solar financing - us · value of a home. a solar lease does not. moreover, transferring can be a...
TRANSCRIPT
Installer’s Guide to
Solar Financing
Seven Things to Know
… about financing residential solar systems
DECEMBER 2016
eBooks
Copyright © CivicSolar, Inc. 2
Table of Contents
______________________________________________
Introduction: How to use this eBook .............................................. 3
1) A History of Solar Financing ..................................................... 4
2) The Competition ........................................................................ 7
3) The Solar ROI ......................................................................... 13
4) Understanding Customer Needs and Preferences ................ 19
5) Solar Financing Options .......................................................... 25
6) Selecting a Financing Partner ................................................. 38
7) Peace of Mind for Customers ................................................. 41
Conclusion .................................................................................. 44
Appendix: Solar Financing Providers .......................................... 45
Copyright © CivicSolar, Inc. 3
Introduction
____________________________________________________________________________
As the leading solar equipment distributor servicing independent
solar installers throughout the U.S., we are proud to support
thousands of contractors building solar PV installation businesses
by providing them with technical, product, and design related
information and services.
Since 2009, we have seen the world of solar financing evolve in
many ways and remain a critical area where we have received
many questions and requests.
Our goal with this guide is to provide you the necessary
knowledge about the rapidly developing solar project financing
options for your business and customers. This is by no means an
exhaustive guide, but covers the basics of evaluating and offering
various solar financing solutions with the goal of helping you
increase your success rate when selling solar solutions.
Please note, we love feedback! If you have any suggestions for
improvement to the next edition of this eBook, please email us at
Copyright © CivicSolar, Inc. 4
01 A History of
Solar
Financing
Copyright © CivicSolar, Inc. 5
A History of Solar Financing
____________________________________________________________________________
2010 National, vertically integrated solar developers (e.g.
SolarCity, SunPower, Vivint, SunEdison, SunRun, Sungevity, etc.)
rapidly increased their market shares. This was a result of a new
type of financial product: the Third-Party-Owned (TPO) solar
model, or, as they are known to home and property owners, solar
leases and solar Power Purchase Agreements (PPAs).
While these TPO solutions provided the average home and
property owner a worry-free way of investing in solar, they failed
to provide full transparency (for home and property owners) or the
level playing field necessary for the thousands of independent
competing installers to succeed. As a result, independent
installers who did not have access to TPO solutions were forced
to contend by selling customer-owned solar solutions for which
there were limited financing solutions.
2012 Customer-owned financing solutions, such as solar specific
loan products and TPO solutions for independent installers,
began entering the market and leveling the field for competition.
Soon after, innovative financing solutions such as Property
Assessed Clean Energy (PACE) entered the market and provided
an increased number of choices for property owners.
2015 - 2016 For the first time in years, TPO solutions began
losing market share to customer-owned solutions. This shift was
Copyright © CivicSolar, Inc. 6
caused by the entry of structured capital into the market along
with increased consumer knowledge of the benefits of investing in
solar.
Now, as we prepare for 2017, we agree with industry analysts
who expect a continued decrease in the share of TPO solutions
as customer-owned solutions become more competitive (seen in
the graph below). In this environment, it is critical for independent
solar installers to understand and be able to communicate the
pros and cons of each type of solar financing solution to potential
customers.
In the next chapter we will discuss the competition in more detail
and show you how to offer potential solar customers financing
options that provide them with full confidence in their investment.
Copyright © CivicSolar, Inc. 7
02 The Competition
Copyright © CivicSolar, Inc. 8
The Competition
______________________________________________________________________
Choosing to own in a lease dominated market
In today’s digital world, customers have access to more
information than ever before. This means, they will often conduct
independent research online before consulting a solar
professional. For this reason, it is critical to:
understand what competitors are offering
be comfortable leading with the appropriate financing
solution and
be able to clearly explain the advantages of the solution
being offered versus larger, more-established competition.
We categorize the various solar players into three major classes:
1. National, vertically integrated solar developers. There are
less than a dozen of such companies, but they make up
close to 40% of the market today.
Examples include: SolarCity, SunPower, Vivint, SunRun, etc.
2. Independent local and regional dealers who offer both the
TPO solutions from the class one national companies along
with their own cash or financed solutions.
3. Independent local and regional installers with no allegiance.
Copyright © CivicSolar, Inc. 9
If you belong to group 3, and find yourself competing with a
company from group 1, it is fair to assume that your competition is
offering at least one standard lease or PPA option. Though this is
how the large public companies (i.e. SolarCity, SunRun,
SunPower) are generating the majority of their sales, it has the
worst long-term ROI for solar customers.
