Residential Solar Financing

While rooftop solar systems are economically viable in many geographies, two primary obstacles prevent widespread adoption—upfront cost and lack of attractive financing. Most property owners interested in benefitting from the potential savings of a rooftop solar system do not have the cash on hand necessary to finance the installation of the system. Further complicating the issue is a dearth of financial products that are suited to the rooftop solar asset. Ideally, financing for rooftop solar matches the useful lifespan of the panels and the stream of savings produced by the panels such that monthly savings are greater than the monthly cost of financing, so solar systems are cash flow positive for the end-user.

Many areas where solar is economically viable lack attractive financing options. But there have been many recent innovative new financial products that have made it increasingly easy for property owners to finance solar systems and avoid upfront costs. See below for two such examples.

CEFC Solar Loan Product

The Clean Energy Finance Corporation provided a AUD 100 million credit facility for Origin Energy to expand its solar PV offering for Australian households and business.

For its customers, Origin installs, maintains, and owns rooftop solar systems, and property owners buy the solar energy generated from the solar system at a lower rate than average retail electricity tariffs through a power purchase agreement (PPA).

Origin’s solar PV offering eliminates the offering eliminates the need for business and residential customers to cover upfront solar PV system costs, while allowing them to benefit from cheaper-than-grid electricity.

Connecticut Green Bank’s CT Solar Loan

When the Connecticut Green Bank was formed in 2011 no solar loan option was available in the state. If a homeowner wanted to own the panels on their roof, but didn’t have ~$25,000 in cash on-hand, that consumer had no way to adopt solar. To address this the Connecticut Green Bank launched the CT Solar Loan product, using $5 million in public dollars to finance loans through its private origination partner, Sungage. Loans were offered at 15 year terms, with 6.49% interest rate. To qualify, borrowers needed a FICO score of 680, and debt-to-income ratio of 45%. A down payment of 5% was also required.

After seeding the loan product with public capital. The Green Bank then took two steps to draw in private capital. First, the Green Bank found a private investor, the crowd-sourcing platform Mosaic, to purchase 80% of the loan portfolio, immediately replacing public capital with private dollars.[1] Second, after showing market potential, Sungage raised a private financing warehouse from Digital Federal Credit Union, who provided $100 million for Sungage to originate far more solar loans across many more states.[2] The Connecticut Green Bank pulled back its own capital, and allowed the private market to take over at greater scale.

References

[1] Trabish, Herman K., “Will Crowdsourced Loans for Rooftop Solar Overtake Third-Party Ownership?” Greentech Media, February 19, 2014.

[2] Reporter’s Notebook, “Green Bank partner lands $100M solar investment,” Hartford Business Journal, November 10, 2014.