Google, Citi, and others are reaping nice returns by funding solar rooftop power projects. Will it last?
By Brian Dumaine, senior-editor-at-large
SolarCity installers lay solar panels on a house in Texas.
FORTUNE -- When Bruce Buller looked into installing solar panels on the roof of his ranch house in Diamond Bar, Calif., he suffered severe sticker shock. "We had been thinking about solar for years," says Buller, "but we found the cost -- about $35,000 -- to be prohibitive." He then discovered SunRun, one of a number of solar installers, including SolarCity and Sungevity, that are applying a new financing model that makes residential solar affordable. They are attracting investors from U.S. Bancorp to Google. Here's how it works.
SunRun raises project capital to buy, install, and maintain its customers' rooftop solar systems. The private company, whose biggest investor is U.S. Bancorp (USB), has attracted a total of $750 million. In Buller's case, his new solar panels (which SunRun paid for entirely) cut his $200-a-month electricity bill by $140, or 70%. Buller gets to keep $50 of the savings and pays the balance to SunRun, which uses it to cover the cost of buying the solar system and hiring a contractor to install and maintain it. The appeal to customers like Buller is that they don't need to spend $35,000 upfront or hassle with maintaining the system. (SunRun also lets customers put some money down or buy the whole system, if they choose, to lower their monthly solar payments.) If Buller moves, SunRun's contract can be transferred to a new homeowner. Says Edward Fenster, the CEO of SunRun: "We have proved we can make solar affordable."
This solar-leasing model is taking off. SunRun, which says it is profitable, will fund close to 10,000 solar systems this year, double the number in 2010. One of its competitors, SolarCity of San Mateo, Calif., which does both commercial and residential buildings and, unlike SunRun, has its own installation teams, has built 17,000 home systems. The fast-growing company has raised $1.4 billion in project financing from, among others, Citibank (C) and Google (GOOG), which alone put in $280 million. Typically, these investors earn 8% to 10% after tax.
Is this simply the latest flavor of securitization à la mortgage-backed securities, which one day could turn into a bubble? Perhaps, but SolarCity CEO Lyndon Rive insists these projects are safe because Americans almost always pay their utility bills. "The default rate on our solar projects is way under 1%," he says.
Other obstacles loom. The price of solar panels is dropping, but they are still more expensive than fossil fuels and don't make economic sense without federal subsidies. Investors like Google and U.S. Bancorp are attracted to these deals because they can take advantage of the 30% federal tax credit program for solar. Take that away, and the industry could suffer. The bill is slated to expire in 2016 and, given the current mood in Congress over green subsidies (think Solyndra), renewal is by no means assured. Also, if interest rates -- now at historic lows -- rise, the higher cost of capital would crimp returns.
In the meantime, customers like Buller are enjoying clean solar power with no money down.
This article is from the November 21, 2011 issue of Fortune.
With hackers running riot on the Internet, here's how you can get paid to stop them.
By Alex Konrad, contributor
FORTUNE -- Don't let the headlines about New Corp.'s (NWSA) recent phone follies give you the wrong idea about hacking: Cyber crime is only getting more complex and dangerous, but it is creating new jobs for people who want to fight it. Recent high-profile hacks of government sites, Citigroup (C), and Sony MORE
Jul 22, 2011 5:00 AM ET
Citigroup is the latest to report a security breach, but the hack occurred more than a month ago. It's time for companies to open up about exposures to its systems.
FORTUNE -- Given the number of recent, high-profile network security breaches, it might be tempting to call 2011 the Year of the Hack. The danger is that there's a good chance 2012 might be even worse.
Image via Wikipedia
The underlying reason MORE
Dan Mitchell, contributor - Jun 9, 2011 3:57 PM ET
Jeff Bezos's strategy of giving customers the best e-reader and e-bookstore possible is paying off for Amazon -- not that it's saying by how much.
FORTUNE -- Sales of the Kindle and of e-books are so good, and growing so fast, that they are now becoming a driver of Amazon's overall growth, says Citigroup analyst Mark Mahaney.
We can't know for sure how many Kindles Amazon (AMZN) is selling, because the company MORE
Dan Mitchell, contributor - Jun 8, 2011 11:49 AM ET
Some of the worst were much-improved this quarter. Others have a lot to answer for.
Although they were once again bested by the amateurs in last week's Apple (AAPL) earnings smackdown -- as they have been every quarter since we've been keeping track -- it was not all bad news for the Wall Street analysts who are paid to predict the company's quarterly results.
As the spreadsheet at right shows, most of MORE
Philip Elmer-DeWitt - Apr 25, 2011 7:29 AM ET
Sales estimates range from 35 million to 100 million, with the biggest slice going to Apple
Source: Barron's
In his debut performance in this week's Barron's, where he replaces the venerable Eric Savitz (now at Forbes), Tiernan Ray provides a useful round-up of Wall Street tablet sales estimates for 2011.
Only trouble is, the estimates vary so widely you don't whether to laugh or cry.
On the low end, Citigroup estimates sales of MORE
Philip Elmer-DeWitt - Nov 27, 2010 12:50 PM ET
To take on their toughest critics, big banks are playing as visitors on social media's turf. Can they keep up, much less win?
By Nin-Hai Tseng, contributor
Five days a week, and sometimes weekends, Larry Rubinoff pounds away on his laptop with a mission: Expose what he believes to be the truth about the big banks' roles in the global financial meltdown.
For this semi-retired mortgage professional turned blogger, running Goldmansachs666.com isn't MORE
Mar 24, 2010 12:45 PM ET
Two very different iPhone reports -- with very different perspectives -- were published this week.
One, from Citigroup's Richard Gardner, focused on the short-term. He looked at inventory levels in Apple's supplier channels, saw levels coming down, concluded that iPhone sales over the holidays were soft, and lowered his Apple (AAPL) price targets for the next three years.
The other, from Generator Research's Andrew Sheehy, took the long view. He reviewed Apple's MORE
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| Company | Price | Change | % Change |
|---|---|---|---|
| Bank of America Corp... | 7.95 | -0.16 | -1.97% |
| Intel Corp | 26.73 | -0.43 | -1.58% |
| Microsoft Corp | 31.27 | -0.17 | -0.54% |
| Ford Motor Co | 12.28 | -0.25 | -2.00% |
| General Electric Co | 19.39 | 0.17 | 0.88% |
| Index | Last | Change | % Change |
|---|---|---|---|
| Dow | 12,938.67 | -27.02 | -0.21% |
| Nasdaq | 2,933.17 | -15.40 | -0.52% |
| S&P 500 | 1,357.66 | -4.55 | -0.33% |
| Treasuries | 2.00 | -0.04 | -1.96% |
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