ECP banks on community solar in New Leaf Energy deal

'Today, there are only a handful of states with established and effective community solar programs,' ECP's Andrew Gilbert says. 'But we expect more states to implement these programs.'

The creation and expansion of community solar programs will be a “major driver” of growth for the recently formed New Leaf Energy, said Andrew Gilbert, a partner at ECP, in an interview with PE Hub. “New Leaf is also using its development expertise to expand into storage and larger projects, which could further accelerate growth,” Gilbert said.

In July, Borrego, a San Diego company focused on large-scale solar energy projects, announced the sale of its Lowell, Massachusetts-based development business to ECP, which is headquartered in Summit, New Jersey.

New Leaf focuses on projects related to the distribution of solar energy. In distribution deals, returns are typically higher, projects can be developed more quickly, and capital is at lower risk than deals involving large, utility-scale development, Gilbert said.

The company boasts a pipeline of 450 projects comprising more than 8.5GW of solar and 7GW and 28GWh of energy storage projects. The company will work towards consolidating markets in New York, Massachusetts, Maine, Virginia, Pennsylvania, Delaware and Illinois, among others.

Community solar projects, which allow consumers with no capacity to develop their own solar energy to get government-subsidized solar power, are rapidly developing in the US. Most projects are supported by legislation at both state and federal levels, while private players are increasingly finding ways to tap into the space to satisfy demand for clean energy.

“Today, there are only a handful of states with established and effective community solar programs,” Gilbert said. “But we expect more states to implement these programs.”

Even though the economy, coupled with the snarled global supply chain during the pandemic put a strain on some energy projects, the ECP partner said the situation opened opportunities as well.

“We believe policy uncertainty and supply chain/inflation concerns have put some pressure on valuations but viewed this as a buying opportunity given the long-term, structural tailwinds remain as strong as ever,” he said.

Encouraging news came last week when, after more than a year of negotiations, Senator Joe Manchin (D-WV) and Senate Majority Leader Chuck Schumer (D-NY) reached an agreement to vote on the Inflation Reduction Act of 2022, which includes $369 billion for energy security and climate change.

“The Inflation Reduction Act, if passed, has benefits for many of our portfolio companies,” Gilbert said. “The standalone storage tax credit is very significant, as ECP is investing in storage across six different portfolio companies.”

He explained: “An ability to monetize solar and storage tax credits without raising tax equity is also critical for smaller, distribution-connected projects, of which Convergent, Pivot and New Leaf are all focused on. Transferability of credits levels the playing field for smaller developers.”