Residential Solar Finance 101: Accessing Capital Markets to Grow Your Business

Size: px

Start display at page:

Download "Residential Solar Finance 101: Accessing Capital Markets to Grow Your Business"

Marvin Marshall
8 years ago
Views:

1 Residential Solar Finance 101: Accessing Capital Markets to Grow Your Business APEC 2014 Mike Pope, CFO March 2014

2 Overview Solar is Booming Residential Solar is a Huge Market Opportunity People Are Going Solar Industry Grew 20% in 2013: US Economy Grew 1.9% (1) Financing Is Driving the Solar Market Financing Allows Consumer Access to Residential Solar Investors Like This Asset Class, Investing Significant Capital Clean Power Finance Enables Financing Connects Supply and Demand Through Scalable, Online Platform Flexible, Unbranded Model Attracts New Players Large Opportunity for New Market Entrants Access New Deal Flow Gain Insight into A Large, Evolving Market (1) Source: Greentech Media Q SMI Report PROPRIETARY CLEAN POWER FINANCE

3 Residential Solar in the U.S. 3

4 What Is Residential Solar? Solar PV panels convert the sun s photons into direct current (DC) electricity. Extra, unused AC power is sent back to the grid to be used by other local consumers. The inverter turns DC into alternating current (AC) for use in the home. Solar power is used first. If there s not enough (or at night), grid power supplements. 4

5 Snapshot: Residential Solar in the U.S. More than 360,000 homes across the country have solar systems (1) Someone installs a residential solar system in the U.S. every 4 minutes. (2) (1) (2) Source: Greentech Media Q SMI Report 5

6 Trend 1: Financing Is a Key Market Driver Residential is the fastest-growing segment in the U.S. solar market. (1) Barriers to Adoption: High up front cost Maintenance concerns Customer confusion FINANCE PRODUCTS Solar Leases and Power Purchase Agreements (PPAs) Consumer Benefits: Little/no money down Professional services for O&M Lower electric bills People Overwhelmingly Go Solar To Save Money (1) Source: Greentech Media Q SMI Report 6

7 Residential Solar and Financing - Are Going Mass Market More U.S. Homes With Solar Installed Solar Homes Installed Increased Use Of Solar Financing % Financed 500K 400K 300K 200K 100K E 2015E 2016E Source: Greentech Media 3Q 2013 SMI Report CLEAN POWER FINANCE PROPRIETARY 2014 CLEAN POWER FINANCE

8 The Next Wave of Consumer Financing Investors Like Residential Solar An Attractive Asset Class Relatively High Returns with Relatively Low Risk Capital Providers Include Banks, Electric Utilities, Corporates MORTGAGE FINANCING $2 Trillion Annual Market AUTO FINANCING $90 Billion Annual Market EDUCATION FINANCING $26 Billion Annual Market ELECTRICITY FINANCING $6 Billion Annual Market (E) Sources: Securities Industry and Financial Markets Association (SIFMA), Greentech Media Research, US Census CLEAN 2011, POWER GTMR, FINANCE Clean Power Finance PROPRIETARY 2014 CLEAN POWER FINANCE

9 Trend 2: Investors Realizing High Risk-Adjusted Returns; An Increasingly Compelling and Credible Asset Class 12% Annual Unlevered Yield Annual Unlevered Cash Yield (1) 10% 8% 6% 4% 2% 10yr "BBB" Corp. 10yr "A" Corp. 10yr T-Note Prime Mortgage 10yr "A" Muni Residential Solar 2013 Prime Auto Student Loan Credit Card 0% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% Annual Default Rate Consumers Overwhelmingly Pay Their Electric Bills Source: Kilowatt Financial (1) Pricing Is for Prime Consumers 9

10 Clean Power Finance 10

11 Clean Power Finance s Platform Enables Financing Manufacturers Distributors Installers Financial Services and Software for the Solar Industry Utilities Corporates Financial Institutions Solar Professionals Grow Their Businesses by Offering Compelling Solar Finance Products to Homeowners Investors Ability to Efficiently Manage Risk and Invest in A Residential Solar Portfolio Top Investors Major Fund Investors 11

12 How It Works Origination and Construction Underwriting Ongoing Operations Verified Professionals Designs System Generates Proposal Selects Financing Options Sells Consumer Underwrites Consumer Confirms Deal Meets Product Parameters Investor Locks Price Reserves Capital 12

13 How It Works Consumer Accepted Origination and Construction Underwriting Ongoing Operations Verified Professionals Completes Construction Agrees to Warranties Underwrites the System (Reviews Construction Documentation Transacts Purchase Investor Pays Installer Takes Ownership of Completed System 13

14 How It Works Consumer Accepted Transaction Completed Origination and Construction Underwriting Ongoing Operations Verified Professionals Services Warranties On-Call Maintenance Manages Assets for Investors Monitors Systems Manages Maintenance Arranges Billing & Payment Collections Customer Service Investor Earns Returns 14

15 Market Opportunities 15

16 Trend 3: New Business Ventures Capitalizing On Increasing Consumer Engagement With Electricity Google Buys Nest for $3.2BN Home automation company Designs and manufactures smart thermostats & smoke detectors Emphasizes user experience Comcast Partners with NRG New industries partnering with energy companies Cable providers, alarm companies, etc. Bring customer acquisition expertise to retail electricity Software-as-a-Service company Helps utilities promote energy efficiency Provides customers with personalized ways to save energy & money. Energy Software Company Opower Files for IPO CPF connects supply and demand Unbranded platform enables traditional businesses to access residential solar opportunity Electricians, roofers, utilities Integrys Energy Services Invests in Solar Through CPF PROPRIETARY CLEAN POWER FINANCE

17 Key Takeaways Trend 1: Financing Is A Key Driver of Growth In US Solar Market, Particularly Residential Sector Trend 2: Favorable Returns with Managed Risk Are Attracting Major New Solar Investors from Variety of Industries Trend 3: New Business Opportunities Proliferate as Consumers Use New Technologies to Engage with Electric Power The CPF Market Connects Industries For Win-Win Outcomes (1) Source: Greentech Media Q SMI Report PROPRIETARY CLEAN POWER FINANCE

18 Thank You Mike Pope CFO

Solar Finance. NARUC Winter Conference John Stanton, VP Policy & Markets

Solar Finance. NARUC Winter Conference John Stanton, VP Policy & Markets Solar Finance NARUC Winter Conference John Stanton, VP Policy & Markets Annual U.S. Residential/Commercial Solar Installations (MWs) % of New U.S. Generating Capacity Distributed Generation Solar is Growing