Though ownership is not the best fit for everyone, many potential
customers simply don’t know their options when it comes to
making this large of an investment. Being able to articulate these
benefits will not only support your customers in making the
decision that is best for them but will allow you to become even
more of an expert on the market.
A. The Benefits of Ownership
Usually, investing in a solar system provides a much higher return
on investment than any leasing program could provide. Here are
seven reasons customers will benefit from investing in a solar
system that can be used to start the financing conversation.
1) Lease or PPA solutions may save up to 30% of a customer’s
electric bill over the next 20 years. Purchasing the system
can provide the customer savings up to 80%.
2) Leasing forces the solar customer to forfeit the 30% Federal
Investment Tax Credit (and other incentives they might
qualify for) to the lease company.
Copyright © CivicSolar, Inc. 10
3) Annual payments increase over time with a lease or PPA
based solution, while they will not change if the system is
owned.
4) With a lease or PPA solution, customers are forced to either
buy the system at market price, extend their lease contract
or return the system at the end of the contract.
5) Ownership of a solar system immediately increases the
value of a home. A solar lease does not. Moreover,
transferring can be a hassle if the home is sold.
6) Similar to the lease, solar-specific loans allow customers to
go solar with zero down and start saving money on day one.
Plus, annual payments will not go up.
7) Solar systems have no moving parts and last for a long time
with no maintenance. Most systems today are sold with a full
25-year warranty on equipment. Lease companies often try
to scare customers into leasing a system by saying that they
will be there to fix the system if it breaks, even though the
likelihood of a system breaking is very low.
Shifting the conversation from leasing options towards customer-
owned options requires a much larger commitment on behalf of
the customer. They will likely need to consider all of their options
and reevaluate their financial security before making their
decision. As an expert on all financing options you will be able to
ensure your customers find the best solution for their needs, while
you earn their trust and, most likely, their business.
Copyright © CivicSolar, Inc. 11
B. Determining if Ownership is the Right Fit
Part of gaining the trust of customers is being honest and realistic
about their assets. Though a cash purchase often results in the
highest ROI for customers, the level of investment required may
not always be feasible. Here are three reasons that a cash
investment would not be the best choice for your customer and
the alternatives that can be offered:
Problem: The customer simply does not have cash to invest
upfront.
Solution: A loan or PACE product.
Problem: The customer has the cash but does not have enough
of a tax obligation to use the 30% Federal Investment Tax Credit
(ITC) and/or other rebates and incentives.
Solution: Pre-paid PPA/lease product.
Problem: The customer does not have the cash and does not
want to undertake the risk of owning and maintaining a system.
Solution: A regular lease or PPA product.
Once you understand the unique needs of your customers, you
can present them with a financing solution that will give them the
highest return on their investment (ROI). In the next chapter, we
will discuss exactly what an ROI is in terms of investing in solar
Copyright © CivicSolar, Inc. 12
and how you can ensure your customers receive the highest one
possible.
Copyright © CivicSolar, Inc. 13
03 The Solar ROI
Copyright © CivicSolar, Inc. 14
The Solar ROI
____________________________________________________________________________
We have found that the most productive residential solar sales
professionals all have one thing in common; they separate the
“cost of solar” conversation from the “financing of solar”
conversation. Simultaneously, installers who can clearly
communicate the ROI of their solar solutions outperform their
competitors. This is why we decided to dedicate a section to
explaining the concept of the Solar ROI.
Return on Investment (ROI): The “return” over your “investment”
or the gain or loss generated on an investment relative to the
amount of money that was invested.
For example, $400,000 is invested in a home that will be rented
out on a monthly basis. After expenses, $2,500 is earned in
monthly income. Meaning that the investment (I) is $400,000 and
the first year return (R) is $2,500 a month for 12 months, totaling
$30,000. To calculate the ROI, divide the return (R) by the
Investment (I) and multiply by 100 to find the percentage increase
or decrease.
ROI = Return / Investment => ($30,000 / $400,000)*100 = 7.5%
Copyright © CivicSolar, Inc. 15
An Example of Solar ROI
Let’s look at ROI in the context of a solar PV system. As seen in
the graph below, the average size of a solar system in the U.S. is
5,000 Watts (approximately 20 250-watt panels), at a cost of
about $3.50 per watt. This is just an average, however, and the
graph below shows just how much this price ranges across the
U.S.
Assuming that the cost per watt is $3.50, your customer’s
“investment” will be:
$3.50 per watt x 5,000 watts = $17,500.
