Record-Low Levels in US Residential Solar

A new release from GTM Research states that U.S. Residential Solar Finance: H1 2018, 2017 was the first year since 2011 when more home systems were bought with cash and loans (59 percent) than with leases and PPAs (41 percent). This course runs contrary to what GTM Research sees in the market sector.

Allison Mond, GTM Research senior solar investigator, attributes the decline of third-party ownership to three key reasons: the widespread availability of loan products, a lack of third-party ownership (TPO) suppliers, and Tesla's and Vivint’s deliberate move away from TPO.

According to the release, the share of TPO in the market is expected to drop to 33 percent by 2023 as increase expectations for the long tail of installers exceed those of top TPO providers. This TPO percentage is higher than previously forecast, as new information implies a rebound in volume for major TPO providers, as well as the likely admission of new TPO providers to the market.

Changing Rank

Sunrun exceeded Tesla as the No. 1 TPO provider in 2017, while Sunrun finished the year with 32 percent market percentage of the TPO market. This compares to 23 percent for Tesla and 16 percent for Vivint Solar, both of whom struggled to grow and are pivoting apart from TPO sales. Sunrun has grown because it is both a vertically combined installer and a financier supplying the long tail of residential installers.

As the prevalence of solar loans grows, Mosaic has emerged as a top player and claimed the No. 1 residential financier place in 2017, just edging out Sunrun. According to the report, Mosaic’s impressive 14 percent market share of entrepreneurs can be attributed to its supply of solar loans to Tesla, as well as its work with larger than 150 other leading solar installers. Sunlight Financial has also grown significantly in 2017, thanks in large part to its relationship with a few large installers, while Dividend Solar has experienced growth due to its capability to work with relatively small and nascent installers.

Competition Heats Up

Solar-specific loan providers, as well as conventional banks and credit unions, have recently inserted the space. Mond notes that this intense competition has led to very competitive rates — and hence compressed margins — leaving questions about the financial health and long-term viability of many of these loan providers. While some lenders are primarily focused on growth and market piece, others are scaling back growth expectations in order to pursue more profitable sales.

Many solar lenders are growing into additional verticals such as storage and home improvement to boost margins. GTM Research also assumes increased adoption of O&M by the end of 2018 after first-movers bring awareness of the product to consumers and different lenders become eager to meet the competition’s offerings.

According to Mond, 2017 was a record year for solar securitizations, with more than $1.4 billion in issuances (up from a cumulative $795 million prior to 2017). "Mosaic, Sunnova and Dividend Finance all issued securitizations for the first time, and the diversity in sponsors and products indicates an increase in investor comfort with space," said Mond.

While GTM Research anticipates Mosaic and Dividend Finance to continue to securitize as a way to raise capital (in addition to selling portfolios of loans), most other lenders prefer to finance themselves exclusively through portfolio sales, which can generate higher profits than securitization.Want to save and be guided by experts? Go to HahaSmart.com and try our price checker tool. It tells you how much solar power you need and how much you can save on your energy bills each month.