A glossary of solar finance terms
Short, compliance-safe definitions of the terms that appear in our insights, markets, and service pages. This site is informational only and is not investment, legal, or tax advice.
- Accredited investor
- A person or entity that meets wealth, income, or professional tests under U.S. securities rules and may be offered certain private placements. This website is not an offer or solicitation. Where an investment proceeds, it is typically limited to accredited or otherwise qualified investors and only through definitive offering documents.
- Who can invest with Sunlight Energy?For investors
- Additionality
- The claim that a clean-energy purchase caused generation that would not otherwise have been built or operated. Corporate buyers often look for additionality when they want Scope 2 claims that track new supply, not just unbundled certificates from existing plants.
- What is a virtual PPA?Renewable energy credits
- Asset management
- The owner-side function that oversees an operating solar or storage plant after commercial operation: monitoring, vendor accountability, reporting, compliance, and lifecycle planning. It is broader than a break-fix O&M contract and sits with the party responsible for long-term yield.
- Solar asset managementHow does O&M protect yield?
- Basis risk
- The mismatch between the wholesale price at a project's injection node and the hub or index used to settle a virtual PPA or hedge. Basis can widen or invert over a long tenor, so counterparties allocate it explicitly rather than treating a hub price as the plant's realized price.
- What is a virtual PPA?PPA structuring
- Battery energy storage (BESS)
- A grid-connected battery that charges and discharges to stack energy, capacity, ancillary, or contracted uses. After federal credit changes, storage is often analyzed on a different Section 48E path than wind and solar. That is a description of the statute—not a determination that any project qualifies.
- Battery energy storage marketHow do BESS projects make money?
- Beginning of construction
- The IRS facts-and-circumstances test—and any applicable safe harbor—used to date when a facility began construction for tax-credit purposes. Physical work of a significant nature and, where still available, a spending safe harbor are the usual methods. Documentation has to survive diligence; this is not a tax opinion.
- What does the end of the ITC mean?What is tax equity?
- Behind the meter
- Generation or storage sited on the customer's side of the utility meter, typically offsetting retail load at a building or campus. Behind-the-meter systems face different interconnection, offtake, and credit questions than front-of-the-meter plants that sell into wholesale markets.
- What is C&I solar?Solar for REITs and CRE
- Bill credit
- A dollar or kilowatt-hour credit applied to a subscriber's utility bill from a shared community-solar array. The credit is how households and businesses receive value without rooftop ownership; state statutes set the rate, term, and low-to-moderate-income rules.
- What is community solar?Community solar explainer
- Broker-dealer
- A firm registered to effect securities transactions for others or for its own account. Sunlight Energy Investments is an independent U.S. platform and is not a registered broker-dealer. This site is informational only and is not an offer to sell or a solicitation to buy any security.
- About Sunlight EnergyDisclosures
- Capacity factor
- Actual energy produced over a period divided by the energy the plant would have produced if it had run at nameplate capacity the entire time. Solar capacity factor varies with resource, design, soiling, and downtime; it is an underwriting input, not a performance guarantee.
- How do you underwrite a solar project?Utility-scale solar
- Commercial and industrial (C&I) solar
- Generation sized for a business, campus, or industrial load—on the roof, in a parking canopy, or offsite through a power purchase agreement. Offtakers lock in a portion of their power price; investors underwrite contracted cash flows with a typically shorter development cycle than utility-scale plants.
- C&I solar marketSolar for REITs and CRE
- Commercial operation date (COD)
- The date a project is accepted as operating under its offtake, interconnection, and financing documents—usually after testing, punch-list closeout, and permission to operate. COD is when contracted revenue typically starts and when many construction and tax-credit clocks are measured.
- How do you underwrite a solar project?What makes a solar site bankable?
- Community solar
- A shared offsite array whose subscribers receive bill credits rather than installing rooftop panels. Enabling state statutes, subscriber mix, and low-to-moderate-income provisions determine where the model works and how it is underwritten.
- Community solar marketWhat is community solar?
- Curtailment
- An instruction or market outcome that reduces a plant's output below what it could have produced. PPAs allocate who bears economic curtailment, congestion, and force-majeure events; vague language is a common reason a contract fails diligence.
- What makes a solar PPA bankable?PPA structuring
- Degradation
- The gradual decline in module output over a multi-decade life, typically expressed as an annual percentage in the production model. Yield also erodes from soiling, downtime, and unenforced warranties—so degradation is only one input to long-term performance.
- How does O&M protect yield?Solar asset management
- EPC
- Engineering, procurement, and construction—the contractor (or wrap) responsible for designing, buying equipment for, and building the plant to a specified scope, schedule, and performance test. Bankable EPCs carry warranty, liquidated-damages, and completion-security terms that lenders and tax-equity partners will diligence.
