Solar Loans To Become Leading Residential Solar Consumer Finance Option In 2018

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New research from GTM Research suggests that direct ownership of residential solar systems through solar loans will continue to outpace solar leases as the leading consumer financing option for residential solar in 2018.

GTM Research published its latest report this week, Bringing Scale, Profitability and Value to the Residential Solar Market, authored by Allison Mond, Senior Analyst for Solar, which concludes that solar loans will be the leading consumer finance solution for residential solar systems in 2018, outpacing competition and continuing to shift the industry away from third-party owned systems, as was dominant in 2015 and 2016 — a prediction which GTM Research made towards the end of 2016 that has well and truly come to pass.

According to the report, the increase in solar lending will come at the expense of third-party owned and cash markets. The overall trend which can be seen playing out over the past three years is due in part to the shifting maturity of the market itself. Early on, in the middle of the decade, big-name companies like SolarCity and Vivint Solar went out of their way to acquire customers, spending millions in increasing their customer base. However, with the growing need to solidify their profitability, companies began making adjustments to how they did business.

With the big-name companies thus seeing their market share tail off somewhat as they focused on profitability over increasing customer numbers, and the cash market plunged due to customer acquisition plaguing both national installers and the long tail of the industry, the loan market came into its own. New companies like Mosaic and shifts to existing companies like SolarCity and Vivint Solar beginning to offer solar loans (as in December 2015 and June 2016) thus caused the solar loan market to explode in 2017 and grew by 81%.

As the market continues to evolve and mature, the solar loan products on offer today often combine aspects of leasing and ownership — offering no upfront costs and annual savings on electricity bills but with the ability to own the system and take advantage of the country’s 30% federal Investment Tax Credit.

The future is cloudy, however, with continued but less dramatic growth through 2023 but rising interests rates will force lenders to reevaluate their pricing modules. New IRS guidance will also begin to impact solar lenders which might benefit some companies over others. That being said, Alison Mond believes that “2018 is gearing up to be another year of impressive loan market growth.”

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Joshua S Hill

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