (27:32)

Yeah, mean, I think some things have gotten better. Some things have gotten worse. It’s kind of a mixed bag, I would say. I mean, interconnection queues seem like they’re only getting worse. I’m sorry to say. That doesn’t seem like it’s gotten much better. It’s all about getting to the best queue position in a certain market. But obviously, cost of modules, think the availability of hardware, EPC contractors level of experience. I think a lot of the elements of developing a project have improved over time.

Again, there’s always headwinds with interconnection, tariff risk, insurance costs after major hail events. There’s definitely, it is a mixed bag. But as I said, I think we ask a lot of the developer community in this country and, I think again, there’s going to be more headwinds in some areas. So, I think it’s really important that developers are able to access new sources of capital that they may not have thought of before to be able to continue fueling their growth.

Wes Ashworth (28:39)

Yeah, when’s the right time for a developer to bring in a SolaREIT or start that conversation?

David Felix (28:46)

Yeah, we actually, we like to come in really early to start conversations to understand how developers are operating. Everyone’s a little bit different as far as the types of projects where they’re developing. So, we like to be a partner from the beginning and to be able to help developers think through their land acquisition strategy and to be able to help them implement that. As far as when we’re actually able to close, we do look for projects to be basically construction ready. So, we don’t want to end up in a scenario where we’re owning land that does not have an energy project on it. That’s not really part of our business model. We want to make sure that they have the basic building blocks of having a constructible project. That’s having an interconnect agreement, having their discretionary permits, site control, obviously, some basic information about the property to make sure they’re able to build the project that they’re intending to on that site.

So, we want to make sure there’s basically no binary deal killer type risk still there before we close. As far as talking to developers, pricing out, looking at terms and conditions, we do that well in advance. But as far as actually closing, we want to make sure that it’s not just going to be vacant land when we’re done.

Wes Ashworth (29:55)

Yeah, and thinking about the project development side a little bit, can you explain SolaREIT’s checklist for determining when to invest in a project, including factors like discretionary permits, site control, and interconnect that you just mentioned as well?

David Felix (30:07)

Yeah, it’s really those things, I would say those are the biggest. Interconnection, discretionary permits, site control, other things like a clean phase one ESA, title and survey, things like that. Again, things that the project developers are going to need to be getting anyway for their tax equity and debt, or if they’re going to be selling the project, are all standard things that developers are going to have available anyway. So, we’re really not asking developers to go above and beyond what they would be needing to do anyway for their overall project financing plans.

Wes Ashworth (30:38)

Yeah, any common red flags that would make you hesitant to invest in a project, like things that come up pretty frequently or things that steer you guys away a little bit?

David Felix (30:46)

I wouldn’t say red flags, but things that we have a certain program for. Brownfield sites, sites that do have environmental contamination, have financed property that fits into that category, but we have a special process that we need to go through. I wouldn’t necessarily call those red flags, but it would be special circumstances.

I’d say that the only reason we decline to move forward on projects maybe is if they’re too small. There are certain kinds of minimum size requirements that we have, we’ve secured about a billion dollars of capital to go and finance these investments and in order to deploy, a significant amount of capital into, into land investments, there has to be a certain volume and scale to the individual transactions so that there can be a reason why we need to decline certain opportunities. Obviously, like I said, things behind the meter, residential, other things like that that may come up periodically, that’s not something that we invest in. Otherwise, I’d say it’s all fair game for solar and battery storage projects.

Wes Ashworth (31:44)

Yeah, you mentioned the range from smaller to larger. What’s a typical range? The smallest you would probably come in and maybe the largest too.

David Felix (31:52)

Yeah, that’s a great question. I’d say we try to keep our minimum check size to around a million dollars. There are exceptions to that, but again, it’s kind of a constant battle of trying to keep the volume up. And I’d say our sweet spot is maybe in the five to $15 million range. We have done quite a few significantly higher than that.

But if I were to draw a bell curve of our transactions over time, I’d say the peak of that bell curve is probably in that $5 to $15 million range, but quite a bit on the tails on either side also.

Wes Ashworth (32:24)

Yeah, good to know. Transitioning a little bit to just some key industry changes and just looking forward. So, in your opinion, what are the most critical industry changes or advancements needed to accelerate the clean energy adoption?