- For developersHow do you underwrite a solar project?
- Foreign entity of concern (FEOC)
- A statutory category used in federal clean-energy credit rules to restrict material assistance and ownership from specified foreign entities. FEOC and related supply-chain tests sit beside construction and placed-in-service gates in current diligence. Eligibility is facts-and-counsel specific.
- What does the end of the ITC mean?What is tax equity?
- Front of the meter
- A plant that interconnects on the utility or wholesale side of the customer meter and sells energy, capacity, or attributes into the grid or under a wholesale PPA. Utility-scale solar and most standalone storage are front-of-the-meter assets.
- Utility-scale solarMerchant vs contracted offtake
- Hyperscaler
- A large cloud or AI operator whose data-center load is a primary driver of near-term U.S. electricity-demand growth. Hyperscalers typically seek firm, additional clean power—not unbundled certificates alone—and often contract through physical or virtual PPAs alongside on-site or adjacent generation.
- Why do data centers need clean energy?Data-center energy
- Interconnection
- The process and agreement that let a project connect to the transmission or distribution grid. Queue position, upgrade costs, and cluster-study rules are often the largest schedule risk in U.S. solar. FERC Order 2023 shifted large-generator studies toward first-ready, first-served clusters.
- Why is interconnection a bottleneck?Utility-scale solar
- Inverted lease
- A tax-equity structure in which the sponsor leases the project to a tax-equity investor, who claims the credit and pays rent. It is one of several monetization paths beside partnership flips, sale-leasebacks, and Section 6418 transfers. Structure choice is facts-and-counsel specific.
- What is tax equity?
- Investment tax credit (ITC)
- A federal credit historically claimed on eligible energy property basis, now largely administered through the Section 48E clean electricity investment credit for new facilities. Wind and solar that miss statutory construction and placed-in-service gates generally lose remaining credit eligibility; storage is often analyzed on a separate path. This is not a qualification opinion.
- What does the end of the ITC mean?What is tax equity?
- Late-stage / shovel-ready
- A project that has cleared or is approaching key development milestones—typically site control, a viable interconnection path, and a clear offtake strategy—so remaining work is execution rather than origination. Sunlight partners with developers on late-stage and shovel-ready projects.
- For developersHow is a solar project financed?
- Levelized cost of energy (LCOE)
- A modeled lifetime cost per megawatt-hour used to compare generating technologies. Published LCOE series (for example Lazard) help explain why solar often clears as new-build generation; they are not a forecast of any project's returns or a substitute for an underwrite.
- What is utility-scale solar?Why solar in institutional portfolios?
- Limited partner
- An investor in a project or fund vehicle whose liability is generally limited to committed capital and who does not manage the asset day to day. Where Sunlight project equity proceeds, participation is typically as a limited partner and only through definitive offering documents.
- What is project equity?How should institutions build a solar portfolio?
- MACRS
- The Modified Accelerated Cost Recovery System—the U.S. depreciation schedule that determines how quickly eligible project basis is deducted for tax purposes. Depreciation, alongside credits, is a core input to tax-equity sizing. Treatment depends on asset class and placed-in-service date.
- What is tax equity?
- Merchant solar
- A plant that sells energy into wholesale markets without a long-term contracted price for all or most of its output. Merchant exposure can change leverage and return shape; most lenders and tax-equity partners still underwrite a contracted piece. Blended structures are common once the contracted slice covers debt.
- Merchant vs contracted offtakeWhat makes a solar PPA bankable?
- Net metering
- A utility billing arrangement that credits behind-the-meter generation exported to the grid, often at or near the retail rate, subject to state and utility tariffs. Successor tariffs, export rates, and program caps vary widely and belong in C&I and distributed underwriting.
- C&I solar marketReal estate solar
- Notice to proceed (NTP)
- The contractual instruction that authorizes the EPC or other contractors to begin construction work, usually after financing, permits, and major equipment conditions are satisfied. NTP is a milestone in the path from late-stage development to commercial operation.
- For developersHow is a solar project financed?
- Offtaker
- The counterparty that buys the project's energy, capacity, or attributes under a PPA or similar contract. Offtaker credit is typically the first screen lenders and tax-equity partners apply. Weak counterparties are a common reason a term sheet fails diligence.
- What makes a solar PPA bankable?PPA structuring
- Operations and maintenance (O&M)
- The field and remote work that keeps a plant producing: monitoring, preventive and corrective maintenance, vegetation, and warranty claims. Institutional O&M is vendor accountability plus data, not a break-fix contract alone.
