Clean Power

Published on November 17th, 2013 | by Giles Parkinson


SolarCity Leads Way Into Low-Interest Solar Financing That Could Be Huge Boost To Solar Industry

November 17th, 2013 by  

Originally published on RenewEconomy.

SolarCity-logoNEWSThe solar industry has achieved another significant breakthrough, after US solar leasing specialist SolarCity issued the first asset back notes for the solar industry, and achieved an interest rate significantly below expectations.

SolarCity raised $54 million in the issue of asset backed securities. It was not a significant sum, but it was an important ground-breaking step for the industry.

Importantly, it gained a relatively strong BBB+ rating from S&P, the credit rating agency’s first assessment of a solar-based securitisation.

Even better, the issue attracted an interest rate of 4.8 per cent. This was well below the 6.5 per cent rate predicted by analysts, and suggests a new source of cheap finance will open up for the industry.

Up to now, the industry has had to rely on tax equity financing, where interest rates can be as high as 15 per cent. In effect, the raising suggests that the industry can cut its financing costs by two thirds, a significant breakthrough.

The notes were sold through a private placement and are secured by the cash flows associated with the solar arrays installed by SolarCity, whose chairman is Elon Musk, of Tesla fame.

“This transaction opens the gates for other companies that are also looking to raise money through ABS markets – particularly other private leasing companies and SunPower,” Deutsche Bank analyst Vishal Shah said in a report.

“We expect cost of capital for future transactions to decrease further as rating agencies get more comfortable with these type of structures and more data becomes available. Finally, we believe companies in the leasing business have the ability to lower cost of capital by at least 200-300 basis points, which in turn could allow them to further lower solar electricity costs and offer more attractively priced PPAs.

“Tax equity financing has been the primary constraint for companies involved in the residential solar market and this transaction should act as a great source of incremental capital.”

Shah said the transaction should boost the solar sector’s profitability and sets the stage for a lot stronger growth of the US solar market over the next 12-18 months.

In its assessment, S&P said despite the relatively new nature of the industry, and the short history of the company, the business case for rooftop solar was strong, with declining prices and no natural competitor.

“Over the next three years, we expect distributed solar generation to continue to grow rapidly, albeit from a small base, fueled by … declining PV system installed and related costs, such as customer acquisition and financing and system component costs; and policies aiming to increase the use of distributed solar generation,” it said.

SolarCity this week announced a partnership with BMW, which will see owners of the BMW i, the car manufacturer’s electric vehicle, receive a 10-percent discount on SolarCity’s home solar offer.

Meanwhile, other large investors continue to expand their solar portfolios. Google has  again teamed up with the global investment firm Kohlberg Kravis Roberts & Co (KKR) and North American solar project developer Recurrent Energy to invest a combined $400 million in six solar plants in California and Arizona, with total capacity of 106MW. The plants, the Wall Street Journal reports, are expected to be grid connected by January.

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About the Author

is the founding editor of, an Australian-based website that provides news and analysis on cleantech, carbon, and climate issues. Giles is based in Sydney and is watching the (slow, but quickening) transformation of Australia's energy grid with great interest.

  • Marion Meads

    SolarCity is the new way to fleece out the taxpayers twice.

    For those that wanted to buy rather than lease, SolarCity’s mode of operation: First, they fleece out their customers by jacking up the prices of installed solar, and then they fleece out the customers by charging a high interest rate.

    For those that wanted to lease: SolarCity fleeces out the government in terms of tax incentives, then they fleece out the ratepayers through a PPA with a guaranteed price escalation.

    They have an excellent business model at your expense. Good for investors indeed.

    Right now, if you tally the total costs, including tax incentives and other credits collected by SolarCity through the lifetime of your solar panel project, the total amount of money collected by SolarCity would be three times than if you buy comparable gee-whiz solar panels from

    and have it installed for $1/watt.

    And you won’t even need any tax credits to recover your costs in 5 years. It would be three years if you apply for tax credits. And after that, free electricity for life, not a PPA contract slave for life.

    • A Real Libertarian

      Where can you get $1/watt solar in the US?

      • Bob_Wallace

        Panels for a bit less than $1/watt.

        “have it installed for $1/watt” I assume is labor. And that seems high.

        Missing: inverter, racking, wiring, disconnects, permits, inspections, ….

        Getting the permits, etc. takes time. If you want someone else to do that then there’s another cost.

      • Marion Meads

        The cost of installation is $1/Watt and should be added to the cost of the system. A 7.56 peak kW for example, complete with state of the art inverters, warranty, web monitoring, and other cool features can be had for $1.71/Watt. So the total cost would be $2.71/Watt, which is way better deal than what SolarCity is offering at $6-$9/watt before rebates if you buy their system without PPA.

        • fred

          You have not taken many other things in consideration when you talk about purchase like who maintains, insure and monitor the system. And more importantly not everyone has the money upfront neither the appetite for the tax credits.

  • ronwint

    Maybe the solar leasing industry has had to rely on tax equity financing up until now, but the rest of the solar industry has been offering low interest $0 down solar loans that do not rely on tax equity financing to their customers for some time now.
    $0 down solar loans are far better financially for the consumer because they allow retention of the 30% federal tax credit and other financial incentives by the consumer, they allow direct ownership of the solar system, and $0 down solar loans are typically offered by smaller dealers that typically offer far better system pricing than the solar lease and PPA companies do.
    The only reason that $0 down solar loans have not led the way thus far is because the solar lease and PPA company’s mighty marketing muscle has kept information of such programs out of the mainstream.

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