Last year, solar panel manufacturers encountered a serious crisis when they attempted to cope with the global flood of very cheap panels made by Chinese companies. Several solar companies had to fold, and SolarCity Corp. (NASDAQ: SCTY) stood out for its successful IPO—but its success was instructive.
SolarCity, rather than manufacturing panels, finances and installs solar panels. That structure was key to its success. Now, competitor Sungevity Inc. has received $125 million in venture capital funding. $50 million of the funding came from Energy Capital Partners. An unnamed major commercial bank provided $35 million, and another $40 million came from Brightpath Capital Partners LP and Lowe’s Cos.
Sungevity installs solar photovoltaic panels on its customers’ homes, who then pay monthly fees to lease the systems for the next twenty years.
“There’s a lot of momentum in this space, and we hope to benefit from that,” though Sungevity has no specific plans or timeline for an IPO, [Sungevity CEO Andrew]Birch said. “We think that Sungevity’s model is the most efficient model to serve downstream solar,” he said.
Last year, Sungevity was able to capitalize on reduced design and permit expenses and more penetrative customer outreach via the Internet to bring the per-system installation cost down by a third.
Currently, the company offers residential solar leasing options in Arizona, California, Colorado, Delaware, Maryland, Massachusetts, New Jersey, and New York. And last year, Sungevity made an investment in an Australian venture.
The year before that, Sungevity bought a stake in Zonline BV, which allowed it to expand into the Netherlands. Although European and Australian customers tend to outright buy rather than lease, there is certainly potential for expansion.
Solar leasing could well become the most attractive option this year. SolarCity is up more than 23 percent since its IPO, and shares were up 4.22% on Thursday morning.