Copyright © CivicSolar, Inc. 16
Next, we include the “30% Federal Investment Tax Credit”
deduction which can be applied to all solar PV investments until
2020.
30% * $17,500 = $5,250
Technically this would adjust your customer’s investment amount
from $17,500 down to $12,250.
Next, calculate the “return.” The return is the value that the solar
system provides to your customer. In most states, net metering
policies allow solar system owners to receive credit for the full
retail value of the electricity they generate and feed back into the
grid. To calculate the value of this generated electricity, we need
to know two things:
1) How much electricity does the solar system create?
2) How much is the electricity worth?
The ROI is calculated by multiplying (1) with (2).
Here is how to answer these questions to find the ROI.
1) How much electricity will your customer’s solar system
generate?
This depends on the location of the project. Since this number
can vary so much, we recommend partnering with your CivicSolar
account manager to use a location-specific design tool to give you
the most accurate calculation. We do know however that the
average U.S. solar system generates about 1,450 kWh per kW in
a year so we will use this number in our practice equations.
Copyright © CivicSolar, Inc. 17
2) How much is your customer’s electricity worth?
The average value of electricity for U.S. homeowners is 12 cents
per kWh. However, this number can be as high as 50 cents in
some parts of the country and as low as 6 cents in others. For our
calculations, we will assume consumers are paying an average of
25 cents per kWh for electricity when they make the decision to
invest in solar for their home.
...
Now let’s apply these estimates using the ROI formula. Assuming
the value of electricity generated is 25 cents, and the system
generates 1450 kWh per kW, the year one return will be:
5 kW x 1450 kwh / kw / yr x $0.25 = $1,813.
This means, the customer’s return on investment equation will be:
Solar ROI = Return / Investment => $1,813 / $12,250 = 14.8%
The year one return of 14.8% equals a payback period of
approximately 6.75 years. In today’s market, this is a high quality
investment!
When it comes to investing in solar, an ROI of 10% or higher is
one that should provide confidence to you and your customers.
Any lower and it may be necessary to look into alternative
financing options such as community solar or energy efficiency
improvements only.
Copyright © CivicSolar, Inc. 18
Once your customer understands the specific investment amount
required and the return it will generate, it will become much easier
to explore their options. However, the concept of ROI does not
take into account the unique circumstances and concerns
presented by each customer. In the next chapter, we will discuss
some of these details that need to be taken into account when
investing in solar.
Copyright © CivicSolar, Inc. 19
04 Understanding
Customer Needs
and Preferences
Copyright © CivicSolar, Inc. 20
Understanding Customer Needs and Preferences
______________________________________________________________________
When selling solar solutions, it is important to understand the
specific needs and preferences of each customer. This is
because the best solution for a customer with limited income, a
decent credit score and no tax obligation will differ dramatically
from a customer who has plenty of cash and a high tax obligation.
Similarly, the solution for a customer who enjoys doing things
himself and wants to understand and maintain their solar system
will be quite different from the one for a single parent who has
limited time, cash, and willingness to own and maintain a system.
For these reasons, we think it is important to explore the following
needs and preferences of customers before deciding which
investment approach will be best for them:
1) System Maintenance
Unlike investing in the stock market, a solar system is a hardware
purchase that may require maintenance over its lifetime. When
designing systems for your customers, it is important to ensure
they understand that a typical solar PV system consists of non-
moving parts that are expected to last for over 20 years. Up-front
requirements such as a quality roof are necessary for a
Copyright © CivicSolar, Inc. 21
successful project while long-term needs such as changing an
inverter might also be required. You can help your customers
achieve peace of mind by understanding their ability to maintain
the system over its lifetime and finding the best financing
solutions for their unique needs.
Leasing/PPA solutions inherently offer that peace of mind by
removing the homeowner from all ongoing PV system
responsibilities and securing a long-term electricity price
agreement. However, Lease/PPA solutions are not always the
most economical for customers because of the 20-year long
recurring interest payments. An alternative solution may be a
warranty from the vendor which we will discuss more in
Chapter 7.
2. Access to the 30% ITC and other tax deductions
In order for a customer to take advantage of these tax benefits,
they must have a tax obligation that is equal to or greater than the
tax benefits derived from the solar system. Many unsecured solar
loan products are designed to capture the homeowner’s ITC
payment and pay down the solar loan. However, if the
homeowner chooses not to use the ITC to pay down 30% of their
loan within 18 months, they may be charged higher interest rates.
A secured or PACE loan will allow for additional tax deductions
from the interest payments (and in some cases, even the principal
payments) over the tenor of the loan.
