Solar financier SunRun has high hopes for 2010. The San Francisco-based company, which provides homeowners with solar leasing options known as power purchasing agreements, has just announced a tax equity commitment of $90 million from US Bancorp to finance residential solar installations next year. It marks the second tax equity deal between US Bancorp and SunRun, which owns, monitors and maintains residential solar panels (it’s completed about 2,700 installations so far), and sells the electricity at a fixed rate after customers pay a minimum $1,000 installation fee. In late 2008, the startup secured a commitment of about $105 million from a US Bancorp affiliate to finance some 2,000 installations. With this new financing, SunRun CEO Edward Fenster said in a statement the company will be able to “bring solar to thousands more homes in 2010.”
Snagging a $90 million tax equity agreement is no small feat these days. Such financing — in which an investor basically buys clean energy tax credits and uses them to shelter otherwise taxable income — has been hard to come by this year. In the wake of the investment bank shake-up, solar companies have had to compete for financing from a shrinking pool of tax equity investors once packed with firms like AIG (s AIG), Lehman Brothers, Wachovia and Morgan Stanley (s MS). Add to this the fact that profits, and therefore taxes high enough to make use of tax credits, have dropped, and energy developers have found less demand for these credits. JP Morgan managing director John Eber said at the Renewable Energy Finance Forum in San Francisco this fall that tax equity financing for renewable energy is expected to total just $2.5 billion to $2.6 billion in 2009, down from $3.6 billion last year and $6 billion in 2007.
SunRun President and co-founder Lynn Jurich told us earlier this year that the company is looking to enter some of the 10-14 states where “solar will make sense” within the next 2-3 years as a result of local subsidies, utility programs and electricity rates that will help bring solar closer to competitive pricing with conventional sources. In October the company expanded to Colorado, adding the Centennial State to its existing markets in California, Massachusetts and Arizona.
SunRun’s funding so far includes $12 million from venture firm Foundation Capital and $18 million in second-round financing led by Accel Partners — capital that the company will need to grow big enough and fast enough to stay ahead of the competition. Jurich tells VentureBeat that in order to have a real edge, SunRun needs to bring in “hundreds of thousands” of new residential customers. Investors, at least, are showing confidence in the company and its ability to make power purchase agreements — long used in the commercial solar market — work for residential installations.
There are signs that SunRun’s bet on a 2010 residential solar boom could pay off. A supply glut of solar products that has been in the making for years keeps pushing prices down, and demand has started to pick up for solar installations, especially in homes.
Photo of Oakland, Calif., residential solar installation courtesy of SunRun