Why Your Neighbors Will Finance Solar Panels for Your Roof
A California startup is letting anyone invest in loans to let homeowners go solar.
Here’s another reason to be nice to the neighbors: They might just give you a no-money-down, low-cost loan to put solar panels on your roof, and once you pay off that debt you’ll get essentially free electricity as long as you own your home.
Welcome to the latest innovation in renewable energy: The crowdsourced solar loan.
The loans are administered by Mosaic, an Oakland, Calif., startup that made its name by letting ordinary investors – that’s you and me – put money into commercial and non-profit solar projects that were once the exclusive domain of big banks and corporations like Google.
In the coming months, the environmentally minded can go to Mosaic’s site and invest in portfolio of 20-year loans made to homeowners. (Each individual loan will be scrubbed of identifying information.) Mosaic is offering the loans through a partnership with solar installer RGS Energy.
The interest rate is 4.99 percent as long as homeowners pay down the loan with a 30 percent federal tax credit they’ll receive for installing a solar system. If they keep the tax credit, the rate jumps to 10 percent after 18 months.
“We think a solar loan if structured right can open up the market and make solar more affordable and accessible for more homeowners,” Mosaic co-founder Billy Parish told The Atlantic.
That goes against the grain of solar financing. In recent years, leases have driven the explosion in residential solar installations as they let homeowners avoid the typical five-figure cost of buying a solar array. Instead, homeowners would pay a monthly fee to a solar installer like SolarCity or Sungevity that in most cases is less than what they’d fork over to their local utility for electricity. In California, for instance, leases account for two-thirds of residential solar installations.
But leases also are a product of the peculiar way the federal government subsidizes solar energy in the United States.
Individuals and businesses that install solar panels qualify for a 30 percent tax credit – known as the investment tax credit, or ITC. Since young solar companies like SolarCity have few taxes to offset, they instead transfer the credits to banks and corporations that put up funds to finance the installation of solar systems for homeowners. These so-called tax equity funds have financed billions of dollars in residential leases in recent years.
But with the ITC set to decline to 10% at the end of 2016, tax equity investors are expected to look for other places to put their money. In the meantime, rooftop solar has gone from being one of those nutty-crunchy California affectations to a mainstream phenomenon and a hedge against rising electricity prices.
That mean homeowners more comfortable taking out loans to pay for a solar system.
“Solar is no longer an emerging technology,” says Jon Doochin, chief executive of Soligent, a California solar distributor that provides financing and other services to independent solar installers. “People say, ‘Solar I get it.’ ”
More important, banks get it. So these days companies like Soligent can offer loan financing at competitive rates – around 6 percent to 14 percent – to homeowners who previously would have had to tap their home equity lines or credit cards to pay for a solar system.
“The rates are dropping significantly because people have more confidence in the technology,” says Doochin.
And there’s another reason homeowners may increasingly opt to own rather than rent: A study by Lawrence Berkeley National Laboratory found that a solar system boosted a home’s resale price by $17,000.
Disclosure: Mosaic co-founder Dan Rosen is The Atlantic's Rebecca J. Rosen's brother. She was not involved in the conception or execution of this story.