Solar installers seek financing for system ownership

 Solar installers seek financing for system ownership Print PDF

February 18, 2011

By Liz Merry
SOLAR TODAY “Small Solar Biz” Columnist

If you run a solar installation company today you face a number of challenges. You have to install energy systems, connect to the grid and ensure the work lasts 30 years. And you may have to be a banker as well.

One of the main drivers behind the growth in the residential solar market is third-party financing. Through a power purchase agreement (PPA) or a lease of the photovoltaic (PV) equipment, the host customer buys just the solar power and not the system itself. Third-party financing relieves the customer of a sizeable upfront payment, as well as shifting the full financial benefits of solar to the system owners.

These financing programs are growing rapidly because the investors — the actual owners of the hardware — are making a decent return on their investment. The host customer pays the equivalent of 7 to 12 percent interest over the life of the contract, hidden in the monthly “flat” electric rate. That reality is rarely made explicit to residential solar customers.

Third-party financing products certainly support the widespread adoption of solar technology, and that is a very good thing. But it also presents another challenge to the smaller installer firms. If you don’t offer a PPA contract, and if you’re not in a position to lease the equipment to your customers, how do you compete against those who do?

Conventional Loans

If your customers want to capture all the benefits available from a PV system — including all incentives, energy savings and the additional resale value of the building — they should buy the system. If they don’t have the cash, they should seek a home loan. Customers with good credit and positive equity in the home can find banks and credit unions willing to write home-improvement loans. Or, they can refinance their current mortgage and take out additional cash for the solar.


 

Peer-to-peer (P2P) lending is a growing phenomenon as well. I found Lending Club through the One Block Off the Grid (1BOG) website, and the option of going P2P seems very interesting. There is a lot to learn about how P2P works before you go that route, but for customers with good credit, borrowing from P2P might be an option. Here’s an article with insights and resources: “The Problem with Peer-to-Peer Lending.”

If you are a solar installer and/or salesperson it makes sense to survey local banks and credit unions and find the institutions willing to make borrowing possible for customers with good credit and equity. Make it easier for customers to say “Yes” to your solar bid by offering borrowing options from local lenders.

For more information on conventional loans and mortgages see --

•  Bankrate.com: A recent survey of home equity rates shows a $30,000 HELOC for 5.17 percent to 7.25 percent.

•  Peer-to-peer lending: Lending Club.

•  New Resource Bank: personal lending and solar-home-equity financing.

•  There are also several solar loan programs listed in the DSIRE database, including one from Sacramento (SMUD: 10yrs, 8.5%, up to $30k). The state of Ohio has a revolving loan program for residential customers.

•  PACE financing: This form of financing is essentially on hold until Fannie Mae and Freddie Mac change their policies.  Learn about the campaign to enable PACE at the Vote Solar site, here.

If your company offers ownership financing, please let us know how it works.

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