Sep 16 2014

Much Better, Cheaper Loans Challenging The Solar Leasing Design?

Dividend Solar is wanting to challenge the existing domestic solar funding structure with a strategy it calls solar-ownership-as-a-service.

Third-party ownership stays the dominant design for funding a domestic solar installation in the US, however thats changing. Direct ownership by means of loans (and other mechanisms like SPEED) is obtaining traction, since PV systems continue to get cheaper while funding alternatives remain to improve. GTM Research is anticipating third-party ownership to peak at 68 percent of the domestic PV market this year.

I spoke with the Dividend Solars creators over lunch last week at Vesta in Redwood City, Calif. These self-described financial structuring nerds are wanting to connect individual house owners with new sources of large-scale capital through its direct financing platform to upset the status quo in the domestic solar market.

The solar financing market is remarkably mispriced, said CEO Steve Michella of Dividend Solar.

The lease/PPA model has been incredible for the growth of solar in the US, but its becoming increasingly clear that solar ownership provides substantially greater long-term value to homeowners. The Dividend Solar [loan] combines the advantages of a lease including energy production warranties, system service warranties and efficiency tracking with the monetary benefit of solar ownership. Michella continued, Our loan solution strolls, talks and looks like a lease however can offer a property owner with significantly better economics. Dividend Solar guarantees the Operations and Upkeep of the system with Next Stage Solar and utilizes Locus Energy as its solar tracking and data analytics platform.

Common institutional investors can not get involved in domestic solar, said Eric White, the startups President, including, Rather of corporations looking to decrease their tax costs it need to have to do with investing behind boringly steady moneycapital. We are an asset aggregator– we enable massive capital to gain access to small-scale micro-infrastructure possessions that produce steady predictable money flow– in a market that was previously unattainable.

Its all about capital access, stated the CEO.

The duo called the companies product, a bridge for large-scale, yield-seeking capital and specific homeowners. The 10-person group seem to have actually struck a nerve– raising $1.5 million in a seed round for working capital in addition to a fund in the 8-figures from a group of well known and very sophisticated Wall Street investors. The investors were at first skeptical about solar however saw the value of using traditional monetary structures to the property class.

Michella views rooftop PV as micro-infrastructure and firmly believes that dispersed energy is a core part of our nations energy facilities future. He suggested that traditional investors in infrastructure have not had access to domestic solar at a significant scale up untilpreviously.

According to the Chief Executive Officer, the Dividend Solar product permits smaller solar installers to contend with the vertically integrated financiers. There are other rewards for the installer in this program which tries to align the interests of the investor, installer and solar owner.

SolarCity and Sunrun make their money with domestic solar leases and power-purchase agreements– and business is great (see SolarCitys current securitization). In a somewhat unenthusiastic product and services development cycle, both companies are testing loan product and services for domestic PV systems. SolarCity has a 30-year loan product and services in pilot. Sunrun offers loans.

Sunruns CEO Lynn Jurich recommends that high consumer acquisition expenses overwhelm the distinction in revenue in between leasing or owning. When you factor in the complete cost of ownership, the benefits of leasing are instant cost savings and access to service without the trouble of ownership (ie, changing inverters, insurance coverage, tracking, upkeep, and so on). Jurich suggests that the money to manage a PV system and take care of it over its whole lifetime is countless dollars.

In June, SunPower partnered with Admirals Bank on a $200 million loan program for domestic solar setups to be finished over the next 2 years. Clean Power Finance and Sungevity are likewise in the loan company, and Kilowatt Financial, Sungage and Mosaic are moving into the solar loan deal business. Look for NRG to go into the fray also. Both the SolarCity and SunEdison loans are unsecured and have a reasonably low interest rate of 4.5 percent to 6.5 percent, according to our sources.

GTM Study expects the United States domestic PV market to exceed 1 gigawatt for the first time in 2014.

Dividends Chief Executive Officer stated, Our mission is to transform the way we invest in our energy infrastructure.

Market data is from the recently launched report United States Residential Solar Financing 2014-2018. For more infoFor more details on the report, see this page or contact Matt Casey at Casey@gtmresearch.com.

Tags: admirals bank, clean power finance, cpf, dividend, gtm research, loans, mosaic, pv, domestic solar, solarcity, sunrun, third-party ownership, vivint