Elon Musk-backed U.S. solar company SolarCity has unveiled today a new package designed to lower the costs of solar energy for the nation’s small and medium-sized businesses (SMBs).
The new package – announced 24 hours before the company’s Q2 financial results – is to be initially targeted directly at owner-occupied business locations in California, before an expected East Coast expansion later this year.
According to SolarCity’s own research, it expects to be able to offer discounts of between 5-25% to SMBs compared to the prices they currently pay in California for their electricity; a figure that includes no upfront costs for installation and a fixed, flat payment rate for 20 years.
SolarCity will target the 28 million SMBs that make up the backbone of the U.S. economy, and expects that its high volume installation, technology development and structured finance model will come to transform how American businesses source and pay for their electricity.
How it will work
SolarCity will leverage its vast network of local installation crews to install rooftop solar PV systems at a lower cost than any other solar provider working in the category, the company claims. By taking this direct approach rather than employing subcontractors, SolarCity expects to undercut average installation costs by 30%.
The company will utilize the technology of its subsidiary to install ZS Peak mounting systems atop SMBs’ roofs, thus allowing an additional 20-50% more solar panels on each surface at faster installation rates. Finally, the financing package offered to SMBs will be completely unique. SolarCity has teamed with Renew Financial to create a range of financing packages for businesses – many of which may have previously been unable to acquire upfront financing because they lack the necessary investment-grade credit ratings.
SolarCity’s financial package will be structured with Property Assessed Clean Energy (PACE), and will be rolled out in California under the CaliforniaFIRST program, offering SMBs a standard commercial lease in which SolarCity finance the upfront cost of the installation, with the PACE program allowing the commercial customer to pay the solar payment on its property tax bill. SolarCity will coordinate all financing as well as installation, monitoring and maintenance, offering affordable peace of mind for the SMB, the company said in a press release.
Initially, SolarCity will design systems in the 30 – 500 kW range, which will capture the SMB market for those companies with rooftops of between 5,000 to 50,000 square feet.
“The truth is that small and medium businesses have been neglected by the solar industry over the past five years,” SolarCity CEO Lyndon Rive told Fortune in an interview announcing the scheme.
The financing program outlined under the PACE program is key to making this new scheme work. PACE offers owner occupiers the opportunity to support any upfront investment in energy efficiency upgrades, such as solar panels, with financing repaid over the course of many years or – as outlined by SolarCity – added to the customer’s building tax bill. Should the owner sell the building, the financing remains with the property, not the client.
In California, solar projects now qualify for PACE financing, which is something that SolarCity has seized upon as it looks to further expand its reach into the growing smaller-scale solar markets of the U.S., including residential rooftops and – as Rive mentioned – the thus-far underdeveloped commercial sector.
By utilizing the PACE financing, its own installers and the company’s new solar mounting system, SolarCity has “been able to crack the code” of the commercial market, Rive added.
It certainly promises to be an innovative approach that could, once again, set the cat amongst the pigeons in an increasingly competitive residential and small commercial landscape. Last week, SunEdison threw its not-inconsiderable weight behind SolarCity rival Vivint Solar, while the market’s third-largest player Sunrun has just raised its first IPO for $309 million.
