Oct 8 (Reuters) - SolarCity Corp, the largest U.S. installer of rooftop solar panels, on Tuesday unveiled a new financing option that for the first time will allow its customers to claim a lucrative federal tax credit for solar power.
The company’s new solar loan will be more affordable in most cases, Chief Executive Lyndon Rive said, than the panel leasing program that has underpinned SolarCity’s rise over the last eight years. He expects the uptake to be substantial.
“My forecast is I think this can be half our residential business come the end of next year,” Rive said in an interview.
SolarCity was founded by Rive and his brother, Peter, and is backed by their cousin, Tesla Motors and Paypal entrepreneur, Elon Musk.
Until now, SolarCity’s business has relied on raising funds from outside investors, including Google Inc and U.S. Bancorp, who own its residential systems and are then able to claim a tax credit worth 30 percent of their value. Those systems are then leased to homeowners, a model that has made going solar accessible to those without the tens of thousands of dollars required to buy a rooftop system outright.
Now, homeowners will be able to own their systems through San Mateo, California-based SolarCity and claim the tax credit while still paying a monthly fee. The addition of the tax credit will make the loan, which the company is calling MyPower, more affordable than other financing alternatives such as a lease and could allow the company to expand into markets where solar has typically not been able to compete with power from the grid.
For people who do not owe federal taxes, a lease or power purchase agreement will still make more sense, Rive said.
SolarCity is not the first to offer homeowners loans for financing solar systems. Boston-based Admirals Bank offers a loan through installers around the country, and solar company SunPower also offers a loan product to its customers. Loans have increased in popularity thanks to an 80 percent drop in the price of solar panels since 2008. The cost of a typical system is now $20,000 to $30,000 instead of the $50,000 to $60,000 just a few years ago.
But SolarCity said its offering is particularly attractive because it is a one stop shop for sales, installation and service for the duration of the 30-year loan. The interest rate is as low as 4.5 percent, SolarCity said.
SolarCity will serve as the direct lender through a subsidiary, SolarCity Financing Company. It is partnering with an undisclosed financial institution but expects to finance the program in the long term in part through security offerings. (Reporting By Nichola Groom; Editing by Bernard Orr)