SolarCity and Bank of America open up tax equity investment

Tax equity investments have helped drive the phenomenal recent growth of the multi-billion-dollar solar industry -- but it's mostly the big banks that have gotten in on the action. Investors in solar tax equity such as Goldman Sachs, JP Morgan, Google, and U.S. Bank deploy funds in $100 million and $200 million chunks, which allows transaction costs to be minimized relative to these large funds.

Large transaction costs keep smaller banks and businesses from being able to participate in solar, a low-risk investment that can help meet sustainability goals.

But SolarCity and Bank of America Merrill Lynch just announced a $200 million tax equity investment program for solar projects that allows community banks to participate in tax equity -- and opens up an enormous potential pool of new investors.

Investors can invest $20 million to $25 million, a smaller investment than has been previously possible given the transaction costs.

Lyndon Rive, the CEO of SolarCity, said that with Bank of America standardizing the agreement and leading the initiative, "other regional banks can ride that, put capital to work, and meet their business goals."

Rive spoke of the "mad rush" to get projects done before the tax equity party ends with the expiry of the federal Investment Tax Credit next year. SolarCity is growing enormously fast (as are its competitors Vivint, Sunrun, and Sungevity) and though well-financed for 2015, SolarCity will need to continue to bring new, low-cost capital into the solar market to continue its lofty growth.

This tax equity program is part of Bank of America’s 10-year, $50 billion environmental business initiative.  

Conergy, Demeter and PACE open up commercial PV

While SolarCity is opening up more sources of investment, Conergy and Demeter Power are launching a solar financing structure that will open up commercial solar to the 90 percent of commercial rooftops currently ineligible.

While banks can gauge the creditworthiness of consumers by assessing their FICO scores, and larger commercial players are investment-grade, smaller commercial customers are closed out of financing solar rooftops. According to a release, "Financiers have not been comfortable taking on the credit risk of funding small commercial systems under a long-term lease or PPA agreement."

Renew Financial (formerly Renewable Funding) can use the property-assessed clean energy (PACE) lease to allow customers to finance the solar system and pay for it as a line item on their property tax assessment.

Brad Copithorne, VP of commercial PACE at Renew Financial, said, "Traditionally, to do a 20-year PPA in the commercial space, what you needed to qualify was an investment-grade host," and added that that situation only applies to 5 percent of the rooftops. "With PACE, we can finance a very high percentage of those rooftops, so we are massively expanding the market."

Renew Financial manages the PACE program; Demeter Power, a U.S. DOE SunShot Incubator awardee, developed a commercial financing structure with less tax risk; and Conergy financed the project.

The first solar project using this tax structure is at the Tiburcio Vasquez Health Center (TVHC) in San Leandro, California. Conergy financed and Demeter developed a 200-kilowatt PV system for the health center "that will offset approximately 90 percent of the energy consumed from the grid," according to a release.

Andrew de Pass, CEO of Conergy, said that the firm is "expanding PACE lease financing to more commercial solar projects in California this year." Copithorne called the TVHC project the first commercial solar PACE deal and said that it was "not even within the spectrum of something that could be financed by a traditional PPA."

“This new financing program costs us nothing upfront, lowers our bills, and minimizes our environmental impact,” said David Vliet, CEO of TVHC.