SolarCity Corp., which lost a U.S. loan guarantee in the wake of Solyndra LLC’s bankruptcy, will move forward on a $1 billion solar rooftop project for military housing with financing from Bank of America Corp.
The loans will help pay for the installations of as much as 300 megawatts of rooftop photovoltaic systems on housing and office buildings used by the military in as many as 33 states over five years, Foster City, California-based SolarCity said today in a statement.
The agreement shows that banks are becoming more comfortable providing financing for renewable-energy projects that in the past could get funded only if the government was willing to back them, said SolarCity Chief Executive Officer Lyndon Rive.
“A year ago it was impossible to do a project of this scale without a loan guarantee,” Rive said in an interview. “That experience put us through a rigorous process that helped make it possible without one.”
The U.S. Energy Department on Sept. 7 offered a conditional guarantee for 80 percent of a $344 million loan to support SolarCity’s project. The loan was to be provided by USRG Renewable Finance, an affiliate of US Renewables Group LLC, and Bank of America.
That was one day after Solyndra, a Fremont, California-based solar company that received $535 million in guarantees from the same program, filed for bankruptcy.
Two weeks later, SolarCity said the political firestorm following Solyndra’s failure prompted increased scrutiny of pending applications, and that its loan guarantee wouldn’t be completed before the program expired at the end of that month.
The Bank of America loan validates the federal guarantee program, which was designed to make new energy technologies more familiar to lenders and spur financing when the government was no longer providing backing, said Damien LaVera, an Energy Department spokesman.
“Our goal was to help provide incentives for private financing of innovative energy technologies,” LaVera said today in an interview. “It’s good news when banks step in without that incentive.”
The loan guarantees would’ve provided cheaper financing for the projects than Bank of America can provide without them. Falling panel prices and more experience making similar loans has helped offset that, said Jonathan Plowe, head of new energy and infrastructure at Bank of America.
Improved Risk Model
“This gave us a financial model to work with to get it done,” Plowe said in an interview. “The risk profile has improved significantly and lower module prices have helped bring costs down.”
Bank of America will provide up to $350 million in financing for the SolarCity project, said Kerrie McHugh, a spokeswoman for the bank based in Charlotte, North Carolina.
The lender is already providing financing for a similar distributed solar project that’s receiving government backing. ProLogis Inc., the world’s biggest warehouse owner, received a partial Energy Department guarantee in September for a $1.4 billion loan to put solar panels on about 750 buildings.
Bank of America said the Prologis deal was one of the reasons it was willing to support SolarCity.
SolarCity has scaled back the project to 120,000 rooftops from a September plan of as many as 160,000. The company installs panels, often at no cost, and charges building owners for the electricity they use at about 5 percent to 10 percent below their local utility rates.
Installations under SolarStrong, as the program is called, have begun at military housing at the Pearl Harbor base in Hawaii and will next expand to states with expensive electricity, such as California, New Jersey and Texas, Rive said.