The investment community's acceptance of financed residential solar has opened the cash floodgates.
Vivint Solar of Provo, Utah just announced that it has secured $200 million in two new tax equity funds to finance solar power systems on residential rooftops. Vivint Solar is the solar integrator and PPA financier unit within Vivint. With 800,000 customers, it's one of the largest home security and automation companies and is looking to break into solar in a big way. Vivint is notable for its sales network and low cost of customer acquisition. The company was acquired by Blackstone for $2 billion in September of last year.
Vivint Solar was the second-largest U.S. residential solar installer in Q1 2013, according to the GTM Research's U.S. PV Leaderboard. Vivint designs, installs and services the solar system, with operations in California, Hawaii, Maryland, Massachusetts, New Jersey, New York, and Washington, D.C.
The company also provides home energy management services as part of its offering.
Here is a partial list of recent funds devoted to residential solar raised in 2013.
- SunPower's residential lease program has signed up a total of 18,400 customers and has about 147 megawatts booked to date with $528 million in net aggregate payments. SunPower just raised $150 million in new residential lease financing.
- Sungevity, the solar sales, financing, and software startup, won $125 million in new venture capital and project financing in January and landed another $15 million in funding, including investment from GE Ventures just last month. Previous investment has come from Brightpath Capital Partners, home improvement store Lowe's, Vision Ridge Partners, Firelake Capital, Craton Equity Partners and Eastern Sun Capital Partners.
- SolarCity (SCTY) joined with Honda Motors on a $65 million residential solar project fund for the benefit of Honda and Acura car buyers earlier this year. SolarCity also raised $500 million from Goldman Sachs in May.
- OneRoof has raised more than $80 million in operating capital and finance capital from Hanwha, Black Coral Capital, U.S. Bank, The Quercus Trust, Yellowtree Energy, and Spring Ventures.
- In June, Sunrun announced three new funds totaling $630 million. Investors include JPMorgan and U.S. Bank. While U.S. Bancorp (NYSE:USB) has been a big supporter of residential solar, this is the first entry for JPM Capital Corporation, a subsidiary of JPMorgan Chase & Co. (NYSE:JPM). Sunrun CEO Ed Fenster said, “It is the largest and most consistent provider of capital to renewables, but until now most of their investments have been in wind. This is a watershed moment.”
- In April, Clean Power Finance (CPF) won a $37 million equity round. Edison International (NYSE:EI) and two other power sector investors joined the deal. That round brings total investment in the firm to more than $62 million from Kleiner Perkins Caulfield & Byers, Google Ventures, Claremont Creek Ventures, Clean Pacific Ventures and Sand Hill Angels.
- Last week, we broke the story of SunEdison's acquisition of EchoFirst, a solar, hot water and conditioned air provider with a dedicated $50 million fund.
Third-party ownership (TPO) has become the leading finance model across the big residential markets in the U.S. According to GTM Research's recent report, Residential Solar PV Financing: The Vendor, Installer and Financier Landscape, 2013-2016, "Third-party financed residential installations comprise more than 50 percent of new capacity in California, Arizona, Colorado and Massachusetts, with the model gaining greater market share in other states such as Connecticut, Delaware, Maryland, New Jersey, New York, Oregon, Texas, Vermont, and Washington."
Shayle Kann, GTM's VP of Research, suggested in an interview that in addition to the usual third-party financing companies such as SolarCity and Sunrun, the industry should keep its eye on newcomers with a unique twist on financing such as OneRoof and Vivint.
GTM Research sees the residential solar financing market in the U.S. growing from $1.3 billion in 2012 to $5.7 billion in 2016.
A potential obstacle to TPO is the plummeting cost of solar, which makes solar increasingly easier to purchase outright. Kann points out the other shadows in the distance: the net-metering debate, the expiration of the ITC, the decline of state incentives, and the availability of project finance to scale with the aggressive ambitions of all of these companies.