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SolarCity Becomes Lender of Solar Loans

October 9, 2014 By Linda Hardesty

solar city energy manageRecently, an article in Bloomberg lauded SolarCity for its savvy business model of “selling power, not panels” to solar customers.

Now, SolarCity is keeping Wall Street on its toes with a new business model: The company introduced MyPower, which provides loans to residential customers so they can buy and own the solar equipment on their homes. SolarCity says the solar financing option combines the low upfront cost and immediate utility savings of a power purchase agreement (PPA) with the benefits of ownership.

Although MyPower is for residential customers, it’s worth noting what SolarCity is doing as others are likely to follow.

SolarCity customers pay for their MyPower solar loan similar to the way they pay for a solar PPA – based on the energy the system produces from the sun – but they retain ownership of the solar panels. MyPower allows customers to prepay their entire balance or prepay a portion of their solar loan to lower their monthly payments at any time, with no fees or penalties.

SolarCity is leveraging its scale and low cost of capital to act as a direct lender to its customers through its subsidiary, SolarCity Finance Company. MyPower customers can receive a fixed annual percentage rate as low as 4.5 percent for 30 years.

While most solar loans are provided by third-party banks and municipalities in partnership with solar manufacturers and regional installers, SolarCity will be lending directly to customers.

SolarCity will offer MyPower to customers in Arizona, California, Colorado, Connecticut, Hawaii, Massachusetts, New York and New Jersey, and ultimately plans to expand the product beyond its existing service territory.

Some other companies are already offering similar kinds of loans, including Sungevity, Clean Power Finance and Mosaic, according to The New York times.

The MyPower loan is a bit unusual in that its repayment is based not only on the overall value of the system but also on how much electricity it produces, so it is calculated in kilowatt-hours and varies each month, reports the NY Times.

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