SolarCity Lets Individuals Invest in PV Projects Through a New Acquisition

More creativity in solar asset-backed financial products

Eric Wesoff January 15, 2014

Eric Wesoff

Editor-at-Large
Greentech Media

Eric Wesoff is Editor-at-Large at Greentech Media. Prior to joining GTM, Eric Wesoff founded Sage Marketing Partners in 2000 to provide sales and marketing-consulting services to venture-capital firms and their portfolio companies in the alternative energy and telecommunications sectors. Mr. Wesoff has become a well-known, respected authority and speaker in these fields.

His expertise covers solar power, fuel cells, biofuels and advanced batteries. His strengths are in market research and analysis, business development and due diligence for investors. He frequently consults for energy startups and Silicon Valley's premier venture capitalists.

SolarCity (SCTY) just acquired privately held financial technology firm Common Assets.

The distributed energy financier and installer also just announced that it will offer a web-based investment platform to allow "individuals and organizations" to invest in solar projects.

Tim Newell, financial products expert and CEO of Common Assets, will join SolarCity as VP of financial products. John Witchel, chief architect of the company (and former CTO of Prosper Marketplace, a person-to-person online lending marketplace), joins SolarCity as senior technology architect for financial products.

Newell told GTM yesterday that "SolarCity has been changing the way that clean energy is delivered to homeowners -- offering financial products that will allow a broad range of investors access to debt instruments backed by diverse portfolios of solar assets."

He noted that SolarCity has been successful in constructing investment vehicles such as tax equity partnerships, debt vehicles, and securitization, and added, "Those are just different types of investment vehicles backed by SolarCity's portfolio."

The new financial product "shares an attribute of crowdfunding," according to Newell. But a crowdfunding company such as Mosaic is typically aggregating investors to finance a medium-sized solar project. Investing in an aggregate portfolio of projects was a model reserved for large financial institutions, not small investors.

"This would be inviting individuals to invest in a portfolio of assets that we've developed," said Newell.

This does look a bit like Mosaic's solar crowdfunding business. One-year-old Mosaic has crowdsourced a claimed $6 million in loans to solar projects, with zero defaults to date. Partnerships and large residential portfolios are claimed to be "on the near horizon" for Mosaic as well.

Newell added, "This is going to look like an investment-grade securitization or like a bond."

How will this work? Customers will be able to come to the website, establish an account, and buy financial products and have them serviced over time, according to the VP.

SolarCity CEO Lyndon Rive said in a statement, “Previously only institutional investors could participate in the financing of most solar assets. With our investment platform, we’re hoping to allow far more individuals and smaller organizations to participate in the transformation to a cleaner, more distributed infrastructure.”

SolarCity has not been bashful about innovating in solar technology or solar finance. The company acquired Paramount Solar and Zep Solar last year while teaming up with Texas homebuilders, partnering with BMW, offering a private placement of $54.4 million of an "aggregate principal amount of Solar Asset-Backed Notes," as well as moving into energy efficiency and energy storage.

SolarCity continues to push the financial, technological and marketing envelope in residential solar. The company installed nearly a third of all U.S. residential PV in the third quarter of 2013, installing almost four times as much as its closest competitor, Vivint Solar, according to GTM Research's U.S. PV Leaderboard.