Interconnection deposits are among the most significant early-stage capital obligations facing renewable energy developers. Executing an Interconnection Service Agreement requires a developer to deposit up to 100% of estimated network upgrade costs, often several million dollars per project. For small and mid-sized developers, meeting this in cash can constrain development pace and scale.
Comity recently arranged interconnection surety bonds on behalf of a solar developer across three distributed generation projects interconnecting through a Midcontinent Independent System Operator utility. Spanning several million dollars in aggregate penal sum, the bonds were issued in favor of the utility to guarantee payment of interconnection and network upgrade costs, serving as the accepted substitute for cash deposits under each Interconnection Service Agreement.
The bonds are backed by layered security. A General Indemnity Agreement was signed jointly and severally by the project principal, the developer's parent as Parental Guarantor, and the founder individually. A companion Place in Funds Agreement (PIF), a bespoke surety instrument, sets a hard deadline by which the principal must either withdraw from the interconnection queue, canceling the bond, or post cash collateral equal to the full penal sum. The Parental Guarantor further pledged the three project LLCs' membership interests and proceeds from the developer's other project sales as additional collateral.
The developer's primary repayment path is sale of the portfolio to a third-party acquirer, with closing expected well ahead of the PIF deadline. Bond termination is expected upon transfer of ownership.
This structure offers a replicable template for developers facing interconnection deposit obligations without matching balance sheet liquidity, preserving capital while keeping projects on track. As deposit requirements grow with the scale of required upgrades, surety-backed structures are likely to see broader use across renewable development.
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