Copyright © CivicSolar, Inc. 22
3. Credit Score
If a customer has applied for an unsecured loan or a lease/PPA
solution, a credit (FICO) score of 650 or higher will most likely be
required for them to qualify. If this is not something your customer
can achieve, a PACE loan, which is based on their property value,
may be a better fit and provide a lower interest rate. We will
discuss PACE loans in detail in Chapter 5.
4. Ability and willingness to refinance mortgage or home
equity lines
In many cases, financing the solar system within a mortgage or a
home equity loan is the most economical. This solution makes
sense when the customer is already planning to refinance.
However, refinancing or getting a new home equity line can
require a substantial time investment and extra upfront costs
which can impact the long-term return on investment.
5. Using their home as loan collateral
Home mortgages, equity lines and FHA Title 1 Loans are secured
loans where the collateral is the equity of the home. Secured
loans typically have lower interest rates compared to unsecured
loans but risk losing the home if the loan defaults. In the case of
an unsecured loan however, the lender would only be able to
Copyright © CivicSolar, Inc. 23
claim the solar system. Taking out a secured loan is worth the risk
when the homeowner is confident in their ability to make the
payments in the future. However, customers should always
consider worst case scenarios when making this kind of decision.
6. Likelihood of Moving
If a solar homeowner moves, they may be required to pay-down
the remaining portion of their solar loan/lease. This requires hiring
an expensive third party certifier to assess the value of the solar
system. Due to the lack of data about solar system transferability,
it is impossible to make a definitive valuation. Homeowners
should discuss this issue with their bank and/or realtors. If they
have serious reservations about the transferability of their system,
a PACE loan may be their best option.
7. Future Financial Obligations
Investing in a solar system is a significant and long-term decision.
If the customer is planning to take on other large liabilities in the
future - such as student loans, a second home, starting a
business, etc. - a PACE loan may be the best option. This is
because it will not affect their personal credit and will offer lower
interest rates. In the case that the homeowner has a low credit
score, PACE loans may also be their only financing option.
Copyright © CivicSolar, Inc. 24
8. Cash on hand
Generally, secured loans and home equity lines have much lower
interest rates than unsecured loans and PACE loans. However,
they may require a significant down-payment. If the homeowner
wants to finance 100% of the system, unsecured loans and PACE
loans are generally the best option.
Understanding customer preferences around these topics will
bring you one step closer to choosing the solar investment option
that is best for your customers. In the next chapter, we will outline
these options in more detail.
Copyright © CivicSolar, Inc. 25
05 Solar
Financing
Options
Copyright © CivicSolar, Inc. 26
Solar Financing Options
______________________________________________________________________
There are two primary approaches customers can use when
investing in a solar system 1. upfront investment or 2. leasing.
Each has advantages and disadvantages that change according
to your customer’s unique needs. In this chapter, we will outline
when it makes the most sense to use each approach and what
you can expect during the process.
Solar Financing Map for Residential Solar Systems
Source: CivicSolar, Inc.
Copyright © CivicSolar, Inc. 27
The solar financing map above is a great resource when making
these decisions. Taking into account the unique needs addressed
in the previous chapter, you can assess which financing option
you think is best for each customer. In this chapter, we will
explore these options in more detail.
1) OWNERSHIP-BASED SOLUTIONS
As discussed in earlier chapters, making the decision to own,
rather than lease, a solar system will produce the highest ROI.
However, this level of investment will not be a good fit for
everyone. We suggest ownership-based solutions when the
customer:
Wants to maximize their ROI over the long term
Wants to leverage the various rebates and incentives
associated with the solar system
Is confident in their ability to own and maintain the system
If ownership is determined to be a good fit, there are four ways to
finance the purchase:
1) Cash
2) Secured Loans
3) Unsecured Loans
4) PACE Loans
Copyright © CivicSolar, Inc. 28
1) Cash
As with many things in life, paying cash to outright purchase the
system is the most economical way of owning solar PV. Plus,
paying cash allows a system owner to avoid paying interest and
other financing fees.
2) Secured Loans
The most common secured loans are Home Equity Loans, FHA
Title 1 Loans, and Mortgage Loans. Industry insiders often say
that one of the best ways to finance solar is within your mortgage
(or home equity line). These types of loans are attractive for
customers because they have low interest rates and the interest
payments are tax deductible.
The key advantage of these types of loans is that they allow your
customers to pay a lower interest rate compared to unsecured
loans. That being said, there are still some disadvantages of
these loans.
Disadvantages of Secured Loans
First, because they are secured loans, if one fails to pay their
monthly payments the bank would have the right to foreclose
on their home. Second, these types of loans usually require
more paperwork and time for approval compared to unsecured
loans.
