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Goldman to finance SolarCity rooftop systems

Jonathan Fahey, AP Energy Writer

NEW YORK (AP) -- Goldman Sachs will finance $500 million worth of rooftop solar systems to be marketed and installed by SolarCity, the companies announced Thursday.

The deal, which was first agreed to last year, is meant to lead to the installation of 110 megawatts of solar panels on the rooftops of homes, businesses and schools. These will generate enough electricity to power 13,000 average U.S. homes.

SolarCity, based in San Mateo, Calif., installs and maintains rooftop solar systems. The company installs panels on customer roofs for no upfront cost. Instead, customers agree to pay SolarCity a set price for the electricity generated by the panels, usually over a period of 20 years. The customer then has to buy less electricity from the utility, and the customer's total electricity expense falls.

But SolarCity needs investors such as banks or other companies to finance the purchase and installation of these systems, each of which costs $25,000 or so, depending on the size of the system.

It is common in the rooftop solar industry to create special financing funds with banks or other investors to pay for new installations. SolarCity says the $500 million Goldman fund is the biggest such fund that targets privately-owned rooftops.

SolarCity CEO Lyndon Rive said in an interview that investors such as Goldman are getting more comfortable with these financing arrangements because returns are good and default rates have been extremely low. He said the Goldman fund allows SolarCity to sell these systems to customers with lower credit quality than in the past.

"This is not financing a boat or some luxury good, it's financing your energy payment," he said. "A customer has three options: Pay us, pay the utility even more, or don't have electricity. Most prefer to pay us less for cleaner electricity."

Goldman, based in New York, will earn a return three ways. It will charge interest, paid through the customer's set monthly electricity fee. It can write off the total value of the systems in the year they are built, an accounting benefit called accelerated depreciation. And it gets federal and state renewable energy tax credits. The federal credit is 30 percent of the cost of the solar projects, in this case $150 million.

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