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Elon Musk's Latest Innovation: A New Financial Model To Pay For Solar

The top names in solar are starting to look and act a lot more like regular electric utilities. And that's a good thing for the future of mainstream renewables.

If solar really is going to destroy the traditional utility business—as some have predicted it could—then the companies that install and maintain panels are going to need to become highly stable and dependable. That means better finance options. And, that means looking more like utilities in the eyes of investors.

In the long term, companies like Sunrun, Sungevity, and SunPower don't want be in the hardware business. They want to be in the energy business, with a model backed by regular—and bankable—flows of monthly leasing payments. As utilities can now say they have a captive pool of customers who aren't about to cancel their energy service, solar installers want to able to prove they have a safe roster of contracts with residential and commercial owners. In this model, the customers pay to buy energy from solar modules on their roofs, while they get the peace of mind of someone else looking after them.

Persuading the market is going to take time. But a recent announcement by SolarCity—the solar installation company chaired by the billionaire entrepreneur Elon Musk—shows that it's not impossible. SolarCity has won approval to offer a new type of bond that's seen as a milestone in solar finance. The company plans to raise $54.4 million from private investors, secured by some of the 68,000 contracts it has with customers around the country. Standard & Poor’s, a credit agency, is sanctioning the offer. In other words, SolarCity is financing itself as a utility might.

The deal is an "important validation for the solar industry" and could open up mainstream debt finance for other solar companies, according to the New York Times. If so, it's another important step for the industry, and another troubling sign for utilities, which now have rivals on Wall Street, as well as in suburbia.

[Image via Shutterstock]

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  • Mouse Rat

    So, Elon Musk just wants to use the existing paradigm of consumer dependence on a utility, only change the powers behind the electrical power?


    I don't want to lease electrical generation in perpetuity. I want to own the source myself.

  • John

    If what the pundits are saying is true - that financing is the single biggest hurdle - than this + Mosaic ( making this same opportunity available to regular, every day people (as opposed to just institutional investors) is a great sign for the industry.