The high cost of solar financing

The solar industry recently attracted attention from two of Silicon Valley’s cornerstone tech giants: Apple and Google. Apple announced an $850 million solar procurement for its offices in Cupertino, CA, marking the largest procurement to date by a company that isn’t a utility. Soon after, Google announced a $300 million investment in 25,000 SolarCity rooftop power plants in return for tax equity from the systems financed by the deal.

Apple’s and Google’s recent investments in solar technology simultaneously underscore the growing interest in solar from the business world, and highlight one of the industry’s key challenges: long-term financing. Leases and loans have effectively lowered upfront costs, and for companies with deep capital pools like Apple and Google long-term economics make sense. But for any entity short of a corporate giant, long-term solar financing is still a challenge, and in some extreme cases, solar can even make power more expensive.

Solar financing was the topic of a recent panel discussion between industry experts in Berkeley, CA. Panelists represented a range of innovative California companies that each presented on varied financing-related topics ranging solar crowdfunding for small businesses, to repackaging solar leases for increased appeal and accessibility.

New Financing Expands the Market

According to Ben Peters from NRG, there’s currently a solar financing surplus. The challenge is making 3^rd party financing available and attractive to new solar customers. 3^rd party financing is a win for both investors and customers: investors get a return on their investment, and solar customers avoid costs that would otherwise make going solar unaffordable. Yet, many potential solar customers adhere to the mentality “why rent when you could buy”. In the long run, Peters expects that new and different 3^rd party financing products, not loans that enable solar ownership, will make solar accessible to a growing number of new potential customers.

PACE Financing Refocuses to Commercial Entities

In his presentation on PACE (property assessed clean energy) financing, Brad Copithorne from Renewable Funding explained that without PACE, very few commercial properties would qualify for long-term financing. PACE is a local government initiative that provides a strong credit and low-cost, long-term capital to businesses and homeowners. PACE financing could be used by commercial property owners for solar projects or any number of energy efficiency upgrades (think insulation, energy storage, and more).

Crowdfunding: A New Financing Frontier for Small Business

And then, there’s crowdfunding: Andreas Karelas with Re-Volv explained how his nonprofit crowd-funds money for a revolving seed fund in order to help small businesses go solar. The businesses that receive Re-Volv’s funds either couldn’t afford high upfront hardware and installation costs, or wouldn’t qualify for a lease or loan.

As Karelas explained, the business model is a win-win: clean energy advocates have an avenue to take action while simultaneously channeling their donations into an investment pool that earns compound interest. At the same time, the small businesses on the receiving end of Re-Volv’s financing model start saving money via reduced energy costs from day one.

Capturing Value Streams with Combined Solar + Storage

Russell Sprole with Stem Inc., an advanced energy storage company that combines storage hardware with predictive analytics software for use with C&I customers, discussed unlocking solar financing for storage projects. As Sprole pointed out, storage and solar don’t qualify for the same tax incentives, and in some cases, seeking financing for a combined solar plus storage project can lead to a lowered credit rate requirement for PACE financing and, in some cases, a net ITC benefit.

Current solar financing models successfully cut upfront costs but don’t address long-term costs. Until new financing models enable access to low-cost, long-term capital for a greater number of potential customers, the size of the solar market won’t reach its full potential. Financing innovations from companies like those present at the Berkeley panel discussion are just a start.

http://theenergycollective.com/annacleonard/2209636/high-cost-solar-financing