U.S. Sen. Michael Bennet, D-Colo., center, helps SolarCity employees Jarret Esposito and Jake Torwatzky install a solar panel on a home in Denver on June 18, 2010.
SolarCity, the dominant U.S. installer of residential solar panels, launched a first-of-its-kind financing plan Wednesday that allows homeowners to buy — not just lease — their systems with zero upfront costs.
Several companies offer leases that allow customers to have solar installed without a hefty down payment and banks offer loans for them to buy rooftop arrays. Yet SolarCity is offering its own low-rate loans that tie repayment to energy produced.
“No one has a product like this,” says Lyndon Rive, co-founder and CEO of SolarCity, a San Mateo, Calif.-based company that went public in December 2012. Its largest shareholder is Rive’s cousin and Tesla Motors CEO Elon Musk.
SolarCity’s stock is up more than 1% Wednesday morning, to $55.20 per share.
Rive says his MyPower financing option is the first to align the solar installer with the lender. “Our loan doesn’t get repaid unless the system performs,” Rive says in an interview, noting that monthly payments are based on how much power a home’s solar array generates.
“This is innovative in that it’s providing a direct source of financing for consumers,” says Rhone Resch, president and CEO of the Solar Energy Industries Association, an industry group. He expects it will make it cheaper and easier for homeowners to go solar.
Resch says that while the installed cost of residential solar has fallen 40% in the last three years, upfront payments can still pose a challenge for consumers. He says a home rooftop array, with a 5 kilowatt-capacity, costs on average between $20,000 and $25,000.
SolarCity, like other installers, has been offering “purchase price agreements” in which customers lease solar panels with little or zero upfront costs. Yet some of its customers said they wanted to own their systems instead.
“There’s a big emotional tie to ownership,” Rive says, adding it also offers additional financial benefits. The U.S. government offers tax credits, currently slated to expire at the end of 2016, to homeowners who install solar systems.
Rive says solar is increasingly becoming a cheaper power source for customers, because its costs are falling as utility electricity prices are rising. To further lower costs, his company plans to open its own factory to mass manufacture rooftop panels.
If a customer with a 30-year loan sells his house, the loan would transfer to the new owner. If the buyer doesn’t want it, SolarCity will simply remove the solar panels, which function as its loan collateral.
Yet Rive doesn’t expect that will happen. He says the company already has about 10 customers moving each day, and in almost every case, the buyer wants to retain the solar panels, because they produce energy at a lower cost than the utility charges.
“It’s a selling point,” Rive says of his product, which has seen booming business.
SolarCity, which now serves customers in 15 states that account for half of the U.S. population, will begin offering its new solar loans in eight that have high power prices: Arizona, California, Colorado, Connecticut, Hawaii, Massachusetts, New York and New Jersey.
Rive expects the loans will entice customers in other states and expects solar will become the cheapest home energy source nationwide within six to 10 years.
“It becomes a hedge against rising energy prices,” Resch says of a home solar array. “It’s also a way for a consumer to self-generate energy and become more independent.”
