Discussion - Distributed Energy

DISCUSSION: Is Solar Securitization ready for the Big Time?

Distributed solar has grown by 5 times since 2010, with current capacity expected to double by 2016.  Residential installations are a key component of this growth.


Financing for distributed solar has traditionally been dependent on the balance sheets of the companies that perform the installations or on various structures centered on tax equity investors.   In order to keep up with demand and in order to expand, solar financers will need to continue to access capital.


NREL announced this week that SAPC has standardized residential lease and commercial PPA agreements, meaning that it will be easier to get financing for solar and easier for those providing the financing to sell and/or securitize that debt.  Essentially, these standards do the same for the solar financing sector that FHLA standards around loan applications do for home financing.

SolarCity also announced recently that they are offering a private placement of $54 million marking the first use of securitization for distributed solar PV assets. As the chart below shows, similar methods of securitization have brought more capital to home mortgage lenders at a very low cost of capital, dramatically increasing home ownership as it became a market norm.


Writing just a few weeks ago, Elias Hinckley of the Energy Collective identified 7 barriers to securitization of solar assets.  Do the new standards announced by SAPC remove at least one of these barriers?  Is this the beginning of a new wave of solar asset backed securities or are there still impediments to this such as geographical diversity of assets, technology not having long-enough track records, market risk related to energy prices, and off take risk?

2 replies »

  1. I’m wondering which are the principal types of areas these trends are visible in. Do we see these in cities that have been developed vertically (majority of buildings) or are they dominant only in cities/towns with a more horizontal layout (1-4 storey houses) or is this distinction statistically insignificant as of now?

  2. Eric,

    Is this the beginning of a new wave of solar asset backed securities? Yes, if that wave has a long lead time. But, does this open the door for more creative financing models to capitalize solar deployment firms? Absolutely. SolarCity has also acquired Common Assets, which is a crowd-funding start-up in an attempt to democratize rooftop solar financing. http://gigaom.com/2014/01/15/with-startup-acquisition-solarcity-will-open-up-solar-investing-to-individuals/

    I see a wave of clever financing models on the horizon.

    -Brandon Tarbert

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