Investors enamored with rooftop solar

The solar market has been marked by falling profits and controversial federal government loans this year, but one bright spot has been the growth of investors putting money into installing solar panels on the rooftops of homes and and small commercial buildings.

Sungevity, based in Berkeley, Calif., said Friday it will be using a fund of “over $50 million” from Rabobank to install solar panels on residential rooftops and sell the electricity to homeowners via leases. The fund represents Rabobank’s first foray into residential solar in North America, the company said. The bank has been funding solar electric arrays at farms, warehouses and other businesses, as well as its own branches.

Earlier this week, another solar service provider, Brightergy in Kansas City, Missouri, announced a $40 million fund from Trinity Private Equity Group, which also put in $2.5 million for an equity stake in Brightergy. Brightergy will use the money to install commercial rooftop solar systems in Massachusetts and sell the electricity to business owners.

The two funds reflect a growing level of comfort for investors with distributed and small-scale solar panel investments, as well as interest by consumers in the current low cost of solar panels, and the various financing models that have been created to fund solar panels. In California, the average price for a system that is 10 KW or less reached $6.8 per watt during the first half of this year, according to a report by Lawrence Berkeley National Laboratory. The prices tend to be lower for larger commercial systems and higher for residential systems because they are smaller. The average residential system is 5 KW ($34,000).

Home and business owners who opt for financing options typically sign a long-term agreement of 10-20 years and pay a monthly fee that should reflect lower rates than what they pay to their utilities. Solar service providers are responsible for the operation and maintenance of the solar systems. The agreements are called leases or power purchase agreements in different regions of the country more or less because of the local regulatory rules on selling electricity to consumers.

Although the expense of owning a system outright is a barrier for consumers to embrace solar, it’s not the only motivation. Paying only for solar electricity (and not owning the panels) takes away the time and headache of figuring out which types of solar panels or brands will deliver a solid performance over time, Ed Fenster, CEO of SunRun, said in a recent interview. San Francisco-based SunRun raises money from banks and other investors to offer financing options, which are marketed by installers.

“The No. 1 reason people enter into a PPA or a lease is not to obtain financing. The typical homeowner who is considering solar now is their early 50s, still working and probably in a dual-wage family with children. They are exceptionally busy,” Fenster said. “Understanding how to model solar production and what’s the difference between manufactures took me at least one year.”

Banks that have been active in setting up residential and commercial solar funds include U.S. Bancorp (s USB) and Citi (s C). Some utilities also have gotten involved. PG&E has set up a $60 million fund for SolarCity and a $100 million fund for SunRun. NRG Energy’s (s NRG) two utilities in Texas, Green Mountain Energy and Reliant Energy, also launched residential solar leases this year. Google (s GOOG) has also become an active investor in residential solar, creating a $75 million fund for Clean Power Finance and $280 million for SolarCity this year.

Solar rooftops have become such a low-risk seeming investment, that a startup called Solar Mosaic is developing a way for citizen investors to invest in solar projects, and make returns similar to investing in a mutual fund.

 Photo courtesy of Sungevity