Google to invest in SolarCity’s residential solar project

SolarCity yesterday said it has created a $750-million fund to finance about 25,000 residential solar projects with Google investing nearly half the amount, Reuters reported.

SolarCity is a California-based  provider of energy services,  that designs, finances and installs solar energy systems, performs energy efficiency audits and retrofits and builds charging stations for electric vehicles.

The money would be used by SolarCity to put solar panels on homes with homeowners then paying a monthly fee to lease the panels from the company. The growth of such financing had made generating electric power from the sun an option for households that did not want to shell out the $20,000 to $30,000 upfront cost of a typical residential solar system.

According to SolarCity the fund was the largest ever created for residential solar systems.

The internet search company's $300-million equity stake was the technology giant's biggest renewable energy investment to date. SolarCity is the top US residential solar installer.

As a so-called ''tax equity'' investor in the fund, Google could claim federal tax credits worth 30 per cent of a solar project's cost to cut its tax burden. Tax equity investors typically enjoy returns of 8 to 10 per cent.

According to SolarCity spokesman Jonathan Bass, the balance $450 million of the fund would come primarily from debt financing.

Google had announced commitments over $1.8 billion in renewable energy investments, including SolarCity, the largest residential solar installer in the country.

The Google-backed fund is SolarCity's largest project financing fund and the largest residential solar fund created in the US. Google teamed up with SolarCity in 2011 with a $280-million fund for financing residential solar power projects (See: Google teams up with SolarCity to create $280-mn fund for residential solar projects).

Google announced last month that it would contribute an unspecified amount of tax equity for a $188-million project to build a 104 megawatt solar power project in Utah.

SolarCity on its part had set up two funds in the past two months: a $350 million fund with JP Morgan and a $400 million fund with Bank of America Merrill Lynch.

That tax break is the single most important public financial aid for the solar energy market and had catalysed its growth.

According to the Solar Energy Industries Association's projections, by the end of 2014, over 20 gigawatts of solar energy projects, using various types of solar technologies, were installed in the US. It expected around the same amount of addition collectively in 2015 and 2016.

Post 2016, the tax credit would drop from 30 per cent to 10 per cent for commercial projects and to zero for homeowners who wanted to claim it.

Although SolarCity installs solar panels mostly on residential rooftops, its projects are considered commercial installations as these are not owned by its homeowner customers rather they pay a monthly fee to use the solar electricity.

Ownership belongs to whoever funds the installations, and with a bank or a company such as Google that is mostly interested in renewable energy investment.