David Felix (32:38)

Yeah, that’s a great question. I wish I had a crystal ball on that one. Again, getting back to interconnection cues, transmission, taking decades in some cases, I think those are significant bottlenecks that seem to not have a clear path to resolution right now. Perhaps there’s, in thinking about a scenario of where deregulation may be beneficial. And the future, I think, maybe all parties would agree that finding ways to streamline interconnection and transmission build out in this country are very high on that list of how we accelerate moving to clean energy as quickly as possible.

Beyond that, I think we’re seeing state markets again, kind of opening, in some cases, community solar, I think is still a very exciting growth area. obviously not everywhere in the country, but I think that’s still a great option. And we work with a lot of the community solar developers who are active in those different markets. And I think that’s an important area of growth, you know, battery storage, we’ve talked about. I think we’re still in the infancy of the battery storage market and seeing what the true potential is for that technology and how it can benefit the growth in this transition to more intermittent renewable sources. Those are the things I think about as far as industry changes. I mean, we’ve talked about tariffs a little bit. I think those are more like managing downside risk. But as far as growth opportunities, I think it’s a question of how do we remove the barriers that we’re all experiencing, transmission and interconnection being kind of top of that list.

Wes Ashworth (34:12)

Yeah, no, without a doubt. And just thinking about a couple other things as we get closer to the end of the episode, but any major misconceptions about finance and clean energy projects that you’d like to clarify for our listeners so you can debunk them right now, any questions that come up commonly or if you hear some things where you’re like, it’s not actually that accurate, it’s more this, like give you a free rein, go ahead and touch on some of those for us.

David Felix (34:38)

Yeah, no, that’s a great question. I think there’s a few of them that come to mind for me. One of them that we run into is that financing challenges are only for larger projects, right? That if you’re doing smaller projects, financing should be much easier. Not necessarily the case, right? Ultimately, you’re still going to need to go through a lot of the same processes. The paperwork is generally similar. The legal fees, a lot of it is going to be not that much less painful, I would say, for smaller projects.

Again, this gets to the benefit of working with partners who are able to kind of grow with developers as they move into different markets. We’ve worked with a bunch who’ve started with smaller projects and then moved into larger scale projects because they’ve realized that the pain points are going to be similar, and the upside is potentially much higher for larger projects. Obviously, there’s delays and other issues with big projects, interconnection that we talked about, so there’s a balance, I think. I’d say that some of the best developers that we work with have a kind of variety of projects that they have become experts in developing. So, I think that’s probably an important one.

But also, like I talked about at the beginning, this conception that leasing is better than purchasing, I think has become pretty prevalent in the industry. It’s kind of a traditional way of doing things, it’s something everybody understands. You’re not really taking on a risk of needing to come up with capital to purchase the site. And that all makes sense, I think, in the context of not having a really strong partner who is able to be that financing partner for you, for purchasing land and realizing that there are the added benefits, added return potential for developers to be able to pursue purchase options where the landowners is willing and interested in doing that. So I think that that’s probably the biggest one, that’s kind of a microcosm to the part of the market that we’re in that we see every day. But, I think it’s an important one, especially when developers are out there thinking about how to manage risk, how to stabilize development, how to wring every dollar out of their projects, is really making sure they’re considering all the options they have available to themselves.

Again, land is something that can be kind of boring or not really a focal point. But I think, making sure that folks are able to leverage all the options they have available to themselves I think is really important, especially when there’s some uncertainty and risk that they’re going to need to be managing.

Wes Ashworth (37:17)

Yeah, any surprising facts about clean energy financing that maybe even industry experts or insiders might not know, any of those come to mind?

David Felix (37:28)

I think a big one is that we see for the land that we’re looking at under battery storage projects, I’d say, in particular, because there can be a big difference in the numbers associated with land under battery storage versus solar. Some of the projects that were financing the land under our very small footprint, down to a quarter acre in some cases. But you can fit quite a few megawatt hours of batteries on a quarter acre in an urban environment. And that’s becoming increasingly important, I think. And what we really look at when we’re looking at the numbers behind these opportunities, we focus on what is the potential for that project, to what is its revenue assumptions over time? How much would we feel comfortable with that project paying us for lease payments over time?

