The 12th annual Solar Summit hosted by Greentech Media brought together some of the biggest names in the solar energy sector to discuss the current health and future of the market. The summit was filled with incredible keynote speakers like Hayes Barnard of Loanpal, Erin Talbot of Mosaic, Tom Werner of SunPower and many more. While the audience was eager to hear about the latest technological and financial advancements, the issue on everyone’s mind was the rollback of the Federal ITC tax credit.
In this article, we’re going to break down some of the major themes in regard to finance expressed by the experts who spoke at the Summit to help paint a picture of where the solar industry may be headed in the next 5 years.
You can’t know where you’re going without understanding where you’ve been and the last few years have been very interesting for the solar industry. While the industry is still growing rapidly, the actual rate of growth is starting to stabilize. Some people may look at this as a negative, but sustainable rates of growth are actually a sign of health in the industry. Data, predictability, and stability in the industry all lead to more investment money flowing as risks become more calculable.
It has been over a decade since the first consumer solar leases and PPAs where introduced and by tracking those accounts; financial institutions can now better understand their associated risks and benefits. From a macro view, delinquency rates, maintenance costs, and service disruptions related to these solar accounts have all proved to be in-line with early predictions. As the data surrounding products like solar leases and PPAs grows, so has the investment interest.
Consumer loans for solar systems are some of the most exciting new products available and competition among companies like Mosaic, Loanpal, and Sunlight is considerable. The loan products allow installers to get paid the same day as installation which enables more solar installation companies to service more customers without the help of large third parties like Sunrun or Vivint.
The highly competitive nature of the new solar loan industry has benefited the consumer by lowering interest rates to 3.99% and extending loan terms to 25+ years. Loan companies are also experimenting with “all inclusive” solar loans for “green” improvement projects. All inclusive loans would finance a solar system and also include upgrades to things like appliances, insulation, and windows.
All these financial products are based on the ITC tax credit, so what will happen to the industry once it’s gone? A post-ITC solar market will be a place of creative financial innovation to allow customers to go solar without needing to pay a premium. Speculation on this subject varies wildly, but all the speakers made one point clear: the solar industry will continue to grow even if the ITC tax credit is eliminated. Obviously, solar lease programs will be hit the hardest by an ITC roll back, but loan companies can keep prices competitive by extending loan amortization beyond 25 years.
For the US market, as climate change awareness increases the (COA) Cost of Acquisition for new solar accounts will decrease. Lower COA means that installation companies will need to charge less for solar installations which in turn will make them more attractive to consumers. Countries like Australia that have populations who accept climate change as a threat enjoy nearly non-existent COAs for new solar customers. People in these countries do not need to be marketed to, they simply understand the necessity of solar and seek it out themselves.
Moving forward into a Post-ITC market, we should see the problem primarily as an educational one. If we can convince the population of this country that the transition to solar energy is the most impactful environmentally positive consumer decision they can make to help avert a climate disaster, then the lack of government subsidies will have no bearing on the continued proliferation of solar energy.
Brendan Cassidy – Grid-Tied Photovoltaic Expert (Solar Energy International)
Advisor, Solar Energy Systems
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