Understanding SolarCity & Incapital’s New Partnership

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Earlier this week, SolarCity announced it’s teaming up with Chicago-based securities company Incapital to increase solar bond access to investors.

Under this strategic alliance, investors can now buy these bonds at major financial institutions from either IRA accounts or brokerages.

Photo Credit: SolarCity Dodge Sprinter by BrokenSphere, via WikiCommons (CC By-SA 3.0 license)

In October 2014, SolarCity launched its “Solar Bonds” initiative, by allowing people to purchase bonds online, while creating debt-based financing to fund further growth. Investors can put down a minimum purchase of a $1,000 bond. Solar Bond rates range from between 1.6% to 5.45% and maturities between 1 and 15 years. Washington Post noted SolarCity intends to sell around $100 million worth of bonds in its new partnership. Revenue on solar bonds comes from over 190,000 of its customers, who lease its rooftop solar systems. SolarCity topped 2014 US residential solar installations, far ahead of its closest competitor, Vivint Solar.

So what does this deal mean for SolarCity, Incapital, and general investments?

First, SolarCity gains another financial partner as it seeks to increase financing, as it continues to grow its brand. Debt financing is an important piece of SolarCity’s puzzle as it tries to increase its ability to buy further assets and leverage future growth. Micheal Bacia, in a guest post here on CleanTechnica last summer, explained the importance:

“In short, financing solar PV is financing assets, not liabilities. Therefore, the operation is cash positive for the borrower. Better cash flow means lower risk, secure repayment, and an opportunity to reinvest. Solar financing is the solution that can provide a boost for the economy, on a local and the global scale.”

Meanwhile, SolarCity has also been busy on the consumer financing side, creating a $750 million fund with Google to encourage more customer to go solar.

Second, Incapital adds a leading renewable energy company in its portfolio. Since 2005, Incapital has been participating in socially responsible investing, as its programs for single investors has helped created 200,000 jobs, while building and renovating more than 10,000 affordable homes. By assisting SolarCity with its Solar Bonds, Incapital has another name it can use in attracting future clients.

Lastly for investors, this provides another option for those who are looking to divest away from fossil fuels as more evidence suggests putting money into the fossil fuel industry is not a wise choice financially or economically.

Clem Dinsmore, a financial advisor from Oppenheimer & Co. recently told Climate Progress that younger investors are likely more accepting of green investing (e.g., investing in solar companies) than older generations. Dinsmore also suggested solar bonds may offer a good alternative to supporting solar companies for those who do not have access to put solar on their home — “as long as it’s “adequately secure from the credit point of view.”

Overall, investors now have another low-risk solar investment option with SolarCity bonds expanded to more people, thanks to Incapital.

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Adam Johnston

is expected to complete the Professional Development Certificate in Renewable Energy from the University of Toronto by December 2017. Adam recently completed his Social Media Certificate from Algonquin College Continuing & Online Learning. Adam also graduated from the University of Winnipeg with a three-year B.A. combined major in Economics and Rhetoric, Writing & Communications in 2011. Adam owns a part-time tax preparation business. He also recently started up Salay Consulting and Social Media services, a part-time business which provides cleantech writing, analysis, and social media services. His eventual goal is to be a cleantech policy analyst. You can follow him on Twitter @adamjohnstonwpg or check out his business www.salayconsultiing.com.

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