2-18-2015 Residential Solar Loans Expected to Increase in 2015
Customers looking for financing options in the U.S. residential solar market will find plenty of options, a growing number of which are loans. In the recent past, most financing options came in the form of third-party financing either as a lease or a power purchase agreement (PPA), so the emergence and growth of solar loans is a recent market shift.
A GTM Research report, titled U.S. Residential Solar Financing 2014-2018, explores the changing financing trends in the solar market. The report found that third-party ownership (TPO) of solar systems really took off in 2012, when it reached a 61 percent market share, up from 42 percent market share the year before. However, GTM Research expects TPO to decline after it reached an estimated 68 percent market share in 2014.
Nicole Litvak, GTM Research Analyst and author of the report, explains the cause for the recent movement away from TPO: “Solar loans are becoming widely available with many more options to choose from than in the past, and declining system costs are making direct ownership affordable for more homeowners. As a result, the share of third-party-owned solar has already begun to come down in leading state markets, including Arizona and Massachusetts.”
To better understand the solar financing options available, GTM Research grouped solar financiers together based on their business model, creating four categories in the process:
Vertically integrated financiers – offer financing and system installation themselves.
Partner model financiers – provide financing but don’t install the systems. They use local or regional partners for installation.
Semi-integrated financiers – finance all systems but require partners and internal resources for installation and sales.
Semi-integrated installers – use both internal and external sources of financing but sell or install all systems themselves
Of the 16 companies GTM Research considered, nine of them were partner model financiers, three were semi-integrated installers, two were semi-integrated financiers, and two were vertically integrated financiers. Seven of the companies offered both loans and leases, four provided only loans, and four offered only leases.
These figures are up from 2013, when there were only 12 financiers. Nine of the 12 companies offered only leases. One offered both loans and leases, and two offered only loans.
Though the market trend appears to be heading away from TPO, all parts of the U.S. residential solar market will experience rapid growth in the next few years, and TPO providers will need to raise over $26 billion from 2014 to 2018 in order to fund consumer demand for solar leases and PPAs. As of June 2014, TPO providers had announced $9.5 billion in funds.