SolarCity, the largest US residential solar installer, has started offering loans directly to homeowners to buy its PV systems that the company claims could undercut prices set through power purchase agreements (PPA).
SolarCity currently offers its residential customers a leasing option or a PPA to have a PV system on their roof, depending on which option the customer’s local utility allows. Customers who lease pay a monthly fee, while PPA customers pay SolarCity per kilowatt hour of electricity. In either case the company claims its customers pay “usually equal to or less than market rate” compared to local utility electricity prices.
The new loan, called MyPower, is paid for per kilowatt hour consumed, like a PPA, but SolarCity says that in many locations it will work out cheaper. The company says it will save homeowners up to 40% on their electricity bills, allow them to lock in prices for a number of years and will require a relatively low credit score of 680. As with their other home solar products, SolarCity promises to take care of ‘soft costs’, such as planning and permitting that often form a larger share of installation in the US compared to other mature markets.
Customers will sign up to a 30-year warranty agreement and will have to pay upwards of 4.5% in annual interest. However they will be allowed to prepay all or some of their monthly balance and will also be able to claim up to 30% of the system’s cost back under the Investment Tax Credit (ITC) scheme.
The availability of finance even in states where solar leasing itself is not permitted means the new loan, could “expand the addressable market for solar power to areas of the United States that have traditionally seen very little adoption”, the company said. The fact that it will lower costs for homeowners further than many PPAs also means SolarCity hopes it will open up the market further.
MyPower is already being offered in eight states – California, New York, New Jersey, Colorado, Connecticut, Hawaii, Massachusetts and Arizona, with the company hoping to roll it out to further territories soon. Loans will be delivered through a subsidiary, SolarCity Finance Company.
Interestingly, A recent report by Deutsche Bank claimed that leasing for rooftop solar in a similar model to that offered by SolarCity could work in China, where the government has set a series of ambitious targets for distributed generation. Meanwhile SolarCity's next closest rival in residential leasing, Vivint Solar, raised over US$300 million in an IPO this month, with chief executive office Greg Butterfield hinting at a number of possible expansion plans.