Happy 2014 everyone. The deep freeze here in the Midwest is making me wish I was in California this week. By the way, how much better do solar panels perform when it is 15 degrees below zero? (Assuming they aren’t covered with snow?)
We’ve had several organizations ask us over the last few months about the returns for financing residential solar. Before we get there, however, let’s make sure we understand what’s included in the returns.
Essentially, there are only two places to earn returns in residential solar: from installation or financing. Installation (or “dealer”) businesses earn profits much like any contractor does, by finding customers and getting them to pay for an installation of equipment. Financing businesses earn money by investing money in solar systems up front and collecting fees over a long period of time.
Some companies, like SolarCity and Vivint, are vertically integrated in these business. Others, such as Sungevity, acquire customers and provide financing but rely on others to do installations. However, these variations don’t create new profit pools, they are just different ways of splitting up the profit pie.
We’ve discussed the profits in the dealer part of the business before. But how much profit is there in the financing part of the business? This depends on a few key factors:
