Ep 64: The Importance of Creditworthiness with Anchor Tenants in Community Solar

by Dakota Malone | Mar 31, 2025

SUMMARY: Dakota explains the critical role of anchor tenant creditworthiness in the success of community solar projects. He outlines how financially stable anchor tenants—typically large corporations, institutions, or municipalities—subscribe to 40–50% of a solar project, providing the financial foundation needed for developers to secure favorable financing and deliver savings to other subscribers, including low- to moderate-income households. He also discusses industry practices, regulatory insights, and case studies such as the Illinois Solar for All program, emphasizing that strong credit backing ensures long-term project viability and equitable energy access.

Introduction to Community Solar and Anchor Tenants (0:00)

Dakota Malone opens the podcast by reintroducing Community Solar Authority (CSA), which has unlocked access to over $35 million in future energy savings. He highlights that the purpose of these podcasts is to explain the business in an accessible way. This episode focuses on a behind-the-scenes look at how anchor tenant creditworthiness impacts approval and success in community solar projects.

The Role of Anchor Tenants in Community Solar (0:15)

Anchor tenants play a foundational financial role in community solar development. A community solar subscription allows large energy users to receive utility bill credits without installing or owning solar infrastructure—often saving an average of $75,000 annually with no upfront investment. These projects depend heavily on anchor tenants, who subscribe to a significant portion of a project’s capacity and provide the revenue assurance needed for project financing and execution.

Financing Enabled by Strong Anchor Tenants (1:37)

Anchor tenants typically subscribe to 40–50% of a solar project’s total capacity. Their financial stability, such as an investment-grade credit rating, makes the project bankable. Dakota shares a case from Westchester, NY, where a project was saved by securing a hospital as an anchor tenant. The hospital’s A+ credit rating and 20-year commitment enabled lenders to offer favorable terms, reducing financing costs by 150 basis points.

Creditworthiness Beyond Size (2:58)

When evaluating potential anchor tenants, CSA looks beyond just company size. Strong candidates combine stable operations and high creditworthiness. While not all must be investment-grade, there must be sufficient financial documentation to support project underwriting. This review builds confidence that the anchor tenant will remain committed throughout the subscription term.

The Ripple Effects of Strong Credit Tenants (3:44)

The presence of a financially strong anchor tenant creates a cascade of positive effects:

Lower financing costs due to reduced risk
Improved project economics, increasing returns
More competitive subscriber rates
Expanded accessibility, allowing low- to moderate-income (LMI) and credit-challenged subscribers to participate
Boosted market confidence, encouraging further industry and policy support

These are not theoretical impacts; Dakota confirms CSA sees these results in real-world projects.

Real-World Workarounds for Credit Reviews (4:52)

Some companies are reluctant to share financial data. In such cases, CSA may facilitate NDAs between the company and solar developers to complete the required credit review. If a review is entirely off the table, CSA may still allow a limited anchor subscription of under 10% of a project. However, this drastically reduces savings and is not a recommended or common practice.

Case Study: Illinois Solar for All (5:11)

CSA highlights innovative anchor tenant structures in programs like Illinois Solar for All, which focus on serving LMI customers. These projects often involve pairing institutional anchor tenants (like municipal housing authorities) with LMI subscribers to create balanced subscriber portfolios. For example, CSA helped Lawrence County Housing Authority and its 400 residents benefit from a 50% electricity discount, demonstrating how anchor credit quality supports broader community access.

Avoiding Common Pitfalls in Anchor Tenant Management (6:18)

As the industry matures, developers have learned to mitigate risks associated with anchor tenants. These include:

Diversification to avoid over-reliance on one tenant
Thorough due diligence on tenant financial health
Alignment of contract terms with financing timelines and client needs
Clearly defined default remedies in case a tenant withdraws unexpectedly

CSA emphasizes the importance of balancing long-term financing needs with the anchor tenant’s operational flexibility, as demonstrated in a recent deal with a state university.

Final Thoughts and Conclusion (8:36)

Anchor tenant creditworthiness is the bedrock of successful community solar development. It directly influences financing, project economics, and community impact. As the market grows, CSA remains committed to guiding clients through this process and ensuring that strong financial partners help make community solar more accessible and resilient.

