ForeFront Power looking for tax equity partners coming off latest deal with NT Solar

ForeFront Power is hoping to line up tax equity for its 2024 portfolio, expected to exceed 100 MW, in a manner similar with its recently concluded transaction with NT Solar, said Bryan Eckstein, ForeFront’s senior vice-president of corporate development and project finance, in an interview with NPM.

NT Solar, a national tax credit syndicator, partnered with ForeFront to finance USD 65m in solar investment tax credits for a portfolio of 100 solar installations across California.

Incentives for renewable energy come through the federal tax system. ForeFront essentially doesn’t have the profit to trigger the tax liability to fully monetize the tax benefits, so they look to partner with investors who are seeking to offset their tax liability by making an equity investment in projects. Therefore, under IRS rules, they are allocated tax benefits that help reduce the cost of power that they deliver to their customers.

NT Solar’s Climate Impact and Revitalization Fund (CIRF) was used to invest in the portfolio. CIRF is a joint effort between NT Solar and National Trust Community Investment Corporation, formed as a way to provide historic preservation and solar tax credit investments within a single platform, both of which have a host of benefits for renewable energy and the decarbonization of the country’s-built environment.

“It’s a way for us to utilize both our expertise in historic preservation investments and renewable energy investments,” added Mike Palien, NT Solar’s Director of Marketing and Communication.

Like its 2023 transaction, most of ForeFront’s 2024 portfolio is moored in California, but its also inclusive of other states.

Eckstein said at present, the company is looking to get a repeat transaction with NT Solar and/or transactions with other tax equity investors.

2023 details

The recent deal marks one of NT Solar’s largest portfolio investments to date and its first deal with ForeFront.

ForeFront is the sole developer of the projects which amounted to more than USD 200m in development costs. The portfolio primarily consists of 64 schools and will connect to four city utility services in some of the largest counties in the state. The projects are mainly parking lot canopy systems. ForeFront will be the long-term owner and operator of the projects.

About 14 projects were operational out of the gate and the remaining projects are essentially constructed and waiting for energization from the utility, according to Eckstein.

“Since then, on a monthly basis, we fund projects that have completed construction, and we’ll continue funding projects throughout the rest of the calendar year,” Eckstein said.

Eckstein said the tax credits will reduce the construction costs, so they can sell power to their customers at a lower dollar-per-kilowatt hour rate. ForeFront will act as the managing member of the partnership and will report everything including tax returns to NT Solar who parcels out the tax credits to the investors.

Several installations within the portfolio will qualify for additional credits or adders for being located in an energy community—locations that have experienced economic hardship stemming from fossil fuel industry or other environmental hardships, such as brownfields or communities in which one or more coal mines or coal-fired plants generating facilities have closed in recent years.

NT Solar is a subsidiary of National Trust Community Investment Corporation, who has invested in more than 200 projects since their establishment in 2000. While they dabble in utility scale projects, they’re more focused on community solar and distributed generation projects in recent years, according to Alyssa Watt, NT Solar’s Senior Transaction Manager.

“We see 100 project sites spread up and down the cost of central and southern California, which in many ways de-risks the investment—different technologies, different system types, different hosts, different off-takers,” Watt told NPM. “There is added value in making a diversified investment like this versus a single utility-scale project.”

Watt said they offer syndicated investments and are always looking to work with new investors and developers like Forefront.

California

California is one of the most established solar markets in the country and has greatly benefited from Net Energy Metering 2.0, which allows ForeFront to cover “extremely high” capital costs for a canopy system, Eckstein said.

“There’s a lot of steel that goes into building these canopy systems—more steel adds more costs—but at least with the legacy net energy metering 2.0, the economics work in California,” Eckstein said.

Canopy projects are also a great land use benefit because of their dual use of providing shading and producing renewable energy, according to Eckstein.

Eckstein said that while they highly value their school customers, constructing projects around school calendars can create some obstacles with their development timelines. Eckstein also noted some new safety provisions that were recently rolled out by the California Division of State Architect have also resulted in some project redesigns.

ForeFront provides a school curriculum alongside all their school solar projects, which develops more interest in STEM and showcases projects installed at the schools.

*This story was originally published exclusively for NPM subscribers last month.


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