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Summary:

PG&E might not be winning over hearts and minds for its smart meter project, but the utility has been getting creative with solar financing. This morning PG&E announced that it will create a $100 million tax equity fund to invest in home solar installations with startup SunRun.

PG&E might not be winning over hearts and minds when it comes to its smart meter project or pushing propositions, but the utility has been getting pretty creative in terms of new ideas for home solar financing. This morning PG&E announced that it will create a $100 million tax equity fund, via a corporate subsidiary called Pacific Energy Capital II, that will fund solar residential installations with startup SunRun. The two companies say the fund will be “the largest residential solar financing vehicle established to date,” and the project follows in the footsteps of a similar program that PG&E created with SolarCity announced earlier this year.

The problem with home solar systems is, frankly, they’re expensive and paying the tens of thousands of dollars upfront to install them on rooftops is a daunting offer to potential customers. San Francisco-based SunRun provides homeowners with solar financing options, and customers can agree to a contract where they pay a monthly fee over many years, with little or no upfront fee.

The PG&E/SunRun home solar tax equity fund will be able to provide financing for “more than 3,500,” new residential solar installations, say the companies. In contrast the $60 million project with SolarCity is supposed to provide financing for 1,000 solar systems (I’m not sure why SunRun’s fund will be able to stretch farther, but will update this when I know.)

Most utilities aren’t creating these types of tax equity funds. It’s much more common for a bank to invest in tax equity — basically buying clean energy tax credits (government tax credits can provide 30 percent of the cost of the solar project)  to shelter otherwise taxable income. Firms like AIG, Lehman Brothers, Wachovia and Morgan Stanley not too long ago ranked among the most active tax equity investors, but given the financial turmoil new parties like PG&E are entering the game.

Late last year SunRun announced a tax equity commitment of $90 million from US Bancorp to finance solar installations in 2010, and in 2008 it scored another $105 million commitment from a US Bancorp affiliate. SunRun is backed by Foundation Capital and Accel Partners.

California has a state-mandated goal (Renewable Portfolio Standard) that says utilities must deliver 20 percent of their electricity generated by renewable energy by 2010, and PG&E has been taking a more active role compared to other utilities in trying to reach that goal. Last year PG&E announced that under a program that will run five years it would build out solar photovoltaic projects that together would produce 500 MW of power, 250 MW of which it will own outright.

For more research on cleantech financing check out GigaOM Pro (subscription required):

Cleantech Financing Trends 2010 & Beyond

  1. check this

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  2. Mark…
    Read this, maybe something for us to try and get going one day in RSA..
    We will get there eventually!!
    Al

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  3. Solar power is becoming more accessible, more affordable and easier t install.

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  4. [...] By Katie Fehrenbacher Jun. 29, 2010, 7:16am PDT No Comments       Fresh from announcing a $100 million solar fund with utility PG&E last week, solar financier SunRun announced this morning that it’s raised $55 million in [...]

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  5. [...] from announcing a $100 million solar fund with utility PG&E last week, solar financier SunRun announced this morning that it’s raised $55 million in [...]

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  6. [...] from announcing a 0 million solar fund with utility PG&E last week, solar financier SunRun announced this morning that it’s closed a million Series C [...]

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  7. [...] Another hot driver was solar. Solar startups brought in $811 million in 26 deals, including funding for Solyndra, BrightSource, and Amonix. Utilities are also picking up their investments into solar financing deals, and PG&E launched a $100 million tax equity vehicle with SunRun last month. [...]

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