To listen to the full episode… go to Spotify to listen.

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If you’re new to my channel, my name is Dakota Malone. I’m a co-founder of Community Solar Authority. We’re a commercial solar developer & consultant on a mission to streamline clean energy deployment.

We deliver turnkey access to community solar for large users of electricity, & our company has unlocked access to $20M+ in future electricity savings for our clients.

Today, we’re focused on educating municipalities, corporations, stakeholders- & other entities consuming lots of electricity to help them benefit from the trillion-dollar clean energy economy.

To our future procurement, facilities, & finance teams we speak to.. we’re here to serve you well with this content ahead of time so that we have a productive conversation when we meet.

Want to access enhanced sustainability & improved operating profit in 90 days?

Book a call and get started.
Here In Service,
Dakota

Read the transcript

(0:00 – 0:14)
Hey guys, this is Dakota Malone, I co-founded Community Solar Authority. We’ve unlocked access to over $35 million plus in future energy savings. We make these podcasts as a way to talk about our business in an easy to digest way.

(0:15 – 0:41)
And today I’m pulling back the curtain and giving you a behind the scenes look at understanding the approval process for anchor tenants in community solar via their credit worthiness. Now, I want to start with the critical role of anchor tenant credit worthiness in community solar projects. So as you know, community solar is one of the most shovel ready strategies to deploy clean energy in the U S to date.

(0:41 – 1:07)
It’s one of those programs that sounds too good to be true, especially when it comes to large energy users, learning how we help our average clients save $75,000 a year on a $0 investment without installing solar. The truth, however, is behind every successful community solar project lies a crucial financial foundation. The anchor tenant, the large energy user that is subscribing and taking up a majority share of that project.

(1:07 – 1:36)
It’s often what allows projects to be financed and executed in the first place and solar developers rely on high quality anchor tenants to support their asset for the longterm. They help promote environmental stewardship and more importantly, provide the opportunity for residential low to moderate income and small business customers to also benefit from lower electricity costs with community solar. So yes, the program is very real and the benefits are great pending on your approval.

(1:37 – 2:03)
Today we’ll explore why anchor tenant credit worthiness matters and how it shapes the entire ecosystem of community solar development. So now let’s talk about the foundation and really understanding anchor tenants in community solar. So as I mentioned, anchor tenants serve as the financial backbone of community solar projects, typically subscribing 40 to 50% of a project’s total capacity based on which market we’re talking about.

(2:03 – 2:28)
These large subscribers, which are often corporations, municipalities, or institutions provide staple predictable revenue streams that make community solar projects bankable. Without them, many projects would struggle to secure the financing necessary to move from concept to reality. There’s actually a story of a Westchester community solar farm in upstate New York, which nearly failed to launch in 2022.

(2:28 – 2:58)
The project’s economics looked bleak until developers secured a local hospital as their anchor tenant. The hospital’s A plus credit rating and 20 year commitment transform the project’s financial outlook, convincing lenders to provide favorable terms that ultimately reduce financing costs by about 150 basis points. Easier said community solar projects don’t make economic sense without 40 to 50% of the project being taken up by financially viable companies.

(2:58 – 3:13)
And here’s an industry insight. When evaluating potential anchor tenants, we look beyond just organizational size. The most valuable anchor tenants combine strong credit worthiness with stable operations, which is why we need to review financials.

(3:13 – 3:44)
It isn’t always about being investment grade as many of our clients that participate are private businesses, but it is about putting a level of confidence into the underwriting process that your business will be there to support the project as an anchor tenant across the term you subscribe to. And now I want to talk about the ripple effect, how these anchor tenants and the quality of their credit worthiness transforms the project economics. So the quality of anchor tenants creates a cascade effect throughout the entire project life cycle.

(3:44 – 4:02)
One, it lowers financing costs. So premium investment grade anchor tenants reduce perceived project risk, leading to better loan terms for the financiers and the trickle down effect for everyone involved. Two, it improves project economics.

(4:02 – 4:19)
So reducing financing costs obviously improves overall project returns, making the project better. Which is why solar developers will aim for the highest level investment grade tenants. It also makes it more competitive when it comes to subscriber rates.

