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For many businesses and property owners, the high upfront cost of solar photovoltaic systems remains the single largest barrier to adoption. The solution? Solar financing. Fresh Energy’s solar financing event, the final installment of a three-part Solar Opportunities Series, will introduce participants to the range of current and emerging solar-financing options available in Minnesota. Learn more at fresh-energy.org/solarseries.
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Third Party Ownership Financing for Residential Solar
James Tong Senior Director
November 2013
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Helping Investors Build and Manage Solar Portfolios, at Scale
Financial Servicesand Software
for the Solar Industry
Solar ProfessionalsGrow Their Business by Offering
Compelling Solar Finance Products to Homeowners
InvestorsAbility to Efficiently Manage Risk and Invest in A Residential Solar
Portfolio
Manufacturers
Distributors
Installers
Utilities
Corporates
Financial Institutions
Major Fund InvestorsTop Investors
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Residential Solar Currently Dominated by Third Party Owned (TPO) Financing
Growing Share of TPO Financing
Source: NREL, CSI Database, MA SREC Program, Arizona Public Services, Salt River Project ; Maryland Energy Administration.
TPO financing becoming increasingly popular.
The installed cost of TPO financed or equivalent or less than the cost of host owned systems.
Installation Costs of Residential PV
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Trends in Residential PV in CA
8,747 Residential PV
systems
617 PV installers
50% of
the PV
Market600 medium and
small PV installers
20 large PV
installers
Top 50 Residential PV Installers in California Q1 & Q2, 2012
While larger installers typically have TPO financing, the CA landscape is highly fragmented with small and medium installers.
TPO financing may be peaking, as installation cost falls and financing options for ownership increases.
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Studies suggest TPO Financing is open solar to new customer segments
Correlation between PV adoption and household
income
Source: Drury et al. 2012
NREL study suggests that TPO financing is opening solar to household with more modest incomes households. UT Austin study makes similar conclusion.
TPO financing may enhance sales of host-owned systems. Separate studies by Yale and UT Austin indicate greater visibility of solar accelerates consumer adoption
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Differences in PV economics for Lease v. Own
• ~300 customers (mostly Dallas, Austin)• TPO customers reported tighter cash
flow led them to lease rather than buy.• Differences in expected returns in lease
vs. own are possibly a reflection of the greater need for precision for TPO products.
PV adopters have similar expectations of returns Third Party customers have higher returns
Third Party customers have a better understanding/estimate of returns
Source: Rai & Sigrin, UT Austin 2012
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Third Party Financing Currently Limited in Select States
Availability of Residential Third Party Solar Financing
TPO financing available in areas where states clarify that such providers would not be regulated as utilities.
More predictability in state incentives/rebates and net energy metering policies would promote more TPO financing and solar adoption, in general.
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Appendix
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Ease in Sales • TPO financing changes sales dynamics; system cost is irrelevant focus is on savings• Different financing structures can cater to different segments (e.g., no price
escalators appeal to fixed income households)
Product Attributes• Typically require 680+ FICO• 10 - 20 year term• Down payments of $0 - $2500 and annual escalators of 0% - 2.9%• Can pay monthly or prepay all payments for additional savings
Benefits Sold to Consumers• Savings of 10-15%• Low or no upfront cost and faster payback period• System monitoring and maintenance with full insurance and warranty• Annual money-back performance guarantee
Overview of Third Party Ownership Financing
