It’s far easier to finance a microgrid project today than it was just a few years ago thanks to new financing mechanisms and a greater understanding of the technology by investors. Still, some great microgrid projects do not see the light of day because of the gap between a developer’s vision and a financier’s scrutiny.
Developers, sponsors and engineers who work on microgrid projects think in terms of equipment, configurations and benefits, such as resiliency and sustainability. As much as they may agree with the policy goals and beneficial aspects of a microgrid, financiers bring a different point of view to a project. They look at the bottom line and think in terms such as internal rate of return, risk-reward ratios and debt-service coverage ratios. The gap between the two points of view often creates a gulf into which a microgrid project can fall and never reappear into the light of day.
It is possible to bridge the gap, however, by taking the time to understand what financiers look for in a microgrid project.
This white paper lays out how investors and other financiers think about energy projects. The aim is to help move a microgrid from the drawing board to reality by preparing engineering firms, developers and project sponsors to think like those in the lending community.