Editor's Note: Learn from a panel of experts and entrepreneurs who have successfully financed their own ventures and are helping others do it at the Thought Leaders Live 2013 event May 29, in Long Beach, Calif. Event and ticket information can be found here.
While few homeowners would object to lower utility bills, many have eschewed residential solar power systems because of the upfront costs--which can be equal to the price of a new car. But just as consumers have embraced the option of leasing automobiles, there has been a shift in the residential solar energy market, with increasing numbers of homeowners installing leased systems. A report by the Solar Energies Industry Association found that residential solar installations increased 11 percent from 2010 to 2011, driven primarily by third-party ownership.
OneRoof Energy is banking on this new approach. The San Diego-based company leases its residential systems--which can cost $30,000 to $40,000 if purchased outright--and has agreements with contractors for installation. The homeowner pays little or nothing upfront but has a monthly leasing fee and, presumably, a vastly reduced electric bill. Typical users see savings of 15 to 25 percent off their monthly expenditure on electricity, according to OneRoof president and CEO David Field.
Bringing its SolarSelect Lease program to market required some creative fundraising. In addition to raising working capital, OneRoof needed to create a specialized tax equity fund that purchases the residential leases and takes advantage of breaks like the investment tax credit, which reduces the tax liability for companies investing in solar projects.
A few investors saw the light. Hanwha International, part of Korean conglomerate Hanwha Group, led a $50 million round that closed in September 2011, followed by a $3 million infusion in March from Black Coral Capital, a Boston-based clean-technology investment firm. Black Coral vice president Nikhil Garg says his team was impressed by OneRoof's sophisticated approach to financing. Field expects to close another round later this year; it could be as much as $100 million for the tax equity fund and another $20 million in working capital.
OneRoof is limited in its expansion opportunities. There are fewer than 10 states with the right ingredients--sun saturation, high electric rates, favorable regulations and local incentives such as tax concessions or rebates for installation--necessary for the company to be profitable, Field says. However, that may change as the price of solar components continues to drop and regulatory environments become more favorable.
Since the introduction of the Solar-Select program in October 2011, OneRoof has expanded from California into Hawaii; additional operations are planned for Arizona, Massachusetts, Connecticut and New York. OneRoof systems have been sold into "several hundred" homes, Field says, noting the company is on track to complete about 4,000 residential installations in 2012, valued at $120 million.
"People want the energy off the solar rooftop, not necessarily the hassle of buying a solar system and getting it installed and maintaining it," he says. "This is just a much better way to serve homeowners."