Sungevity, one of the leaders in solar leasing, has raised another $125 million in expansion capital.
Brightpath Capital Partners, and home improvement retailer, Lowe's led a $40 million venture capital round and private equity firm Energy Capital Partners and a "leading commercial bank" committed to $85 million in project financing.
Capital from project financings will support solar leasing in the nine states Sungevity is active in - Arizona, California, Colorado, Connecticut, Delaware, Maryland, Massachusetts, New Jersey and New York. Sungevity also has a presence in Europe through its equity stake in Netherlands-based, Zonline, and in Australia through a joint venture called Sungevity Australia.
"Sungevity's unique customer acquisition approach, scalable business model and stable cash flow generated by its established customer base, is a natural fit for our diversified energy portfolio," says Nazar Massouh of Energy Capital.
Over the past year, Sungevity focused on building relationships with third parties like Lowe's in retailing and Sierra Club in non-profits to gain access to customers at lower costs. It also developed proprietary software that makes it easy for customers to refer friends and family.
As a result, most new customers come from referrals. It's also been able to cut costs by using the Internet and satellite technology to provide price quotes to potential customers. And by working with local installation partners, it's been able to cut installation costs 30% in 2012.
Competitor SolarCity (SCTY) went public in December and its stock is up 70% since then. Sungevity has a 3.1% share of the US residential solar market, much smaller than SolarCity, which has a 13.3% share, according to GTM Research.
Other players in solar leasing are SunEdison, Sunrun, Vivint, Clean Power Finance, OneRoof, BrightGrid Solar, and several others.
Solar leasing is attractive to investors because they get a 30%federal Investment Tax Credit (ITC) and it's attractive to installers because they earn reliable, monthly payments over a long-term contract signed with customers. It's attractive to homeowners and businesses because they get a solar system with no upfront cost and no responsibility for maintenance. They are also protected from rising utility bills by locking in a monthly price that's often lower than what they'd pay to a utility for conventional energy.
The solar leasing model has been helped tremendously by the rapid drop in solar panel costs, down 30% in 2012 alone. Solar leasing is expected to be among the most important drivers for the solar PV market for the foreseeable future as government incentives dry up.
As of October 2012, almost $2 billion had been invested in solar leasing funds for the year, mostly from Credit Suisse, Rabobank, Wells Fargo, Citi, and US Bancorp.