SolarCity raised $54.4 million this week. It didn't do it, though, by selling a lot of solar panels or stock. Instead, the Silicon Valley company bundled up a bunch of residential leases for the photovoltaic arrays it installed on suburban rooftops—and then sold them to pension funds, hedge funds, and other high-rolling investors.
Packaging leases for cars, ships, trains, and other big-ticket items into so-called asset-backed securities has been common for decades. But this marks the first time that solar has been securitized. SolarCity's move opens the door to a potentially large new pool of capital that could finance the expansion of renewable energy just as crucial federal tax incentives for green power are set to sunset in the coming years.
“You look at the market and it’s huge,” SolarCity chief financial officer Bob Kelly told me.
How huge? Kelly is already planning to sell $200 million more worth of solar securities in the first half of next year.
“The solar business is asset-intensive,” Kelly says. “Every three minutes we make a sale. For a typical household, the cost is $21,000 to put a solar system on the roof. You need to increase your sources of capital and drive down the cost.”