PG&E Corporation, the parent company of utility Pacific Gas & Electric, announced on Monday a new $100 million tax equity fund to finance residential solar systems with little or no money down.
The fund will bankroll installations by solar installer SunRun, which will own and operate the systems in return for providing customers, who essentially lease their rooftops to the installer, with a guaranteed electricity bill over several years. Investors in the fund receive the 30 percent tax credit that accrues with each installation.
Similar multi-million dollar funds are already in operation, but PG&E Corp’s, which will be managed by PG&E subsidiary Pacific Energy Capital II, is the first set up by a utility holding company, and is also the largest so far, according to PG&E Corp.
SunRun plans to use the $100 million fund to provide over 3,500 customers in California, Massachusetts, New Jersey, Arizona, Colorado and possibly elsewhere with rooftop solar systems.
Structured as either a lease or a power purchase agreement (PPA) depending on the jurisdiction, low or no money down solar installations have become increasingly popular with customers. SolarCity introduced the no/low money down solar lease in 2008, but SunRun was the first company to provide PPAs for residential customers in 2007.
If their popularity continues, solar leases and PPAs could provide a free-market turbo boost to efforts by municipalities and states to increase their renewable energy output, by accelerating the distribution of small-scale solar power. One inherent advantage solar power (and to a lesser extent, wind) has over other sources of electricity is that it can be deployed on a small scale – from roof to roof – over a large area relatively hassle free.
In fact, PG&E Corp’s entry into solar financing, along with similar announcements in recent months, suggests that the biggest obstacle to widespread distributed solar systems is simply a lack of financing – or was until now.
One benchmark of just how popular these installations are, and by extension the viability of distributed solar, will be how quickly SunRun and other installers burn through the financing now becoming available.
PG&E, California’s largest utility, leads the nation in megawatts of solar electricity added to the grid, with 85 MW connected in 2009, according to a report (PDF) by the Solar Electric Power Association (SEPA).