SolarCity Corp., a closely held installer and owner of rooftop power systems, was awarded a U.S. Energy Department loan guarantee that the company says will allow it to double U.S. residential solar installations.
The loan guarantee is intended to support installations on military residences and buildings in as many as 33 states. SolarCity, based in Foster City, California, is planning a $1 billion, five-year program to install 160,000 rooftop photovoltaic systems.
The Energy Department’s conditional commitment guarantees 80 percent of a $344 million loan to support part of the project. The loan is provided by USRG Renewable Finance, an affiliate of US Renewables Group LLC, in partnership with Bank of America Corp., the Energy Department said Wednesday in a statement.
The loan guarantee was necessary to make the initiative profitable, as SolarCity expands upon an initial installation at a military base in Arizona in 2009, according to Lyndon Rive, the company’s chief executive officer.
“We thought that we could scale this model onto all the other military housing,” Rive said Wednesday in a telephone interview. “As we looked at it, the economics just couldn’t pencil,” because the cost of energy for military housing is often lower than the traditional cost of energy, he said. The loan guarantee enabled SolarCity to “get a lower cost of capital” to help “make solar affordable.”
New Solar Generation
SolarCity’s SolarStrong project may create up to 371 megawatts of new solar generation capacity, Bank of America said Wednesday in a statement. Construction is underway on an initial 4-megawatt system in Hawaii, and installations are expected to follow on military bases in Nevada, Kentucky, California, and Texas, the bank said.
The project will help the U.S. Defense Department meet its goal of providing 25 percent of its energy from renewable resources by 2025, the Energy Department said.
The loan must close by September to meet the deadline for the Energy Department’s loan guarantee programs, which haven’t been extended by Congress. The remaining cost of SolarStrong will be financed by equity from SolarCity and other investors that haven’t been announced yet, according to Rive.
The government’s risk is “extremely low” because the loan only comes into effect after the systems are built and producing electricity,’’ Rive said.
© Copyright 2014 Bloomberg News. All rights reserved.