Using a loan to finance a residential solar system is not a new idea -- but new entrants, new investors and new financial models are changing the way people purchase and invest in solar. More than $200 million has flowed into solar loans in the last few weeks.  

Sungage just landed a $100 million solar loan fund from a large credit union, and Mosaic just announced that PartnerRe, a global reinsurer which is very attentive to risk, will provide up to $100 million to back Mosaic’s residential solar loan program.

Last month Dividend Solar raised a solar loan fund in the "eight figures" from "a group of well-known and very sophisticated Wall Street investors," according to the firm's CEO. SolarCity announced its PPA-lookalike loan product earlier this month.

Direct ownership of solar via loans is gaining traction because PV systems continue to get cheaper while financing options continue to improve.

Firms such as SunPower, SolarCity, Clean Power Finance, Sunrun, NRG, Sungevity, SunEdison, Kilowatt Financial, Sungage, Mosaic and Dividend Solar are already in the solar loan business. A survey conducted by Mosaic found that around 60 percent of respondents would prefer to own a residential rooftop system rather than lease it, assuming savings and performance are similar. Among the 26 percent who still want to lease, more than half would choose a loan instead if a warranty was included.

Sungage: Disrupting the utility and financial services sector

Sara Ross, the CEO of 5-year-old firm Sungage, noted the firm's single-minded focus on solar loans in a recent interview with GTM, saying that it is "great to see the established players address the strong preference for solar ownership." She added, "I fully expect the dominant choice to be loans."    

The new $100 million loan facility is enough to finance approximately 4,000 solar installations. The installations will be starting in Connecticut and soon reaching Massachusetts, New Jersey and New York.

"Ours is simple consumer finance -- we're not a utility trying to extract...value from the customer. The other piece is the way we deliver at the point of sale -- that brings financing to the kitchen table. Our homeowners can get solar while in their pajamas and without lifting a pen."

Sungage works with national solar installers such as RGS and Astrum. Ross said, "Installers can pit Sungage's loan versus leasing at $100 [per month] for fifteen years and owning the system -- or pay the same amount and still not own anything."

As far as operations and maintenance (O&M) is concerned, Ross said, "We don't agree with that framing -- there's not O&M with a residential solar system; there are occasional repairs. Just like you need a new muffler. There's no daily or monthly or even annual [required maintenance]. The question is, is there a market for repairs? And given the growth of the solar industry, there are plenty of installers who can take care of repairs." She added, "The result is the consumer can save more and own the system, and still get a professional warranty from an installer like Astrum."

"What Sungage is drawing on is what's been happening in financial services. We are the Lending Club of solar. We connect borrowers with sources of capital -- and we now have a credit union. We're taking that model from financial services to the residential solar space."

According to Ross, Sungage's platform will serve to disrupt the utility space as well as the financial services sector. She added, "It's a counterpoint to SolarCity -- we're just enabling the lending." She noted that the credit union, DCU, "has the cheapest money; they are not taxed and pay low interest."

DCU is the largest credit union in New England with more than 400,000 members across the U.S.  

According to the company, "Sungage created the industry’s first secured solar loan; a product in which the solar energy system serves as the collateral so no home equity is required."

The CEO said on more than one occasion during our interview, "With a solar loan, I own the asset."    

Mosaic moves from peer-to-peer to solar loans

Mosaic, founded as a peer-to-peer solar finance firm, has added solar loans to its offering. PartnerRe, a global reinsurer, will furnish up to $100 million in financing for Mosaic’s home solar loan program. Mosaic claims its peer-to-peer lending platform has "seen thousands of investors join the Mosaic community." PartnerRe is a reinsurer with 2013 revenue of $5.5 billion and total assets of $23.4 billion.    

Steve Michella, founder of Dividend Solar, told GTM recently, "The lease/PPA model has been tremendous for the growth of solar in the U.S., but it’s becoming increasingly clear that solar ownership offers significantly greater long-term value to homeowners."

GTM Research recently published its latest report on residential solar financing and forecasts third-party ownership to peak at 68 percent of the residential PV market this year. GTM Research also expects the U.S. residential PV market to exceed 1 gigawatt for the first time in 2014.

If you're in Las Vegas at Solar Power International this week, the GTM Research analysts are out in force. Say hello to us in booth #3909 and check out our analysts presenting live at the show.

Click to enlarge

Source: GTM Research's U.S. Residential Solar Financing 2014-2018 (for more information on the report, visit