Until now, most of the growth in large renewable energy installations has been carried out by independent developers. The typical developer business model is based on capturing the yield arbitrage between early stage projects and operating assets (or a middle point in the development process) due to different risk profiles. However, the collapse of SunEdison seems like the final nail in the coffin for this business plan.

In the last 15 years, developers have benefited from a significant reduction in development risks: wind and solar technologies and their respective supply chains matured, standardized procedures and contracts appeared, and capital became easily accessible. At the same time, government policies designed to support a high-risk industry (such as feed-in tariffs [FITs] and guaranteed grid access) remained in place. This increased the yield arbitrage between the development stages.

Most of the initial renewables development has happened in the wind sector. Areas suitable for wind development are limited, and resources need to be verified with local wind speed data for at least a year or two to be able to get financing for the project. In addition, wind turbines are distributed in large patches of land that are sometimes owned by different organizations and under different local authorities. Wind installations are also relatively complex to build, limiting the number of engineering performance contractors (EPCs) with the skills needed to build them. These barriers increase costs but also protect developers that are early to enter the market; they also make good wind projects relatively scarce.

Solar costs have reached a point where solar PV can now compete with wind deployments, and solar developments do not face the same barriers as wind. In solar, resource variability within the same region is not significant; projects can be deployed following land ownership or local authority limits, and their build complexity is low. All this means that a significant number of developments can quickly arise in the same market simultaneously. The first victims of solar were FITs; when solar costs were low enough to benefit from the tariffs, projects boomed. Governments tried to respond by lowering the FITs, but by then the costs of solar were even lower. The only way to stop the spiraling cost created by FITs was to eliminate them.