- How does O&M protect yield?Solar asset management
- Partnership flip
- A tax-equity structure in which the investor holds a large share of income and loss until a target yield is reached, then allocations flip in favor of the sponsor. It remains a primary way to monetize credits and depreciation beside sale-leasebacks, inverted leases, and transfers.
- What is tax equity?
- Performance ratio
- Measured output divided by the output expected from irradiance and the plant's design, used to diagnose underperformance independent of weather. Asset managers use it with availability and soiling data to decide when a variance is a weather story versus a maintenance story.
- How is AI used in operations?How does O&M protect yield?
- Placed in service
- The tax date a facility is ready and available for its intended use. For remaining wind and solar credits after the One Big Beautiful Bill Act, facilities that begin construction after July 4, 2026 generally must be placed in service by December 31, 2027. Interconnection and supply-chain timing sit outside the owner's control.
- What does the end of the ITC mean?Why is interconnection a bottleneck?
- Power purchase agreement (PPA)
- A long-term contract for energy, and often environmental attributes, at an agreed price and tenor. A bankable PPA has a creditworthy offtaker, a tenor that matches the capital stack, defensible pricing, and clear allocation of curtailment and change-in-law risk.
- PPA structuringWhat makes a solar PPA bankable?
- Project equity
- Ownership capital in a specific solar, storage, or digital-infrastructure asset—typically as a limited partner—rather than a share of a public company. Cash flows come from the project's contracted revenue, and investments can lose value, including loss of principal. This website is not an offer or solicitation.
- For investorsHow is a solar project financed?
- Renewable energy credit (REC)
- The environmental attribute of one megawatt-hour of renewable generation. Bundled PPAs, unbundled sales, and state SREC markets can add a second cash-flow stream beside energy. Who owns the RECs decides who can make the environmental claim. Federal tax credits and RECs are separate.
- What are RECs?What is a virtual PPA?
- Sale-leaseback
- A tax-equity structure in which the sponsor sells the project to a tax-equity investor and leases it back. The buyer claims the credit and depreciation; the sponsor operates the asset and pays rent. It is an alternative to a partnership flip or a Section 6418 transfer.
- What is tax equity?
- Scope 2
- Indirect greenhouse-gas emissions from purchased electricity under the GHG Protocol. Market-based Scope 2 claims depend on retiring RECs or equivalent instruments that match the reporting period and market. A VPPA without REC retirement does not by itself support a market-based claim.
- What is a virtual PPA?Can ESG investing deliver returns and impact?
- Section 45Y
- The clean electricity production credit in the Internal Revenue Code. The One Big Beautiful Bill Act terminates 45Y for wind and solar facilities that miss specified beginning-of-construction and placed-in-service gates. Whether a given facility is eligible is a facts-and-counsel question.
- What does the end of the ITC mean?
- Section 48E
- The clean electricity investment credit that succeeded the classic ITC for new facilities. Wind and solar that miss statutory gates generally lose 48E; energy storage is typically analyzed on a separate 48E path and is not on the same phaseout clock. That is not a qualification opinion.
- What does the end of the ITC mean?Why pair solar with storage?
- Section 6418 transferability
- The Internal Revenue Code provision that lets an eligible taxpayer transfer all or a portion of certain clean-energy credits to an unrelated buyer for cash. Transferability created a second monetization path beside partnership flips and does not, by itself, change credit eligibility.
- What is tax equity?
- Solar-plus-storage
- A plant that pairs photovoltaic generation with a battery so energy can be shifted into higher-value hours or firmed for an offtaker. Design choices—duration, AC versus DC coupling, and offtake—drive stacked revenue. Credit rules for the storage leg now often diverge from the solar leg.
- Why pair solar with storage?Battery energy storage market
- Tax equity
- Capital that monetizes federal investment credits and depreciation at financial close. Partnership flips, sale-leasebacks, inverted leases, and Section 6418 transfers are the main tools. Credit phaseouts and beginning-of-construction rules now sit at the center of tax-equity diligence.
- What is tax equity?What does the end of the ITC mean?
- Utility-scale solar
- A multi-megawatt ground-mount plant that sells power under a long-term PPA or into wholesale markets. The investment case is contracted cash flow; the development case is land, queue, and offtake. Interconnection, permitting, and offtake—not module price—are the usual path-to-COD risks.
- Utility-scale marketWhat is utility-scale solar?
- Virtual PPA (VPPA)
- A contract-for-differences that settles the difference between a strike price and a wholesale hub, with no physical delivery to the buyer's meter. Scope 2 claims depend on retiring RECs. Bankability still turns on offtaker credit, tenor, and how basis risk is shared.
- What is a virtual PPA?PPA structuring
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