(4:19 – 4:39)
So better economics allow developers to offer more attractive savings to mass market customers. It also increases accessibility. Stronger economics on community solar projects can support inclusion of LMI or low to moderate income or credit challenge subscribers who traditionally may not be able to benefit.

(4:39 – 4:51)
And lastly, it also deploys market confidence. Successful projects build industry momentum and policy support to continue the growth of community solar. This cascade effect isn’t theoretical.

(4:52 – 5:10)
We see it all the time in our work, consulting alongside some of the most significant community solar developers in the space. There are instances where private companies have a blanket policy of we don’t share financials. Our workaround is to execute NDAs between solar developers and their company such that we can have an effective financial review completed.

(5:11 – 5:40)
Otherwise, if financial review is completely off the table, we can subscribe these anchors to typically less than 10% of a given project to avoid review, but it decimates their savings and isn’t something we routinely practice because frankly, it’s a waste of time. Here’s some real world applications to the case studies on some anchor tenant innovation. Across the country, community solar programs are finding creative approaches to structuring anchor tenants.

(5:41 – 6:18)
The one example I’d like to provide is the Illinois Solar for All program, which pairs institutional anchor tenants with community organizations to create balanced subscriber profiles. They typically come at a 50% discount and are strictly aimed at LMI or low to moderate income opportunities. And we have helped subscribe anchor tenants into the Illinois Solar for All program, including a deal we’ve done with Lawrence County Housing Authority, where we took their large building with, I want to say about 400 residents, and we helped them directly benefit from a 50% discount using community solar.

(6:18 – 6:42)
In this type of example, you can see how credit worthiness determines a project’s viability when we’re pairing a stabilized long-term tenant like a municipal housing authority and putting it into one of these community solar projects. And now let’s talk about avoiding common pitfalls. So as the community solar market matures, solar developers have learned valuable lessons on anchor tenant management.

(6:42 – 7:05)
Sometimes they diversify when possible. So over-reliance on a single anchor tenant creates a concentration risk, and it all comes down to the lenders and financiers’ appetite to balance risk on their projects. So when we do large Fortune 500 corporations, we try to keep it under one roof as often as possible, and sometimes it’s not possible because of the amount of usage they have across markets.

(7:05 – 8:36)
They need multiple solar developers so that they can balance their risk properly. Due diligence is also essential. Thorough investigation of anchor tenant financial health prevents downstream issues.

So when we’re qualifying our clients, we’re making sure that they don’t plan on getting up and leaving or exiting for convenience or closing down operations, as an example, because the anchor tenant is obviously a huge component to the success of these projects. We need to make sure, even if it’s a shorter term, that that anchor tenant is committed to sticking around. Again, this leads into aligning commitment terms and making sure that the contract duration aligns with the financing requirements, but also the long-term anchor subscriber.

We recently just did a deal with a state university, and the contract terms needed to include financing timelines on the developer side to reach tax equity requirements, but then also be short enough on the client subscriber side so that they weren’t interfering with future sustainability plans. Lastly, the pitfall that we always try to avoid is contractual remedies. We want to clearly define processes and protections in case of an anchor tenant default.

And again, we recently had a developer that reached out to us. They had an anchor tenant who went out of business at no fault to the actual tenant. So they exited the community solar subscription without penalty, but the developer needed to pay us to replace them with a new anchor tenant.

(8:36 – 9:04)
In conclusion, the anchor tenant and the credit worthiness is the foundation of a successful community solar project. As community solar continues its rapid growth across America, anchor tenant credit worthiness remains the bedrock upon which successful projects are built. The cascading benefits of strong anchor tenants from favorable financing to affordable access ultimately determine which projects succeed in delivering on the promise of democratized clean energy.

(9:05 – 9:29)
Community Solar Authority remains committed to see the nationwide adoption of community solar and will continue to educate our clients on the importance of credit worthiness in order to get approved for our pipeline of projects. If you are a large energy user or a potential affiliate that wants to work with community solar authority, you can get started by visiting our website at community solar authority dot com. I also encourage you to connect with me on LinkedIn at linkedin.com slash in slash Dakota Malone.

(9:30 – 9:33)
Thank you guys for tuning into this episode and I will catch you on the next one.