If you to want to install solar panels on your roof but haven’t yet because it’s too expensive, Google really wants to help.
The search giant, valued at $370 billion, is once again boosting its investment in SolarCity’s residential solar power model by $300 million, both companies announced Thursday. Combined with a new financing structure from SolarCity, the companies say this will result in a new fund worth $750 million to help install distributed rooftop solar on homes across the country.
That’s the largest investment in such a fund ever, according to SolarCity. It means “roughly 25,000” new solar households and about 500 megawatts of new capacity, SolarCity spokesperson Jonathan Bass said in an interview.
“Whenever you have a company of Google’s stature get involved it’s significant,” Bass said.
At the end of 2014, SolarCity had 190,000 customers and one gigawatt of deployed production, according to its letter to shareholders, so this fund means a significant bump.
Here’s how it will work for the average person. The first step is you need to own a home. Then you work with SolarCity to design a customized system for your particular roof. They look at past electric bills and the rate charged by the utility, and guarantee a lower rate that locks in a lower monthly payment. For instance, if your normal monthly bill is $200, it could drop to $60 after the installation, plus $100 in the monthly solar rental, yielding a new average monthly bill of $160. Google’s initial investment pays for the system outright through a lease or power purchase agreement. You do not have to pay for the design or placement of the panels SolarCity installs and then maintains throughout the life of the lease.
Once installed, the panels generate renewable, clean electricity, feeding the grid mostly during times of the day where demand is high. The homeowner pays the lower monthly electricity rate, not worrying about rising utility bills or extra carbon pollution. Google and SolarCity pay to maintain the panels because they own them. Both companies pocket the income brought by sale of the power to the utility through net metering, as well as federal and state renewable energy tax benefits. At the end of the lease or rental term (usually 20 years), much like an automobile, you have the option to buy the system back, set it up as a loan, or let SolarCity take it back, no charge.
So while it is likely a better deal to pay for your own solar installation, earn the tax credits yourself, and begin saving money on electricity and try to make some selling extra back to the utility, not everyone can afford the initial price tag, which typically runs north of of $10,000.
“Investment in this model allows us to offer solar to a lot more customers,” Bass said. “We continually raise these funds, and the symbolism here is the fact that we can raise $750 million shows the demand for this service.”
In fact, he deemed it “the democratization of electricity.”
Making solar energy an option for a much broader consumer base is great for companies like Google and SolarCity who will earn a tidy profit through more billpayers offering up their roofs. But it can also be great for consumers who can get clean solar energy, for cheaper than traditional sources, without paying for or installing anything. And it can even work out well for utilities, who start to see their demand curves drop during times of the day when the grid all the power it can get.
This is SolarCity’s model, and Google has joined up before. In 2011, Google made its first foray into the residential solar market with a $280 million investment in a fund with SolarCity. It generated such a return on investment that they’re more than doubling down.
Thursday’s announcement, however, signaled the largest investment in a fund like this Google or any other company has ever made. The first $300 million comes from Google, and unlike the structure the two companies set up in 2011, SolarCity will contribute $450 million in debt financing (one of many funding structures the company uses to lower the cost of capital), leaving the total boost at $750 million. Banks are the typical investor in SolarCity’s model (such as a recent $200 million investment by CreditSuisse), so Google’s first step into this partnership was fairly revolutionary. Thursday’s announcement further cements Google as a major player in the renewable energy business.
Google may have stopped its renewable energy research efforts, but recently it has upped its already significant investment in the industry with moves like powering its headquarters with wind energy from NextEra.
“We’re happy to support SolarCity’s mission to help families reduce their carbon footprint and energy costs,” Sidd Mundra, Renewable Energy Principal at Google, said in a statement. “It’s good for the environment, good for families and also makes good business sense.”
SolarCity operates in 14 states and D.C. as of now, each of which is friendly to net metering — the utility option that allows homes and businesses with solar energy to sell excess power back onto the grid. Bass said they employ around 9,500 people, and have been adding 300–400 jobs per month. SolarCity has been installing one out of every three solar power system in the United States.