SolarCity Corp. (SCTY), the leading residential solar service provider of the U.S., now has plans to offer loans to homeowners for solar systems, under a program called MyPower. This move could reshape the rooftop solar market and drive rapid adoption. Following the news, SolarCity shares rose 3.5% to end at $56.48 on Oct 8, 2014. The shares have gained 52.1% in the past one year.
Per a typical rooftop solar deal, the company owns the panels and offers them on lease to customers or for an agreement to buy power. On the other hand, MyPower will allow customers to own their systems and still pay less for electricity. SolarCity is the latest company to offer consumers the option of a 30-year loan, which comes with an interest rate as low as 4.5%.
Although other companies like SunPower Corp. (SPWR) and Boston-based Admirals Bank offer loan to their clients, SolarCity’s MyPower strength lies in the fact that it features a one stop shop for sales, installation and service for the 30-year loan period without any penalties or fees for prepayments.
The company will begin offering loans in eight states comprising Arizona, California, Colorado, Connecticut, Hawaii, Massachusetts, New York and New Jersey. It aims to expand the product beyond its existing service territory.
This new financing option from SolarCity will allow its customers to claim a lucrative federal tax credit for solar power for the first time. Homeowners will now be able to own their systems through SolarCity and claim the tax credit. With a conventional solar lease, the solar company or its financiers enjoy the credit of 30% of the cost of the system. However, with the MyPower loan, customers will enjoy the benefit of the tax credit, bringing down power prices considerably.
It costs $30,000 to install a typical system in California. Under MyPower, customers will get a $30,000 MyPower loan at a 4.5% interest rate. The customer would pay back the loan at 16 cents a kilowatt hour for the first year. After that, the customer gets a $9,000 tax credit and then their cost for solar is about 11 or 12 cents a kilowatt hour.
This downstream solar company has been playing on its strength, providing renewable power lower than the grid price to residential and commercial customers in the U.S. SolarCity is well supported in its endeavors by a booming U.S. solar market. The company sees installations climbing to as much as 900 MW to 1 GW by 2015. It also expects a million rooftop solar customers by 2018.
SolarCity deployed 107 megawatt (MW) in the second quarter 2014, up nearly 102% year over year on the back of a 111% rise in residential MW deployed. This brought the total installed capacity to 756 MW as of Jun 30, 2014.
Residential solar in the U.S. is now a sizzling story. This market even outpaced the commercial and utility segments last year and has already started to attract more conventional electric power companies that mostly have coal and natural gas as their sources. As per Solar Energy Industries Association, residential PV installation grew 45% year over year in the second quarter of 2014.
SolarCity is also known for its innovative marketing strategies. The solar panel maker has in the past partnered with big-box retailers like Best Buy Company, Inc. (BBY) and The Home Depot, Inc. (HD) to boost its customer base and popularize residential solar.
SolarCity is one of several companies under real life ‘Iron Man’ Elon Musk’s umbrella. The company currently carries a Zacks Rank #4 (Sell).
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