That ratio, I would say, of the land size to the revenue assumptions is drastically different for battery storage projects. Obviously solar is a huge footprint. Battery storage is much more condensed on a megawatt hours per acre basis. So, I would say that is maybe an interesting trend that we’re seeing in the potential financing options for battery storage projects in particular.

Wes Ashworth (38:52)

Yeah, that’s a good one. Very insightful. So finally, you’ve made a big impact in your career, and you’ve made that very intentionally and you continue to make that impact in the space. So, for those looking to make a meaningful impact in renewable energy, what advice would you offer them based on your experience?

David Felix (39:09)

Yeah, I love this question. I think a lot about mentoring. I think it’s an important part of growing in this industry is thinking about mentors that I’ve had that I’m very grateful for in my career and thinking about how I can try to be supportive of up-and-coming folks in the industry. A few things I think about, this is a very broad and long-term transition, we’re talking about fundamentally changing how humans produce and use energy across our society, across everything that we do. And it’s going to take, as fast as I want it to go, I think it is a multi-generational project. Hopefully, we can make it go as quickly as possible. Every day that we move faster is a little bit less air pollution in the air, it’s a little bit less carbon emissions, a little bit less impact.

We talked a lot about specific targets for, like GHG reduction, and I guess I think about it in the terms of, we’re already seeing impacts and the carbon that’s already up in the atmosphere is going to be causing issues for a long time, so every day that we save, every ton that we don’t emit is a step in the right direction. And it’s not like there’s going to be a magic bullet that solves all this. It’s a lot of hard work over decades to really implement these solutions that we all are seeing the potential of now. I’d say it’s a really exciting time. Like I said, when I started, solar was $5 a watt for a solar panel, and now it’s, what, $0.30 a watt, less than that. So, the costs have come down, the commodification of solar panels, of lithium ion cells. We have all the technology. There’s still a lot of potential for wind and geothermal. It’s all here. Now it’s a question of how fast we can go.

So, I would say the biggest thing to be excited about is that there’s a lot of opportunity. And then I think the question is, what part of it do you want to be in? So, I started my career in engineering. I’ve moved into project development and finance. There’s a whole universe of regulatory, of legal, lobbying, turning the wrenches, maintaining the systems, there’s all sorts of, there’s something for everybody. Even I think about whoever drew up the climate stripes, right? Like the magic of visualizing what is happening and like the whole art and everything. There’s something for everybody in this transition, and I think it’s just a really exciting thing to be a part of and it’s something that you can devote your entire career to. Cause like I said, as fast as I think we all want it to move. Unfortunately, I think it’s going to be around for everyone who’s alive today for all of their life and probably, future generations as well, so there’s no shortage of opportunity, I would say.

And I would say, reach out to people in the industry. Networking, I think, is important. Getting to know different opportunities that are out there, and keeping an open mind with, and kind of as much as you can, keeping a pulse on the industry and what’s happening and trying to see these changes as they’re evolving over time, because there’s always something new. But yeah, I think it’s a very exciting time for young folks in the industry.

Wes Ashworth (42:08)

I agree wholeheartedly. As we wrap up, any final pieces, words of wisdom, insights, things you didn’t get to touch on that you would like to add, the floor is yours.

David Felix (42:18)

I think I just said it all in the last one. I guess the biggest thing is, I think there can be kind of discouraging moments, right? There can be setbacks, can be kind of, wow, we wish that would have gone a different way. Or we really wish this utility commission would make better decisions. There are always setbacks. We call it “the solar coaster” in the industry. Maybe we need a new name because it doesn’t include battery storage. There’s always ups and downs, but the general trajectory is very encouraging, and I don’t think there’s any stopping it.

The baseline fundamentals, cost of the technology, even if other breakthroughs happen, I think there is just significant momentum that is unstoppable at this point, so I always go back to that when I may be discouraged about whatever the latest setback might be, that the overall trend is really positive and to just keep chugging ahead and making progress. Cause every little bit counts.

Wes Ashworth (43:17)

Yeah, I love that. Such a great way to wrap it up. Thank you so much David for coming on the show. Thank you as always to our listeners out there for tuning into this episode of Green Giants. We hope you enjoyed the conversation with David Felix and gained valuable insights into the future of clean energy and innovation at SolaREIT If you loved this episode, which I’m sure you did, don’t forget to subscribe to the podcast, share it with your friends, your colleagues, or anyone passionate about renewable energy. And with that, we will see you next time.