Four notes on the rise of residential solar loans over third-party owned leases
According to the U.S. residential solar finance update: H2 2019 from Wood Mackenzie, solar loans are officially outpacing leases in the residential solar segment – hitting 55 percent market share in the first half of 2019. This equals 40 percent growth year over year in solar loans.
1. Expanding base
Included within the rise of the residential solar loan is the growing viability/customer interest of bundling storage with PV. Plus, with the residential solar segment only poised to grow more overall, lenders are gaining a bigger appetite for risk, thus opening up more financing options for the low to moderate income (LMI) customer segment.
Nothing illustrates this new lending world like the success of Loanpal. The company debuted two years ago and has already vaulted to the top of residential solar financing due in large part to its focus on “riskier” LMI customer products. Loanpal is responsible for more than $2 billion in residential solar loans since 2018 and 30% of all new solar loans in the U.S. It recently partnered with PenFed Credit Union – its 14th such partnership.
3. TPO shift
Third-party ownership isn’t going away though, especially in California as TPO providers are targeting homebuilders and the new-build solar segment. Many of these homes will have the solar bundled in with the mortgage, which is beyond the scope of solar loan providers.
4. ITC issue?
The H1 2019 report said to expect a stepdown of Investment Tax Credit (ITC) to tip the scales back to TPO early this year (happy new year!), but the momentum of solar loans (the 55 percent market share in the first half of the year) is around five percent higher than estimates from the H1 report), and the popularity of new, creative financial products may be enough to overcome the initial adjustment period.
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