Copyright © CivicSolar, Inc. 29
It is also worthwhile to note that not all mortgage underwriters
and secured lenders offer solar financing. This is because it is
still a new industry and uncertainty still exists. Since solar
financing would likely make up a small percentage of the
lender’s portfolio, there is not a significant demand for lenders
to efficiently finance solar projects.
3) Unsecured Loans
Unsecured loans are also a common way of financing solar
solutions. They have recently become more accessible because
of the increased demand in solar ownership. These types of loans
are popular because they are fast, easy to get approved and do
not require any cash up-front. In fact, the leading unsecured
lending providers have technology platforms that allow the
homeowner to be approved and receive funding almost instantly.
If done through one of these providers, the entire approval and
funding process can be paperless and supported by a dedicated
customer service team who can answer all homeowner and
contractor questions. The homeowner's approval and interest for
an unsecured loan will depend on factors such as their FICO and
Debt to Income ratio.
Something important to consider when deciding which loan is best
for your customer is the risk of losing their home. If unsecured
solar loans are defaulted on, there is not the risk of losing their
Copyright © CivicSolar, Inc. 30
home. There is however the risk of losing the solar system. The
main disadvantages to unsecured solar loans are as follows:
Higher interest rates than secured loans
High origination fees (A.K.A. dealer or merchant fees)
Interest payments are not tax deductible
4 Things to Consider when Comparing Unsecured Loans
When comparing unsecured loan products, the solar contractors
should compare and factor in the following:
i) APR
The APR is the total, including all fees and annual interest
rate. FICO scores and the terms determine the APR and
solar APRs generally range from 3% to 9%. A longer term
and lower FICO score indicate higher risk which will raise the
APR. An 18 Month Interest Only product is very popular, but
the homeowner must be able to exercise the 30% ITC within
the first 18 months to maintain a low APR.
In states like California and New York, where the utility rates
are high, this loan product allows for homeowners to start
saving on their solar projects from day one.
Copyright © CivicSolar, Inc. 31
ii) Dealer Fees
This is the processing fee for the loan that the contractor
burdens and is similar to a car loan or mortgage. The dealer
fee will depend on the APR, the customer’s FICO score and
the individual provider’s terms. The lower the FICO score
and APR, the higher the dealer fee. Dealer fees range from
15% to 20% of the cost of the solar system for most solar
loans. The dealer fee can be financed with the loan, so the
installer can pass the cost on to the customer.
iii) Terms
The terms are the duration for a solar loan, or how many
years until the principal is paid off. Common offerings are 5,
10, 12, 15, and 20 years. The longer the terms, the higher
the interest rate. A 20 year loan can almost double the
interest rate compared to a 5 year loan, but the annual
payments will be lower because of the longer duration of the
loan.
iv) Prepayment Penalties
Unsecured solar loans will not usually have a prepayment
penalty, but this will need to be verified.
Copyright © CivicSolar, Inc. 32
Some of the leading providers of unsecured solar loans are:
GreenSky, Mosaic, Admirals Bank, and Dividend Solar.
Authorized contractors are only allowed to offer unsecured
loans as homeowners are not able to be approved for this
type of financing directly from the provider. Contractor
approval criteria varies.
At a minimum, these businesses need to have operated for
2 years and be in good standing. Some financing providers
will require North American Board of Certified Energy
Professionals (NABCEP) certified installers and have an
approved equipment list. Generally, the total loan approval
for an unsecured loan will be around $50,000 (some go as
high as $100,000), but this should be sufficient for most
residential projects ($3.50/W install cost).
4) PACE Loans
PACE is an innovative way of financing energy efficiency and
renewable energy projects. To have access to PACE financing,
the local county or municipal government must have established a
PACE program in their district.
What makes the PACE loan unique is that it is taken by the home
(or property) rather than the individual (i.e. the property owner).
The payments for PACE loans are secured against the property
Copyright © CivicSolar, Inc. 33
and paid via the tax bill of the property (one payment per year
rather).
Similar to taxes, if they are not paid, the local government would
have recourse on the customer’s home, preventing them from
selling it.
To qualify for a PACE loan, the homeowner must be up-to-date
on their mortgage and tax payments. Leading PACE providers
like Ygrene have online tools to see if a property qualifies for a
PACE loan and can estimate the total loan amount the
homeowner could be issued.
Like Unsecured Loans, PACE providers have fast and paperless
approval and funding processes. Homeowners must have a pre-
approved contractor install their solar system. The total loan
amount is usually limited to 15% of the property’s value.
