The investment community’s acceptance of financed residential solar has opened the cash floodgates.
Over the last few weeks, announcements in residential solar finance and customer acquisition have spotlighted solar's strongest investment segment. Here's a roundup of recent news in the sector.
- The Digital Federal Credit Union "may provide up to $100 million" in loans for its members (up to $50,000 per member) to finance solar projects with PV modules from SunPower. It's a novel customer acquisition strategy with DCU acting as lead originator for a group of 36 credit unions formed to support SunPower's residential loan or lease programs.
- In August, SolarCity acquired its direct marketing partner, Paramount Solar, for $120 million. Last month the solar installer and financier teamed up with Viridian, a retail energy services provider in the Northeast.
- Solar Universe added two new franchises in New York and New Jersey. The company acquired Gen110 in September.
- Brightergy and Black & Veatch formed an alliance to develop $100 million in solar projects ranging from 25 kilowatts to 2 megawatts over the next three years, including commercial rooftops in Kansas City. Brightergy acts as the project developer and provides sales, marketing and financing resources. Black & Veatch provides engineering, procurement, construction and consulting.
- Sunrun and Nest have teamed up. "Under the partnership, Sunrun customers can get a $250 Nest thermostat for free, along with another $250 credit for electricity; Nest customers interested in solar can get a $500 voucher for a Sunrun solar system," as reported by Katie Tweed.
Those entries add to this list of residential solar finance funding and M&A:
- Vivint Solar of Provo, Utah secured $200 million in two new tax equity funds to finance solar power systems on residential rooftops. Vivint Solar is the solar integrator and PPA financier unit within Vivint. Vivint is notable for its sales network and low cost of customer acquisition. The company was acquired by Blackstone for $2 billion in September of last year. Vivint Solar was the second-largest U.S. residential solar installer in the first half of 2013, according to the GTM Research's U.S. PV Leaderboard.
- In April, residential solar financing startup Clean Power Finance (CPF) announced the $37 million piece of a $60 million equity round that included Edison International (NYSE:EI), Duke Energy, Clear Sky, NextEra Energy's Investment arm, and Dominion. CPF has closed on an additional $20 million in equity capital from funds in the United Arab Emirates. CPF manages hundreds of millions in project finance funds for corporations and institutions.
- SunPower's residential lease program has signed up a total of 18,400 customers and has about 147 megawatts booked to date with $528 million in net aggregate payments. SunPower just raised $150 million in new residential lease financing.
- Sungevity, the solar sales, financing, and software startup, won $125 million in new venture capital and project financing in January and landed another $15 million in funding, including investment from GE Ventures just last month. Previous investment has come from Brightpath Capital Partners, home improvement store Lowe's, Vision Ridge Partners, Firelake Capital, Craton Equity Partners and Eastern Sun Capital Partners.
- SolarCity (SCTY) joined with Honda Motors on a $65 million residential solar project fund for the benefit of Honda and Acura car buyers earlier this year. SolarCity also raised $500 million from Goldman Sachs in May.
- OneRoof has raised more than $80 million in operating capital and finance capital from Hanwha, Black Coral Capital, U.S. Bank, The Quercus Trust, Yellowtree Energy, and Spring Ventures.
- In June, Sunrun announced three new funds totaling $630 million. Investors include JPMorgan and U.S. Bank. While U.S. Bancorp (NYSE:USB) has been a big supporter of residential solar, this is the first entry for JPM Capital Corporation, a subsidiary of JPMorgan Chase & Co. (NYSE:JPM). Sunrun CEO Ed Fenster said, “It is the largest and most consistent provider of capital to renewables, but until now most of their investments have been in wind. This is a watershed moment.”
- SunEdison acquired EchoFirst, a solar, hot water and conditioned air provider, along with a dedicated $50 million fund. SunEdison also announced that Wells Fargo looks to invest more than $100 million of tax equity financing in 2013 and 2014 to fund solar DG projects developed by SunEdison in the U.S.
GTM Research sees the residential solar financing market in the U.S. growing from $1.3 billion in 2012 to $5.7 billion in 2016.
Shayle Kann, VP of Research at GTM, pulls it together here: "The flurry of investment activity in the U.S. residential solar market reflects four trends on which we have been focusing recently at GTM Research. First, residential solar financing via leases and PPAs continues to be the dominant model today, with over a dozen companies now offering solutions in that space. Second, financing options are diversifying and debt is beginning to make a resurgence, as evidenced in part by SunPower's deal with the Digital Federal Credit Union. Third, retail electricity providers are increasingly viewing solar as a potential differentiator among their competitors, and we expect to see more partnerships like the SolarCity/Direct Energy deal over the next three months. And finally, customer acquisition is the new 'hot' space for residential solar innovation, and the M&A in that landscape is just beginning."
Source: GTM Research’s U.S. Residential Solar PV Financing: The Vendor, Installer and Financier Landscape, 2013-2016
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Customer acquisition costs currently account for about 10 percent of overall residential solar costs -- but this category has the most near-term potential for cost reductions of any component of system costs, according to the latest report by GTM Research, U.S. Residential Solar PV Customer Acquisition: Strategies, Costs and Vendors. The 45-page report includes analysis on over 80 installers, vendors, and channel partners in the residential solar installation market. For more information on the U.S. Residential Solar PV Customer Acquisition report, please visit http://www.greentechmedia.com/research/report/us-residential-solar-pv-customer-acquisition.
And be sure to register for the upcoming U.S. Solar Market Insight event produced by GTM Research and SEIA, which will feature a keynote from former FERC commissioner Jon Wellinghoff.
