In the past, SolarCity has been dismissive of solar loans, with their CEO saying he did not see loans becoming the next big thing. Fast-forward a year and SolarCity is now releasing its own solar loan program, which it’s calling MyPower. Several residential solar companies have been offering loans for for some time, but SolarCity is still the biggest. This change of direction by them shows just how much traction loans are getting.
This isn’t as dramatic a shift as it may seem at first, though. SolarCity has been testing the waters of solar loans for the past several months, and apparently likes what it sees. The appeal of solar loans versus leases is understandable. Who wouldn’t want to own their solar system for no money down?
SolarCity’s MyPower program is a sort of power purchase agreement (PPA)-loan hybrid. Customers pay for their system similarly to how they pay for a solar PPA — based on the energy the system produces — but they retain ownership of the solar panels. SolarCity calculates the payment each month based on how much electricity was generated.
Lyndon Rive was quoted by the New York Times as saying, “The motivation of the company and the customer are aligned. We are highly motivated to make sure the system is always performing at its maximum capacity.”
This can result in a great benefit for customers, who may pay up to 40% less for solar power than for utility power. Unlike other loans, MyPower allows customers to prepay their entire balance or prepay a portion of their solar loan to lower their monthly payments at any time, with no fees or penalties.
SolarCity is acting as a direct lender with this new program through its subsidiary, SolarCity Finance Company. MyPower customers can receive a fixed annual percentage rate, which ranges from 4.5% to 6.5% for 30 years. Due to its potential to lower the cost of solar electricity, SolarCity ultimately expects MyPower to expand the addressable market for solar power to areas of the United States that have traditionally seen very little adoption.
While most solar loans are provided by third-party banks and municipalities in partnership with solar manufacturers and regional installers, SolarCity lends directly to customers as part of its full-service model. MyPower also places no lien on the home — making it easier to transfer in a sale. This is a big deal for solar loans, as selling one’s home while still making payments on a solar loan could be difficult.
Despite organizations like the NREL saying that solar loans will continue to grow into the future, Solarcity claims their loans are just another tool in their solar toolbox.
“Probably there’s some group of customers who will find a loan more appealing and comprehensible,” Rives said to the New York Times, “but I think at the end of the day it’s just another tool in the toolbox for SolarCity, and a tool that many of the other companies in SolarCity’s business are finding valuable.”
SolarCity will offer MyPower loans to customers in Arizona, California, Colorado, Connecticut, Hawaii, Massachusetts, New York, and New Jersey, and ultimately plans to expand the product beyond its existing service territory.
While SolarCity offering loans is likely the biggest news of the day for the company, SolarCity has also renewed a partnership with Honda that will provide financing for $50 million of solar projects. Honda and Acura customers and dealerships are eligible under the program. Additionally, a co-marketing campaign is being implemented that specifically targets electric vehicle and home solar owners. With SolarCity’s new loan offering, these customers have even more ways to go solar.