SolarCity closed two major rounds of funding this week that will give a boost to its residential and commercial solar businesses, and could possibly breathe new life into a languishing commercial and industrial (C&I) solar market.
On April 7, the California-based company announced it had closed the second round of financing as part of its renewable energy tax equity investment program with Bank of America Merrill Lynch and another investor. The program will finance approximately $188 million in solar projects, covering the upfront cost of the solar equipment and installation.
On April 6, SolarCity announced it had closed a $150 million round of non-recourse financing with Credit Suisse to support deployment of commercial solar energy systems, including battery storage systems.
The news builds on last year’s announcement that SolarCity had activated a $1 billion fund in partnership with Credit Suisse that is expected to finance more than 300 megawatts of solar for businesses, schools and government organizations across the U.S.
SolarCity is widely known as the largest residential solar installer in the U.S., but it has also climbed to the top of the commercial and industrial space, claiming the top spot for installations in 2014 and 2015, according to the GTM Research U.S. PV Leaderboard.
"Our asset portfolio enables us to continually bring in new capital from top-tier institutional and corporate investors," said Jeff Munson, director of structured finance of SolarCity, in a statement. "Additionally, our proprietary, in-house technology provides us competitive advantages that have led us to become one of the top commercial solar providers in the U.S.”
SolarCity's commercial offering leverages ZS Peak, a proprietary mounting system that integrates the solar panel with the racking hardware, reducing project build time from multiple weeks to a just a few days.
Battery storage projects will be supported by DemandLogic, which is SolarCity’s dedicated battery for businesses aimed at beating utilities' demand charges. Developed with energy storage technology from Tesla, DemandLogic is equipped with autonomous learning software to optimize savings.
This isn't SolarCity’s first move in the C&I solar-plus-storage space. The company launched its energy storage product for businesses in 2013. Currently, DemandLogic is officially only available for customers in California, Massachusetts and Connecticut.
California’s Self-Generation Incentive Program database lists SolarCity's commercial storage pipeline at 4.3 megawatts, of which only 505 kilowatts have been deployed, according to Ravi Manghani, senior energy storage analyst at GTM Research.
Most of those deployments came in 2011. In all likelihood, they were installed for Wal-Mart to aid in reducing peak load. SolarCity is currently installing an additional 10 battery projects for Wal-Mart using 200-kilowatt (400-kilowatt-hour) batteries.
“Commercial solar-plus-storage financing -- or for that matter, even residential -- has been a tough nut to crack,” said Manghani. “Companies like Stem and Green Charge Networks that have secured financing for C&I storage have kept solar financing out of the conversation. And in spite of favorable economics for C&I solar-plus-storage, the market has been languid.”
GTM Research estimates that less than half of C&I storage projects are currently deployed in combination with solar. Some sites with solar may later add storage, but there are relatively few simultaneous deployments. Manghani said he's eager to see the extent to which SolarCity can bring two disparate value streams offered by solar (kilowatt-hour savings) and storage (kilowatt management) under a common financing platform.
It will also be interesting to see the impact that a new round of financing could have on the overall C&I market.
Installations in the commercial solar segment have actually dropped 4 percent on an annual basis over the past two years, according to Cory Honeyman, senior solar analyst at GTM Research. This is primarily due to three challenges: policy constraints brought on by state incentive volatility and challenging rate structures, a sluggish customer acquisition process, and limited financing for small and non-investment grade commercial customers.
Honeyman said it will be telling for the sector to see just how much of SolarCity’s $150 million C&I fund targets solar-plus-storage and how much targets small commercial customer segments.
He'll be looking out for "whether this fund focuses on more of the same or reveals a shift in commercial solar finance toward underserved solar-plus solutions and customer types that can reboot the broader commercial solar market."
Between funding announcements, SolarCity unveiled last week that it has appointed former Federal Energy Regulatory Commission Chairman Jon Wellinghoff as the company’s chief policy officer. The progressive energy policy expert will advise SolarCity on regulatory and legislative affairs, and could lead the company's commercial solar policy debates.