Renovate America raises $90 million for home energy efficiency

The company—which specializes in software and financing for home energy efficiency—has raised $90 million from new investors DFJ Growth and Silver Lake Kraftwerk, as well as existing investors RockPort Capital Partners, Valor Equity Partners, DB Masdar, and 400 Capital Management. The company has in all raised approximately $175 million, bringing its value to $500 million.

The new funding will let the company expand to new states in 2016. Renovate has been one of the surprise breakthrough hits in cleantech this decade. The company has financed over $950 million in home energy efficiency improvements—all in California. Many of the projects include solar arrays and a growing number include technology to curb water consumption. It has also securitized over $600 million in Property Assessed Clean Energy (PACE) bonds.

All of this went against the grain. While U.S. homes waste a considerable amount of energy, home energy retrofits has not even remotely achieved anything like the growth seen in solar. Recurve, an early entrant, went under. SolarCity tried, but then exited, home retrofits.  Next Step Living has succeeded, but partly because it is concentrated its efforts in colder states like Massachusetts, which also subsidizes the cost of energy audits.

Meanwhile, PACE financing, which allows homeowners to finance energy efficiency upgrades through supplemental charges on their property tax bills, was on terminal life support in 2010 thanks to opposition from banks and Fannie Mae and Freddie Mac.

Renovate, meanwhile, developed a business model that aligned the interests of contractors and homeowners well while keeping its own costs lower. It put together a healthy channel of contractors instead of trying to hire people to renovate homes itself and developed a cloud-based system for organizing jobs and financing. CEO J.P. McNeill is adamant that Renovate is ultimately a software company.

The company also took a broad approach to the customer base. Rather than target homeowners that wanted to save energy, it targeted anyone looking to upgrade. There are approximately 135 million residences in the U.S. Approximately 15 to 20% of them annually are in need of upgrades or retrofits involving repairs every year and approximately 15 to 20 percent of those repairs will impact gas, electricity and water. Renovate America can deliver PACE financing through its contractors for that portion of those inevitable projects.

If you want marble countertops, you can’t use PACE for it. But if you’re heater blew up, you might as well use PACE instead of a home equity line-of-credit, a second mortgage, cash or credit cards for that portion of the project. Financing rates under the HERO program range from around 5.9 to 8.9 percent and get paid off over five to 20 years.

“The goal is not to convince people to fix things that are working well, but 15 to 20% of homes already have problems,” McNeill told us back in February. “Solar is a pull, but the biggest pull is when they have a leaky roof or a water heater blows.” The company isn’t alone in the PACE race. Sausalito’s Clean Fund is landing projects for commercial PACE projects in California while Renewable Funding, founded by the godfather of PACE Cisco DeVries, is cranking up funding programs in California, Hawaii and Pennsylvania. Both have also recently raised funds for projects. Alternative ideas like on-bill financing are also getting the go-ahead in certain jurisdictions.

While cleantech skeptics still exist, there’s been quite a bit of good news recently. Flex purchased solar tracker company NEXTracker for $245 million and Elon Musk unfurled the Model X at a star-studded event. Solar and energy storage are growing rapidly.

http://www.forbes.com/sites/michaelkanellos/2015/10/01/renovate-america-raises-90-million-for-home-energy-efficiency/?ss=energy