A deal between California utility Pacific Gas & Electric and solar company SunRun will eliminate the upfront cost of installing rooftop solar panels for 3,500 homes.
PG&E subsidiary Pacific Energy Capital has created a $100 million tax equity fund that will be used by SunRun to offer homeowners financing for solar electric panels.
SunRun offers a power purchase agreement through which consumers pay a small upfront fee and then a monthly payment for the solar panels, rather than purchase them outright. The financing, regularly used with business customers, allows homeowners to lower their monthly electricity bills with the panels, but avoid the installation cost, which can be in the range of $25,000 to $40,000 depending on the size.
The $100 million will fund installations this year and in 2011 in Arizona, California, Colorado, Massachusetts, and New Jersey. SunRun already has 4,000 customers of its financing service through partnerships with 15 other solar installers.
The solar financing model of offering a power purchase agreement, or leasing solar panels, is one of the most promising methods for making solar photovoltaic panels accessible to more homeowners. The financing companies own and maintain the panels over 20 years and so they benefit from the state and federal tax credits and rebates and sell the electricity to the utility.
The credit crisis that started in 2008, along with the dipping economy, took a toll on financing for renewable-energy projects which rely on tax credits for financing. But solar financing companies focused on residential customers have continued to expand over the past two years.
PG&E, which raised the fund mainly through shareholders, expects to get a return on its investment and learn more about the residential solar market. "As a company in a region where distributed solar is becoming increasingly important, we are focused on continuing to take advantage of smart, strategic opportunities that enable us to acquire an in-depth understanding of this market and these technologies," Brian Steel, senior director of corporate strategy and development at PG&E, said in a statement.
Earlier this year, PG&E announced a similar deal with SolarCity, in which PG&E provided $60 million in tax equity to finance a solar panel leasing program.