Bad parenting is a heavy burden to bear for any child. It’s also not ideal for a renewable power income vehicle that needs a trustworthy and deep-pocketed sponsor to grow its asset base. Yet that’s the situation TerraForm Power (NASDAQ: TERP) is facing as parent SunEdison (NYSE: SUNE) fends off multiple lawsuits that could bankrupt it, while paying loan-shark rates on financing that should otherwise keep it going for the next couple of years.

Right now, TERP shares yield 17.5% annualizing the most recent dividend, vs. 6% to 8% for the more popular yieldcos, as such tax-deferred income vehicles are known.

Some of the spread is justifiable given the credit crunch at SunEdison, which has leaned financially on its affiliates to make ends meet. Further, TERP’s current portfolio of renewable assets with 1,918 MW of generating capacity, selling power to investment-grade offtakers under long-term agreements, could be diluted with 470 MW of significantly higher-risk residential rooftop assets, which TerraForm was made to buy as part of SunEdison’s pending acquisition of Vivint Solar (NYSE: VSLR).

There are grave doubts as to whether that acquisition will go through, and TerraForm will be an immediate winner if it doesn’t. But even if it does, the current discount looks excessive for the added risk, especially given the long-term likelihood of a new affiliation with a healthier project developer than SunEdison.

That prospect — and of course the yield — set TerraForm apart. If SunEdison manages to clamber out of its hole and survive, TerraForm is likely to rally alongside, and if it doesn’t TerraForm should ultimately end up getting sold to another renewables developer.

In either case, the yield is likely to decline by way of capital appreciation. We’re upgrading TERP to a Buy below $10 in the Aggressive Portfolio.

Some recent industry developments are relevant here. The investment climate for solar projects improved dramatically in December when Congress passed the $1.15 trillion Consolidated Appropriations Act, 2016, extending the 30% investment tax credit on solar projects for an additional two years, through 2018. At that point the tax subsidy begins to diminish, settling at 10% in 2022.

That’s also when the first set of state compliance deadlines for the EPA’s Clean Power Plan (CPP) might come into effect. The CPP, which has just been put on hold by the U.S. Supreme Court while lower courts adjudicate a legal challenge from 29 states and the affected industries, would require a 32% cut in utility-sector carbon emissions from 2005 levels by 2030.

States Lead the Charge

But even if the CPP is ultimately overturned, utilities have other good reasons to invest in solar power — many are required to do so by their states’ alternative energy mandates.

For instance, California, which already derives more than 20% of its electricity from renewable sources, last year upped its mandated renewables share in electricity sales from 33% by 2020 to 50% by 2030.

New York, on order from Gov. Andrew Cuomo, is in the process of raising its renewables mandate from 30% as of 2015 to 50% by 2030 as well. Hawaii has legislated 100% reliance on renewable power sources by 2045.

Such mandates are not just a blue-state phenomenon. Texas required a minimum of 5,880 megawatts (MW) of renewable generating capacity by 2015, and had more than twice as much by 2013, mostly as a result of rapid investment in wind turbines. Nevada law requires 25% of the state’s energy consumption to come from renewable sources by 2025. In all, 29 states and the District of Columbia imposed renewable portfolio standards (RPS) as of last year:

Source: U.S. Department of Energy study

In the aggregate, such mandates will require 106 gigawatts (GW) of domestic renewable capacity other than hydro-electric by 2025, accounting for 8% of the U.S. power supply. Renewables other than hydro accounted for 6.4% of the power generated by commercial U.S. suppliers during the first 10 months of 2015.