SolarCity isn’t content with being just an installer of solar panels on rooftops. With ambition to become a big national company and possibly go public soon, the company has expanded beyond solar to brand itself as the provider of a broader set of energy-related services, including upgrading air conditioning systems and insulating air ducts to minimize leaks to achieve savings.
The company is launching a marketing push for its energy efficiency service by announcing Tuesday a loan program from Admirals Bank of Boston. Homeowners can use the loan program to help finance energy efficiency audits and subsequent home improvement work, the cost of which typically ranges from $4,000 to $12,000, said Lyndon Rive, CEO of SolarCity in San Mateo, Calif.
“We are getting into more than electricity sales [to include] the full management of your energy at home — everything that consumes energy in your house,” Rive said.
The loan, and the accompanying announcement that it’s expanding the energy efficiency service to the East Coast, provides a snap shot of a company that is a solid fund raiser and has helped to popularize the use of leases and power purchase agreements to remove the expensive barrier for going solar.
But competition has grown quickly in solar. The company recently bagged an $81 million equity round for expansion, technology development and acquisitions. An IPO would give it more capital to grow the different services it offers beyond solar, such as installing electric car charging stations.
The company, founded in 2006, is making a push for its new services at a time when the business of installing solar systems has moved beyond the startup stage to attract a growing number of companies that have established brands. Vivint, known for its home security business, lined up $75 million last year to push its solar service. NRG Energy is now targeting the same kind of rooftop projects that SolarCity does after buying Solar Power Partners last year to create an in-house development team.
SolarCity, which has been going after larger and larger projects, also is now competing more so than ever against companies such as SunEdison and SunPower which, incidentally, filed a lawsuit last month alleging data theft by former employees who went to work for SolarCity.
Then there are the roofing materials companies and electricians and roofers and various other businesses that have jumped into the solar market in recent years. Finally, not to mention venture-backed solar startups that have broadened their reach beyond their home state of California, such as Sungevity and Sunrun.
Growing the energy efficiency business is a key part to show SolarCity can scale beyond solar. The company hasn’t touted its energy efficiency services as much as it has its solar installation work, at least not in press releases, though Rive did invite Forbes into his home last year for a video tour to explain the results of an energy audit by his own staff.
Software and rebates
The company has worked on about 5,000 energy efficiency projects, some of them already completed, since mid-2010 when it bought Building Solutions and launched the service in several western states and Texas. The company improved Building Solutions’ software to do more accurate energy audits, recommend and prioritize upgrades and better quantify energy savings, said Levi Blankenship, manager of energy efficiency services at SolarCity.
While SolarCity offers leases for solar, it doesn’t provide similar financing arrangements for energy efficiency upgrades. Owning and operating solar energy systems and collecting monthly payments from their electricity production makes a good business case, but the same can’t be said for owning, say, furnaces, air duct insulation or water heaters, Rive said. So customers pay cash upfront for the retrofits, and some could turn to banks for home improvement loans. Federal, state and local incentives for energy efficiency upgrades also have helped to defray the costs for many.
And unlike the solar lease, which guarantees the amount of electricity produced each month, an energy efficiency contract from SolarCity doesn’t provide energy savings guarantees. It’s difficult to promise a certain amount of energy savings when the company can’t control how much energy a household uses, and that use can change with, for example, an addition of family members, Blankenship said.
The company does do a post-installation evaluation within a week or so to verify what energy savings will likely be if energy use doesn’t change, Blankenship said. This evaluation is sometimes necessary for claiming government rebates. SolarCity entered the energy efficiency business around the time when California started an incentive program called Energy Upgrade California that gives rebates based on projected energy savings of a retrofit project rather than the cost of buying individual equipment. The company is now expanding its energy efficiency service to the East Coast regions, such as New Jersey, New York and Massachusetts, where it already offers solar installation.
Photos courtesy of SolarCity