SolarCity to Finance Rooftop Panels in Shift From Leasing

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SolarCity Corp. will offer loans for rooftop solar power systems in a bid to reach consumers who want to own the panels rather than lease them or pay cash.

No-money-down leases helped SolarCity become the largest U.S. supplier of rooftop solar power. Today it will begin offering 30-year loans in eight states including New York and New Jersey that are repaid through borrowers’ power bills, the San Mateo, California-based company said today in a statement.

Loans may offer a better deal for consumers than leases, said Chief Executive Officer Lyndon Rive. Under SolarCity’s current model, the company owns the equipment and the customers make monthly payments for power, an arrangement typically called a power purchase agreement or PPA.

“Once consumers understand it, they should prefer this product over a PPA,” Rive said in an interview yesterday. He estimates these types of loans will make up half the company’s business by mid-2015. “The total savings is greater than with a PPA.”

Two-thirds of U.S. residential solar systems last year were funded by third parties through PPAs, according to Boston-based GTM Research. That’s expected to peak this year at 68 percent and then decline to 61 percent by 2016 as more financing options emerge, the research company said in a June report.

With SolarCity’s MyPower loan program, homeowners who qualify can finance rooftop solar systems at a rate as low as 4.5 percent. There are no penalties or fees for prepayments.

Tax Credit

“Loans make more sense as solar systems get cheaper and homeowners become more confident in the technology,” said Nicholas Culver, a solar analyst at Bloomberg New Energy Finance in New York. “SolarCity is addressing a potential threat to their business model.”

For a typical system in California that costs $30,000 to install, power will cost about 16 cents a kilowatt-hour in the first year, Rive said.

Homeowners will also qualify for a 30 percent federal tax credit, $9,000 in this case. Once that’s applied to the loan, the price will decline to about 11 cents a kilowatt-hour.

SolarCity’s loan program also allows it to enter states such as Georgia and North Carolina that ban third-party ownership of rooftop solar systems. The company isn’t the first solar installer to offer debt financing in addition to leases.

Admirals Bank offers loans of as much as $40,000 for renewable-energy systems and in June announced a partnership with SunPower Corp., a solar-panel manufacturer and rooftop system provider. SunTrust Banks Inc.’s LightStream unit offers financing for rooftop power at rates that start at 4.99 percent.

Loans Today

SolarCity will begin offering loans to homeowners today in Arizona, California, Colorado, Connecticut, Hawaii, Massachusetts, New York and New Jersey.

Once debt on the solar loans becomes big enough, SolarCity plans to securitize them, probably by tying the monthly payments to bond issues, Rive said.

SolarCity rose 3.5 percent to $56.48 at the close in New York. The shares have gained 45 percent in the past year.

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