A couple of years ago, startup Sungevity set out to provide hassle-free services for homeowners who want to install solar electric systems. Looks like its strategy has paid off: On Wednesday, the company announced it has raised another $15 million.
Where can solar startups find opportunities when their playground is increasingly dominated by giants from other industries? That’s a question that some Silicon Valley solar company executives and investors have pondered for some time now. The answers are software and services.
SunRun, after announcing a $100 million solar fund with utility PG&E last week, has closed a $55 million Series C round led by VC heavyweights Sequoia Capital. The solar financier plans to use the funds to ramp up sales and expand its U.S. operations.
PG&E might not be winning over hearts and minds for its smart meter project, but the utility has been getting creative with solar financing. This morning PG&E announced that it will create a $100 million tax equity fund to invest in home solar installations with startup SunRun.
Solar financier SunRun has high hopes for 2010. The San Francisco-based company, which provides homeowners with solar leasing options known as power purchasing agreements, has just announced a tax equity commitment of $90 million from US Bancorp to finance residential solar installations next year. It marks the second tax equity deal between US Bancorp and SunRun, which owns, monitors and maintains residential solar panels (it’s completed about 2,700 installations so far), and sells the electricity at a fixed rate after customers pay a minimum $1,000 installation fee. In late 2008, the startup secured a commitment of about $105 million from a US Bancorp affiliate to finance some 2,000 installations. With this new financing, SunRun CEO Edward Fenster said in a statement the company will be able to “bring solar to thousands more homes in 2010.”
Snagging a $90 million tax equity agreement is no small feat these days. Such financing — in which an investor basically buys clean energy tax credits and uses them to shelter otherwise taxable income — has been hard to come by this year. In the wake of the investment bank shake-up, solar companies have had to compete for financing from a shrinking pool of tax equity investors once packed with firms like AIG (s AIG), Lehman Brothers, Wachovia and Morgan Stanley (s MS). Add to this the fact that profits, and therefore taxes high enough to make use of tax credits, have dropped, and energy developers have found less demand for these credits. JP Morgan managing director John Eber said at the Renewable Energy Finance Forum in San Francisco this fall that tax equity financing for renewable energy is expected to total just $2.5 billion to $2.6 billion in 2009, down from $3.6 billion last year and $6 billion in 2007. Read More about SunRun Adds $90M From US Bancorp, Hopes for 2010 Solar Boom
It looks like financing for solar projects may be starting to pick up again. Solar installer Borrego Solar Systems is set to announce on Monday that it will offer power-purchase agreements (PPAs) — contracts that provide the upfront financing of a solar-power system in exchange for agreements with customers to buy the resulting power — for its commercial, educational and governmental customers.
The deal will enable the company to offer financing directly to its customers instead of partnering with third-party financiers, which it has done in the past. That means customers will be able to get financing and buy systems from the same company, instead of having to deal with two separate companies, and Borrego claims this will result in lower costs for its customers.
Read More about Solar Funds on the Rise: Borrego Launches Financing Deal
Facebook and SunRun, a San Francisco-based company that helps finance residential solar installations, don’t connect on many levels. But according to Rich Wong, a partner with Accel Partners — the venture capital firm that backed Facebook early on and on Tuesday will announce that it has led an $18 million investment round for SunRun — the biggest risk in both plays has to do with whether the startup will be able to achieve massive scale.
SunRun co-founder and president Lynn Jurich tells us the funding will support expansion beyond California, Massachusetts and Arizona, where over the last two years it has started providing homeowners with solar leasing options and what are called power purchasing agreements — SunRun owns, monitors and maintains the solar panels, and sells the electricity at a fixed rate after customers pay a $1,000 installation fee. Jurich declined to name specific target markets, but said SunRun is looking to enter some of the 10-14 states where “solar will make sense” within the next 2-3 years as a result of local subsidies, utility programs and electricity rates that will help bring solar closer to competitive pricing with conventional sources. Read More about Solar Financier SunRun Snaps Up $18M Series B, Eyes U.S. Expansion
[qi:115] The venture model is ailing, and folks in the industry are promoting two different diagnoses for the sickness. One group says the industry needs more exits and should promote the return of smaller initial public offerings, while the other says the industry has grown too big in terms of the money it raises and needs to shrink. Both are probably right, but I think firms adjusting for a smaller overall industry will be likelier to succeed. Read More about The VC Industry Is Too Fat and the Exits Are Too Thin
SunRun, a San Francisco-based startup that finances solar power systems for homeowners, has formed a partnership with contractor OCR Solar & Roofing, which could help expand the market for roof-integrated solar systems. SunRun sets up power-purchasing agreements (PPAs) through which homeowners typically pay a few thousand dollars up front and then buy power at a fixed price from a third party that owns and maintains a solar installation on their roof.
OCR Solar & Roofing is the fourth company in SunRun’s network of approved contractors; the firm specializes in installing integrated systems (as opposed to rack-mounted panels) for existing homes. While both SunRun and OCR currently operate only in California, if their plans to expand in the first half of next year go through, they could help open the retrofit market to roof-integrated systems. Roof-integrated solar increasingly represents the default solar option for new construction and a key focus for solar panel makers. More obtrusive rack-mounted solar panels remain the convention for retrofits largely because they cost about 10 percent less and require less gutting of the existing roof, according to OCR solar division chief Aaron Nitzkin.
SunRun, a startup that finances solar power for homeowners, says it has secured a tax equity commitment of around $105 million from an affiliate of US Bancorp to buy about 2,000 residential solar facilities. SunRun is one of the first companies to attempt to create a business model where homeowners can buy solar power off their roofs, while a third party owns the panels.
That business model, called a power purchase agreement, is what has helped the commercial solar industry grow. Building owners get a fixed, flat rate to purchase solar electricity, and don’t have to pay for the hardware itself. In September, SunRun’s service had its one-year anniversary, though it’s unclear how successful converting the commercial model to residential homes has actually been.
SunRun has managed to raise venture financing and has made some significant partnerships in the past. Back in June SunRun raised $12 million in financing from venture firm Foundation Capital. And a couple months before that, SunRun said it had partnered up with solar installer Akeena Solar. In a market where project financing is hard to come by, the funding from US Bancorp seems like it’s a recognition that PPAs for residential customers are showing promise.