2013 Was a Great Year for Solar Financing — What Will the Future Hold?

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New financing strategies for solar projects are helping to move the industry forward. Smaller solar projects now have more financing options than they did just a year ago.

Innovative financing strategies are prominent in solar news these days. Mosaic led the way early in 2013 with their crowdfunding offering, which allowed people in California and New York (and accredited investors throughout the country) to invest in solar for as little as $25. Its resounding success so far in attracting investors is paving the way for others to follow suit with similar models.

Collective Sun, which came on the scene late last year, provides funding for solar projects exclusively to nonprofits — on of the most underserved sectors when it comes to solar. Nonprofits, which are tax-exempt, can’t get most solar incentives, which usually require having a tax liability. So Collective Sun stepped in to fill this hole by offering secure investments in solar projects for nonprofits with good returns for investors.

 

SolarCity is now getting into the crowdfunding action. The company has been a major player in new financing options and was in the headlines last year for their first solar securitization, a huge step forward for the solar industry. Its new crowdfunding offering is sure to step up the game in that arena.

 

All these developments are crucial for solar, since financing has been one of the biggest hurdles to making projects happen. It can be hard to get traditional banks to provide funding. Although solar is a relatively safe investment, it’s a new enough one that many banks and investment firms don’t yet understand its risks — or lack thereof.

 

While banks have been getting in on larger, utility-scale projects, it’s still a challenge to finance smaller commercial or residential solar installations.

 

Given the size and potential of the market, it’s no surprise that new twists on the financing theme keep popping up. A recent one was devised by THINKnrg, a California company that manages solar projects, for an installation at the Oshman Family Jewish Community Center in Palo Alto.

 

For the JCC installation, investors provided capital for the panels and installation, while THiNKnrg took care of permits and clearances. THINKnrg will sell electricity from the panels to the JCC at 4 cents per kilowatt-hour, providing hefty savings from the 8 cents the JCC has been paying their local utility. THiNKnrg makes a profit from selling the JCC’s excess electricity — as part of the deal, the JCC must sell some energy back to THiNKnrg — and by claiming the rebates and tax credits. This is common with installations for nonprofits, which can’t get the tax credits.

 

The business model for the JCC project features some unique details. But what all these new models share is a means to provide profits for the offering company, good returns and relatively low risk for investors, and savings for the individuals or organizations who go solar.

 

And they’re just the tip of the iceberg. With so much new financing opening up for solar, and such large players as SolarCity participating, financing smaller solar projects may not continue to be the major hurdle it’s been in the past. We may soon look back on 2013 as the year things started to really open up for solar financing.