Fair Value

12 Months Ended

Dec. 31, 2023

Our accounting policy for the fair value measurement of cash equivalents is described in Note 2 — Summary of Significant Accounting Policies.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The tables below set forth, by level, our financial assets that are accounted for at fair value for the respective periods. The table does not include assets and liabilities that are measured at historical cost or any basis other than fair value (in thousands):


	Fair Value Measured at Reporting Date Using
December 31, 2023	Level 1		Level 2		Level 3		Total

Assets
Cash equivalents:
Money market funds	$	601,076	$	—	$	—	$	601,076


	$	601,076	$	—	$	—	$	601,076
Liabilities


Derivatives:

Embedded EPP derivatives	—		—		4,376		4,376

	$	—	$	—	$	4,376	$	4,376


	Fair Value Measured at Reporting Date Using
December 31, 2022	Level 1		Level 2		Level 3		Total

Assets
Cash equivalents:
Money market funds	$	291,903	$	—	$	—	$	291,903
	$	291,903	$	—	$	—	$	291,903
Liabilities
Derivatives:
Embedded EPP derivatives	—		—		5,895		$	5,895
	$	—	$	—	$	5,895	$	5,895

Money Market Funds — Money market funds are valued using quoted market prices for identical securities and are therefore classified as Level 1 financial assets.

Embedded Escalation Protection Plan Derivative Liability in Sales Contracts — We estimate the fair value of the embedded EPP derivatives in certain sales contracts using a Monte Carlo simulation model, which considers various potential electricity price curves over the sales contracts’ terms. We use historical grid prices and available forecasts of future electricity prices to estimate future electricity prices. We have classified these derivatives as a Level 3 financial liability.

The changes in the Level 3 financial liabilities during the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):


	Embedded EPP Derivative Liability
Liabilities at December 31, 2021	$	6,461
Changes in fair value	(566)
Liabilities at December 31, 2022	5,895
EPP liability settlement	(3,160)
Changes in fair value	1,641
Liabilities at December 31, 2023	$	4,376

To estimate the liabilities related to the EPP contracts, an option pricing method was implemented through a Monte Carlo simulation, which considers various potential electricity price forward curves over the sales contracts’ terms. We use historical grid prices and available forecasts to estimate future electricity prices. The grid pricing EPP guarantees that we provided in some of our sales arrangements represent an embedded derivative, with the initial value accounted for as a reduction in product revenue and any changes, reevaluated quarterly, in the fair market value of the derivative recorded in gain (loss) on revaluation of embedded derivatives.

The unobservable inputs were simulated based on the available values for avoided cost and cost of electricity as calculated for December 31, 2023 and 2022, using an expected growth rate of 7% over the contracts’ life and volatility of 15%. The estimated growth rate and volatility were estimated based on the historical tariff changes for the period 2008 to 2023. Avoided cost is the transmission and distribution cost expressed in dollars per kilowatt hours avoided in the given year of the contract, calculated using the billing rates of the effective utility tariff applied during the year to the host account for which usage is offset by the generator. If the billing rates within the utility tariff change during the measurement period, the average amount of charge for each rate shall be weighted by the number of effective months for each amount.

The inputs listed above would have had a direct impact on the fair values of the EPP derivatives if they were adjusted. Generally, a decrease in electric grid prices would result in an increase in the estimated fair value of our EPP derivative liabilities.

For the years ended December 31, 2023, 2022 and 2021, we recorded the fair value of the embedded EPP derivatives with no material unrealized gains or losses in either of the three years ended December 31, 2023, 2022 and 2021 in our consolidated statements of operations. The fair value of these derivatives was 4.4 million and 5.9 million as of December 31, 2023 and 2022, respectively.

In June 2023, per an EPP agreement with one of our customers, we paid $3.2 million, which was recorded as a reduction to our balance of embedded EPP derivative liability as of December 31, 2023.

Financial Assets and Liabilities and Other Items Not Measured at Fair Value on a Recurring Basis

Debt Instruments — The senior secured notes, term loans and convertible senior notes are based on rates currently offered for instruments with similar maturities and terms (Level 2). The following table presents the estimated fair values and carrying values of debt instruments (in thousands):


	December 31, 2023		December 31, 2022
	Net Carrying Value	Fair Value	Net Carrying Value	Fair Value

Debt instruments
Recourse:
3% Green Convertible Senior Notes due June 2028	615,205	673,613	—	—
2.5% Green Convertible Senior Notes due August 2025	226,801	260,820	224,832	309,488
10.25% Senior Secured Notes due March 2027	—	—	60,960	60,472
Non-recourse:
4.6% Term Loan due October 2026	3,085	2,866	—	—
4.6% Term Loan due April 2026	1,542	1,479	—	—
3.04% Senior Secured Notes due June 2031	—	—	125,787	117,028

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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