Pros of PACE
One key advantage of the PACE loan is that it is an off-balance
sheet item or tax lien. This means the solar loan will not affect the
homeowner’s credit, ability to borrow, or mortgage. This is very
important because getting a PACE loan will not only lower a
customer’s energy bills but also have no effect on current or
future personal financing decisions. Since the PACE loan is a tax
lien on the property, transferring the solar loan is easy because it
is not necessary for the homeowner to pay-down the loan’s
Copyright © CivicSolar, Inc. 34
remaining balance. What’s more, the PACE loan is not tied to the
homeowner.
While the process for transferring leased or financed solar
systems is still ambiguous, PACE removes such concerns. PACE
loans are not just for solar projects but also for energy efficiency
upgrades and/or other clean energy projects.
Like unsecured loans, PACE loans can finance 100% of the
project (no down-payment necessary). PACE loan terms will
range from 5-20 years and the interest rate will depend on the
term (5% to 8%). The longer the term, the higher the interest rate.
The interest rates on PACE loans are generally higher (and there
are prepayment penalties) than unsecured loans, but the
origination fee is lower and is tax deductible.
Leading providers of PACE Loans are: Ygrene, Hero,
CaliforniaFirst, and mPower. You can see a complete list of all
PACE providers for all U.S. states here.
Below is a table that summarizes the attributes of secured,
unsecured and PACE loans:
Copyright © CivicSolar, Inc. 35
Solar Ownership Products
Financing Type
APR Dealer Fee
Terms
(Years) Prepayment Penalty
Technology / Support
Tax Deductible Interest
Off-Balance Sheet
Secured Loan
<5% <2% 5-30 Yes Minimal resources
Yes No
Unsecured Loan
3-10%
10-15%
5-20 No Sales Tools; Approval and Funding tools; Paperless Process; Excellent customer support
No No
PACE Loan
5-8%
3-7% 5-20 Yes Sales Tools; Approval and Funding tools; Paperless Process; Excellent customer support
Yes Yes
2) THIRD-PARTY-OWNED (TPO) SOLUTIONS:
When paying cash upfront for a solar system is not an option,
lease and PPA solutions are the next best solution. TPO solutions
(Leases / PPAs) make sense for customers who:
Do not want to own and maintain the system
Copyright © CivicSolar, Inc. 36
Are interested in going solar mostly for the environmental
reasons
Are interested in saving money immediately with zero down
and are OK with not maximizing their ROI in the long term
Cannot use the 30% Federal Investment Tax Credit
When considering leasing a system or signing a PPA, it is
important to understand the differences between a lease and a
PPA.
When leasing a system, contracts are usually written for 20-years
and covered by monthly fees that typically come out to be 10-30%
less than their average monthly electric bill. The lease provider
will often provide a minimum production guarantee in terms of
kWh production and be responsible for maintaining the solar
system.
1) Power Purchase Agreements
PPAs are slightly different from leases because the customer
agrees to purchase the electricity that the system generates at a
predetermined price, on a take or pay basis rather than month to
month. This often means that the customer’s monthly payments
vary slightly based on the production of the system.
2) PrePaid PPAs and Leases
There is also a class of PPAs and Leases called Prepaid PPAs
and leases. These offerings make sense for customers who have
Copyright © CivicSolar, Inc. 37
the upfront cash but do not want to own and maintain a system
and are not interested in the tax rebates and benefits. Just like in
the case of regular leases and PPAs, when your customer signs a
Prepaid Lease or a Prepaid PPA the financing company benefits
from the tax incentives. These financing companies also have the
ability to take advantage of accelerated depreciation benefits
(something that homeowners cannot do).
For example, providers can still offer the customer a 20-year
lease deal at a price that equals the cash price of the system
minus 15-30%. At the end of the 20-year period, the customer has
the option to acquire the asset at the current market value. Pre-
paid PPAs and Leases also make a lot of sense when a customer
is a non-profit entity such as a church, YMCA, United Way or an
animal shelter.
As we have covered in this chapter, there are numerous options
to consider when looking to finance solar systems. Depending on
the specific situation of your customer, some solutions may be
better than others. As always, you can refer to the graph on page
26 as a decision making guide for specific customer cases, but
your account manager is also a good resource!
Once you make a decision, it will be time to include a finance
professional in the conversation. The next chapter outlines some
questions that will give both you and your customers peace of
mind when selecting a financial partner.
