Here comes the sun
Google has agreements to fund well over a billion dollars in
renewable energy projects. They have just stepped even deeper into the renewables game with their
largest single investment to date:
Google Inc. is making its largest bet yet on renewable energy, a $300 million investment to support at least 25,000 SolarCity Corp. rooftop power plants.
Google is contributing to a SolarCity fund valued at $750 million, the largest ever created for residential solar, the San Mateo, California-based solar panel installer said Thursday in a statement.
Google has invested with SolarCity before.
This isn’t the first time that Google has put money into a SolarCity fund. In the Summer of 2011, Google committed $280 million into a similar solar installation fund created by SolarCity. That collaboration was one of the first examples of a corporate entity (and not a bank) agreeing to invest in solar projects. Usually SolarCity works with banks like Citi, U.S. Bancorp, or Goldman Sachs to raise these types of funds.
The fund will be used to cover the upfront costs of installing solar panels on new customers' roofs.
SolarCity’s business was built around creating solar-as-a-service deals where it can offer a homeowner the installation of solar panels and the accompanying solar energy in exchange for a monthly fee over several years (say, 20 to 25 years). That monthly fee is usually less than the homeowner would pay for their monthly utility bill. Thus the homeowner can buy solar energy without having to pay for the high upfront cost of the installation of the solar panels.
This is exciting news for more environmentally minded people out there.
However, there is a very important reality in all of this renewable spending:
This type of investment has typically been provided mostly by banks, and the supply of tax credits exceeds the demand for tax-equity financing, Rive said. The rates solar developers pay in such deals has increased since 2008 even as interest rates fell to near zero.
Back then a typical tax-equity deal might pay an after-tax rate of return of about 7 percent. Today, Rive said they pay at least 8 percent. Attracting more corporate investors to this type of deal may boost demand and let developers pay less, reducing the industry’s financing costs.
These deals make good business sense. The fight for our environmental future, right now, is a fight between new businesses and old businesses. Unfortunately for the old businesses, they may be stretched too thin and a bit too slow to invest in what is clearly the future.