California solar installer raises $15 million to expand to the East Coast
During a withering recession, one would think the residential solar business would suffer. After all, five-figure photovoltaic panel arrays would seem to be one of those household improvements that would be first to fall off the to-do list.
Yet on Wednesday, Sungevity, an Oakland, Calif., solar installer, announced that it had raised a $15 million round of funding to further finance the three-year-old startup’s breakneck growth. Including the $15 million, the company has raised a total of $25 million from Greener Capital, Firelake Capital, BrightPath Capital Partners and individual investors such as the actress Cate Blanchett.
Sungevity says that in 2010 its share of the California residential solar market has grown from 0.4 percent to 2.9 percent. The company’s innovation has been to use imaging technology and proprietary software to remotely size and design rooftop arrays, allowing customers to order their solar systems online. That cuts out multiple visits to a home by salespeople and installers.
But what’s really driving Sungevity’s growth, and that of competitors like SolarCity and SunRun, is a financial innovation.
Earlier this year, US Bank created a $24 million tax equity fund for Sungevity to finance solar leases. That lets homeowners obtain a solar array for no money down and a monthly payment that can be offset by the savings on their electricity bill. For its part, US Bank gets to take a 30 percent federal investment tax credit on the installations.
Danny Kennedy, Sungevity’s co-founder and president, said that the company had signed one megawatt’s worth of solar leases in October alone and connected solar arrays generating 500 kilowatts of electricity to the power grid.
“It depends on the month and geography, but broadly 95 percent” of sales are leases, Kennedy, a former Greenpeace activist, said in an e-mail.
He said Sungevity, which currently operates in Arizona, California and Colorado, will use the latest round of funding to expand to the East Coast.
“We’re targeting a cluster of six states in the Northeast,” Kennedy said. “The likely suspects include New Jersey, Massachusetts and Pennsylvania.”
Those states offer varying incentives for homeowners to install solar arrays, with New Jersey offering some of the nation’s most generous subsidies.
The company also will be seeking an additional tax equity investment to fund additional solar leases for customers, according to Kennedy.
Sungevity’s investors seemed pleased by the startup’s performance. When I ran into Charlie Finnie, the managing partner of Greener Capital, at an event at Sungevity’s offices in September he was all smiles when he mentioned the company’s burgeoning revenues.
“This is a winner,” he said.