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SolarCity launches loan program for homeowners

In a move that sent ripples through the solar industry Wednesday, SolarCity Corp., which employs more than 500 in the Sacramento area, launched a loan program that lets homeowners buy their rooftop solar systems.

Typically, homeowners who install a conventional rooftop solar system either lease the system or pay the utility and the company for power, without owning the solar panels. Under SolarCity’s MyPower financing option, consumers take out a 30-year loan, which is paid back based on the electricity generated by their solar panels. If the panels produce a lot of solar energy, the loan payback is faster.

San Mateo-based SolarCity is the nation’s No. 1 solar installer, so its announcement drew reactions throughout the industry.

Alfred Abernathy, a Bay Area energy analyst, characterized MyPower as a “game-changer because it gives consumers a mainstream-type loan process that also gives them ownership of their own equipment. … On one level, it’s a variation of the old-fashioned car loan.”

A typical rooftop solar system for a 2,000-square-foot home can cost $30,000, according to the U.S. Department of Energy.

MyPower loans will be offered at 4.5 percent over 30 years. SolarCity will act as a direct lender to customers through its subsidiary, SolarCity Finance Co.

SolarCity, which will project a homeowner’s monthly cost over 30 years, says savings could be up to 40 percent less than the cost of standard, utility-provided power. Under MyPower, homeowners can prepay a portion or the entire loan balance to lower their monthly payments at any time, with no fees or penalties.

Abernathy and other analysts said the loan concept “has the potential to give a substantial boost to the residential solar market.”

In a phone interview, SolarCity CEO Lyndon Rive cited the example of a typical consumer paying around 20 cents per kilowatt-hour for utility-provided power, with small annual percentage increases. Under MyPower, he said, customers would pay 16 cents per kilowatt-hour the first year, which could dip to around 12 cents in subsequent years through a 30 percent federal tax credit, which the homeowner could claim as owner of the system. Currently, if a customer is leasing the solar panel system, the federal tax credit usually goes back to the solar company.

Overall, Rive believes that MyPower will help educate more people about energy savings. “Most people don’t know the exact price of energy,” he said. “They think about the monthly bill of $250 or $150, not 20 cents a kilowatt hour. … It’s important to know about the energy you’re consuming.”

Rive also said the biggest advantage of a homeowner owning a solar system is that “if you sell your home, you can include the full value of the solar system.”

In recent years, the growth of rooftop solar has been propelled by financing schemes that allow customers to have solar panels installed for little or no money down. The solar company installs the system, and customers either lease it or enter an agreement to pay for the power over a 20-year period. The combined price that customers pay to the solar company and the electric utility is less than what the customer would pay for power without solar panels.

Those plans were rolled out in 2007 and 2008 by SunRun, SolarCity, Sungevity and others. Last year, two-thirds of all solar systems were installed under those types of plans, according to Shayle Kann, senior vice president of GTM Research, an analysis and consulting firm.

The concept of ownership is being touted by SolarCity’s competitors, some of whom have also offered loan programs.

“We believe that purchasing a system instantly creates an asset on your roof, while leasing a system does not provide the same form of long-time value,” said Abe Emard, CEO of SUNworks, a Roseville-based solar system installer, in a statement last month. SUNworks, a subsidiary of Santa Barbara-based Solar3D Inc., also offers some loans for its solar systems sold to agricultural, commercial and residential customers.

What sets SolarCity’s loan program apart, aside from the company’s size, is that repayments are based on the electricity generated by its rooftop solar panels.

SolarCity, which has a sales office in Roseville and an operations center in Sacramento, also has a degree of star power. The company’s largest shareholder and chairman, Elon Musk, is a regular fixture in national headlines as CEO of Palo Alto-based Tesla Motors Inc. and the space exploration company SpaceX, based in Hawthorne.

Analyst Abernathy called Musk’s presence a plus for SolarCity’s plans: “I think that any company with Musk at the front is going to get instant credibility in the business world and among consumers.”

SolarCity, which operates in 15 states, is initially offering MyPower in about half of its markets: California, Arizona, Colorado, Connecticut, Hawaii, Massachusetts, New York and New Jersey.

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