Wednesday, August 15, 2012

Banks Double Down On Solar Investments

The solar industry may be in turmoil as a trade war with China widens to Europe and photovoltaic module manufacturers take big hits on Wall Street but for companies that install solar panels on rooftops the boom times roll on.

Case in point: Credit Suisse this week put $300 million into funds to finance residential solar systems installed by San Francisco Bay Area startups SunRun ($200 million) and SolarCity ($100 million). Last month, U.S. Bancorp threw $250 million into a SolarCity fund and Credit Suisse previously had invested $100 million for SolarCity installations.

So why has rooftop solar become an attractive bet at a time when manufacturers struggle? The steep fall in the price of polysilicon, a chief component of solar cells, and rapid expansion of manufacturing capacity by Chinese companies like Suntech, Trina and Yingli contributed to a 75% plunge in solar module prices over the past three years, making solar more attractive to homeowners.

The advent of solar leases offered by installers like SolarCity, SunRun and Sungevity allowed homeowners to go solar without the typical five-figure upfront costs and installations began to accelerate. (In 200, 93% of residential solar systems in California were owned; in 2011, nearly two-thirds were leased, according to the California Public Utilities Commission.)

Given that each solar system installed generated a 30% investment tax credit, banks and other investors saw a sunny return on investment and put together so-called tax equity funds that could take advantage of such tax credits. (Solar startups generally have little tax liability to offset with credits.)

Meanwhile, a study by the U.S. Partnership for Renewable Energy Finance has found that a $10,500 residential investment tax credit, or ITC, can generate $22,882 in returns for the federal government in taxable wages and revenues over the 30-year-life of a rooftop solar system.

As the U.S. continues to work toward economic recovery, the most effective energy policies will encourage private investment to generate maximum return on incentives,” wrote the report’s author, Connie Chern, a senior associate with SolarCity’s structured finance group. “The ITC incentivizes the private sector to invest in the solar industry, and generates a measurable fiscal return to the taxpayer, in addition to creating positive impact on employment and the environment.”


No comments: