SunPower Corp. (NASDAQ: SPWR) announced Wednesday morning that it would join with Google Inc. (NASDAQ: GOOGL) to provide up to $250 million in new financing for residential solar installations. Google will provide $100 million and SunPower has committed to approximately $150 million.
The funds will be used to finance installation of residential rooftop systems that SunPower will then lease back to homeowners. This kind of arrangement can reduce immediate out-of-pocket expense to homeowners to zero, and monthly installment payments can replace all or some of the homeowner’s residential electricity bill.
SunPower has made solar modules and panels for years now, and it added a downstream business in 2010 with its purchase of SunRay. First Solar Inc. (NASDAQ: FSLR) and SunEdison Corp. (NYSE: SUNE) also added downstream businesses to help support the companies’ panel business. The initial focus was on large utility-scale projects, but that focus has shifted over time to residential and commercial rooftop systems.
It is much easier for solar panel makers like SunPower to finance and install thousands of rooftop systems than it is to finance and build a utility-scale plant in the deserts of California that costs a few billion dollars. The leasing income provides a steady flow of revenue, and some companies even install the solar system for free and sell the electricity under a long-term contract with the owner of the home or business. It is sort of like having a personal power company, where the customer pays for the electricity and the amortization of the capital costs as well.
SolarCity Corp. (NASDAQ: SCTY) has made a living on the long-term power-purchase agreement (PPA) deals. It and the other solar maker-installers not only reap the profits from the lease and PPA deals, they also get the benefit of the investment tax credit for installing the systems. If the ability to retain the investment tax credit should disappear — and that is being considered in Congress — the financial efficacy of these deals could be jeopardized.
For now, though, the sun is shining and SunPower’s stock was up about 6.4%, after rising as much as 10% earlier, Wednesday morning. Shares traded at $31.29 in a 52-week range of $11.22 to $37.14.