Copyright © CivicSolar, Inc. 38
06 Selecting
a Financing
Partner
Copyright © CivicSolar, Inc. 39
Selecting a Financing Partner
______________________________________________________________________
With more than 150 financing offerings on the market today,
finding the right partner is a critical step in offering a
comprehensive financing proposal. Don’t be afraid to vet
companies against each other when presenting options to
customers as their business should be as dependent on your
happiness and yours is dependent on the happiness of your
customers.
Here are the 14 most important questions to have answered when
selecting your financing partners:
1) What is the reputation of the company?
2) How long have they been in business?
3) How stringent are their installer qualification criteria?
4) How efficient are their on-boarding and training processes?
5) How responsive are their account managers?
6) How competitive are their pricing and interest rates?
7) What are their payment schedules like?
8) How long are the tenors of their loans and leases/PPAs?
9) Do they have a technology platform that facilitates customer
application and loan approval process?
Copyright © CivicSolar, Inc. 40
10) How quickly do they approve or deny a customer’s loan
application?
11) What are their requirements for contractors to become
authorized dealers?
12) What restrictions are there for projects (either equipment or
homeowner qualifications)?
13) How does their funding process work? How quickly do they
fund projects, do they allow staged funding, and what do they
require to complete projects (and make final disbursement)?
14) Do they market to homeowners? How much marketing
collateral or sales support do they offer?
Answering these questions will give you a better idea of whether
or not the partnership will be mutually beneficial and ensures that
you, and your customers, can be confident in the investment.
Copyright © CivicSolar, Inc. 41
07 Achieving
Peace of Mind
Copyright © CivicSolar, Inc. 42
Achieving Peace of Mind
______________________________________________________________________
The Importance of Warranties
Regardless of which financing option you choose, customers may
have remaining concerns about the long-term commitment of
investing in a solar system.
Some common questions we hear from home and property
owners include:
“What if my solar PV system does not work as it is supposed
to?”
“What if my panels or inverters break after a few years?”
“How do I know that my installer is not going to drill holes on
my roof that will cause leakage when it rains?”
Warranties can appease some of this uneasiness.
If you are purchasing your equipment through CivicSolar, it will
likely already include 20+ years of manufacturer warranties. The
challenge however, is guaranteeing the integrity of the entire
system over its lifetime. This can include ensuring how much
energy the system will produce or issues such as roof leaks,
electrical tripping, etc.
Copyright © CivicSolar, Inc. 43
One solution we recommend is to offer your own warranty
contracts along with the standard engineering, procurement and
construction (EPC) contracts. If you are uncomfortable writing
your own warranty contracts, CivicSolar offers a comprehensive
“Solar Customer Warranty Management Service” for our partners.
If this sounds like a good fit for you, your Account Manager can
provide more information.
Copyright © CivicSolar, Inc. 44
Conclusion
______________________________________________________________________
Thank you for taking the time to read this eBook! We hope it has
answered some of the difficult questions surrounding solar
financing. The bottom line is that there is not one perfect financing
solution, but many. By working to understand each of them, you
will be able to confidently answer the questions presented by your
customers and stay on the cutting edge of the increasingly
competitive solar industry.
We hope that you feel even more prepared to evaluate various
financing solutions for your solar business. If you have any
additional questions, we are here to help and look forward to
being a part of your continued success!
- The CivicSolar Team
Copyright © CivicSolar, Inc. 45
Appendix: Solar Financing Providers
______________________________________________________________________
Unsecured Solar Loan Providers
Admiral’s Bank* All 50 States
Bank Five MA, RI
Banner Bank WA
BGE Home MD
Center for Energy and The Environment MN
City and County of Honolulu HI
City of Milwaukee WI
City of Plano TX
