SolarCity (SCTY, Financial) is an American energy services provider, headquartered in San Mateo, California.
SolarCity Corporation has been involved in the designing, installation, monitoring, maintenance and financing of solar energy systems to residential and commercial customers. SolarCity enables its customers to lease a solar energy system at their homes/workplaces with no upfront costs. The company installs solar panels at the customer’s premises and charges a monthly rent. Alternatively, the customers can also purchase the energy produced by the solar energy system and pay the monthly fee based on energy consumed. In both scenarios, the customers end up paying much less than they pay for electricity from the utility company. The company has already been serving in more than 14 states in the U.S. and with this Solar-as-service deal it has transformed the renewable energy industry and opened up a solar energy option to tens of thousands of people who previously could not afford it.
At the end of 2014, SolarCity had become the largest installer of solar panels in the US, with over 190,000 customers and producing close to 1 GW of deployed production.
Google investing in Solar Energy
Google Inc. (GOOG, Financial) has agreed to invest $300 million to a SolarCity fund in a bid to finance residential solar projects and support installation of at least 25,000 solar panels across 15 states in the U.S. This will be Google’s biggest investment in the renewable energy sector, since 2011, when Google had invested $280 million in a similar SolarCity fund.
On Feb. 25, SolarCity announced the creation of a $750 million fund which is arguably the largest fund ever created for residential solar energy projects. This fund will cover the cost of installation of solar panels and other equipments, and will enable SolarCity to install another 1 GW within 2015.
Unlike the structure the two companies had set up in 2011, this time SolarCity will contribute $450 million in debt financing in order to lower the cost of capital, leaving the total boost at $750 million.
“This new fund for SolarCity will be used by the company to cover the cost of installing solar systems on homes in the 15 states. SolarCity generally installs the systems at no charge to customers, and then charges the residents slightly less per month for the energy than they’d pay their traditional utility” disclosed company sources.
Google’s interest in investing in such funds help in bringing the company good returns (8 to 12%) on the investment.
The deals with home owners tend to generate fairly reliable revenue as they are used to paying their monthly utilities. The Google-SolarCity deal is structured as a tax-equity deal, which means Google gets tax breaks that flow from the solar systems financed by the fund. The tax benefits include 30% of the installed cost of a solar power system. In a quest to reduce its tax bills and support promotion of greener energy options, Google has aggressively invested more than $1.5 billion in renewable energy projects, ranging from wind farms in Texas, to solar power plants in the Mojave Desert.
Impact of Google’s investment
Such deals indicate how renewable energy companies have been successful at tapping into a broader pool of investors which previously were mostly reserved only for banks.
This deal also marks the dominant presence of solar energy, which is all set to grow by 40% in 2015. Solar industry has also become a major employer in the US, employing twice as many workers as the coal industry.
Hopefully this move by Google will lead other corporations to invest in cleaner and greener sources of energy.
