Work Involved in Solar Financing Due Diligence
The worst case in lending is that someone borrows your capital and you never see it returned. However, there is plenty more that can occur which is far from optimal. While borrowers may come into the deal intended to scam the lender, they may also be borrowing without knowing their own risks of default. Factors which can jeopardize the on-time repayment can come in the forms of failed installs, changes in local policy, or personal financial issues that are unexpected, for example. Therefore, more work must go into reviewing funding applications besides the honesty and reputation of the borrower. I’d like to walk through it here in a way that informs those interested in WattWatt or potentially picking up the job of verifying incoming applications on the TCR.
Verifiers should be looking for:
State of existing electrical and structural conditions of building.
Potential shading issues and whether they can be easily removed.
Whether major adjustments are necessary, what their cost may be, and if the customer is willing to accept them.
Construction and interconnection done without permission of local building authorities or utility.
High risk of drop in electricity price that solar customer is offsetting.
Risk of delays in completion of construction after capital is deployed.
Removal of subsidies that lender or off-taker intended to take advantage of.
Misrepresented system size or equipment.
Installers or home owners with poor records or issues jeopardizing ability to repay. Checking payment history of electrical bills.
Installer ability to collect repayment.
Building with proper structural capability to handle additional load.
Proper installation. Whether the mounting hardware on the roof, electrical wiring and conduit running from roof array down to inverter, and inverter and interconnection equipment has been mounted and installed correctly.
Whether electrical and mechanical equipment is rated for the system being installed in the conditions it will face for the duration of its operation.
Potential Snags:
Installer/developer doesn’t want to let the verifier review all the information necessary.
Verifier accidentally overlooks an important factor.
Verifier is bribed by installer/developer to overlook an important factor.
Potential Approaches:
While the theory of the token design may make sense, the network is consistent of individuals conducting the work. These people need to both earn enough to thrive in their lives and also feel rewarded for their work. Two options have been thought of that could assist people unable to wait out the time necessary to realize the gains from their work.
- Businesses open up to hire people to conduct the due diligence. In these cases, the businesses would own enough of a share of the tokens to be invested enough to hire staff and open operations. Operations may also include opening up the market in their area by on-boarding new solar developers. This opens up a source of revenue when they sell the solar developers their verification tokens. Recall the solar developers must stake these tokens along with their application to the crowdfunding registry.
- Brokers open up shop to service verifiers they find valuable to the network. These brokers purpose is to offer the verifiers stable incomes rated to the verifiers perceived added value to the network. The brokers would either be holders of the tokens or promise the verifiers a price in the future for their tokens and distribute the payment over the agreed time of the work.
Verifying the Verifiers:
As the network not only works to incentivize people going out in the field to conduct due diligence but also to partake in votes on who you believe, there will be a network of people voting on which side they believe. Depending on someone’s stake or ability, token holders may sometimes follow behind others and check their work. This is an interesting situation to consider when designing the rules behind the token verification game.
There must be rules set in the verification game to incentivize secondary checks. However, redundant checking of every application would be highly inefficient and the costs would likely push it over the existing model. A rule could be put in place that not only removes listings that can be proven later to be fraudulent but also punishes those involved in supporting the listing. This could come in the form of loss of tokens or outright removal from the network. Some of these choices will be left to the network to decide among themselves during governance votes.