City of Richland WA
City of Tallahassee Utilities FL
Clark Public Utilities WA
CT Green Bank CT
Dividend Solar All 50 States
Educational Employees Credit Union CA
Elevations Credit Union CO
EnerBank USA All 50 States
First Associates All 50 States
First Citizens’ Federal Credit Union MA
First New York Federal Credit Union NY
Fort Collins Utilities CO
GreenSky Credit* All 50 States
Greenworks Lending CT, DC, MD
Hamilton County OH
Home Loan Investment Bank All 50 States
LightStream – SunTrust All 50 States
Copyright © CivicSolar, Inc. 46
Idaho Governor’s OER Energy
Loan Program ID
Iowa Energy Center IA
Matador’s Community Credit Union CA
Michigan Saves MI
Montana Dept. of Environmental Quality MT
Mosaic* CA
National Bank of Arizona AZ
Nebraska Energy Office NE
North Brookfield Savings Bank MA
Oregon Dept. of Energy OR
PSE&G Solar Loan Program NJ
Piedmont Electric Membership Corporation NC
Provident Credit Union All 50 States
Puget Sound Cooperative Credit Union WA
Redwood Credit Union CA
SF Fire Credit Union CA
San Antonio Credit Union TX
San Diego Metropolitan Credit Union CA
Santee Cooper SC
Shrewsburry Federal Credit Union MA
Spruce Finance All 50 States
St. Lucie County Florida FL
Summit Credit Union All 50 States
Sun West All 50 States
Sungage CA, CO, CT, FT, MD, MA,
NH, NJ, NY, TX, VT
UmassFive College Federal Credit Union MA
Umpqa Banku NV, OR
University of Virginia Credit Union VA
Velocity Credit Union TX
Weymouth Bank MA
Copyright © CivicSolar, Inc. 47
Secured Loan Providers
Admiral’s Bank* All 50 States
AmeriFirst All 50 States
Bank Five MA, RI
Bank of Colorado CO, NM
BayCoast Bank MA, RI
City and County of Honolulu HI
City of Milwaukee WI
City of Plano TX
City of Richland WA
City of Tallahassee Utilities FL
Clark Public Utilities WA
Educational Employees Credit Union CA
Elevations Credit Union CO
Energy Loan Network CA
First Associates All 50 States
First New York Federal Credit Union NY
Fort Collins Utilities CO
GreenSky Credit* All 50 States
Greenworks Lending CT, DC, MD
Hamilton County OH
Home Loan Investment Bank All 50 States
Idaho Governor’s OER Energy
Loan Program ID
Iowa Energy Center IA
Matador’s Community Credit Union CA
Medallion Bank All 50 States
Michigan Saves MI
Montana Dept. of Environmental Quality MT
National Bank of Arizona AZ
Copyright © CivicSolar, Inc. 48
Nebraska Energy Office NE
Oregon Dept. of Energy OR
Piedmont Electric Membership Corporation NC
Provident Credit Union All 50 States
Puget Sound Cooperative Credit Union WA
Redwood Credit Union CA
San Antonio Credit Union TX
San Diego Metropolitan Credit Union CA
Santee Cooper SC
Spruce Finance All 50 States
St. Lucie County Florida FL
State Treasurer of Ohio OH
Summit Credit Union All 50 States
Sun West All 50 States
Umpqa Banku NV, OR
University of Virginia Credit Union VA
Velocity Credit Union TX
PACE Loan Providers
Arkansas Advanced Energy
Equity Program AR
AllianceNRG Program CA
CaliforniaFIRST CA
Energy Efficient Equity CA
Figtree PACE Financing CA
Green Finance San Francisco CA
HERO Program CA
Los Angeles County Commercial
PACE Program CA
mPOWER CA
Copyright © CivicSolar, Inc. 49
PACE Funding CA
Renew Financial
Sonoma County Energy Independence
Program CA
Ygrene* CA, CO, FL, MO
Colorado C-PACE CO
Connecticut Energy Finance and Investment
Authority (CEFIA) CT
D.C. PACE Commercial DC
Clean Energy Green Corridor, Miami-Dade FL
Florida PACE Funding Agency Program FL
Green Energy Works Program FL
Leon County Commercial PACE Program FL
St. Lucie County’s Commercial
PACE Program FL
Clean Energy Atlanta Program GA
KY-PACE KY
MD-PACE MD
Ann Arbor’s PACE Program MI
Lean and Green Michigan MI
Minnesota Edina Emerald Energy
Program MN
Southwest Regional Development
Commission MN
Minnesota PACE Program MN
Missouri Clean Energy District Program MO
Set the PACE St. Louis MO
Show Me PACE MO
NJ PACE NJ
Energize New York Finance NY
New York Long Island Green Homes NY
Greater Cincinnati Energy Alliance OH
Copyright © CivicSolar, Inc. 50
Ohio Northeast Ohio Advanced
Energy District OH
Toledo-Lucas County Port Authority/Better
Buildings Challenge OH
UTAH C-PACE UT
Texas PACE Authority Program TX
Wisconsin Milwaukee Energy
Efficiency (ME2) WI
Solar Lease / PPA Providers
OneRoof CA
Real Goods Solar CA
Spruce Finance AZ, CA, CO, HI, MA,
NJ, OR, PA
Sungevity AZ, CA, CO, CT, DC, DE,
MA, MD, NJ, NM, NY, VT
Sunnova AZ, CA, CO, CT, DE, HI, LA,
MA, MD, MO, NJ, NM, NV,
NY, OR, PA, TX
(*): CivicSolar recommended vendor. Based on rate structure, pricing, regional reach, quality of
service and reputation.