Ten years ago, it seemed impossible that solar power on rooftops would become a widespread reality. Today, the question is why it's not growing faster. Companies such as Sunrun, Clean Power Finance, SolarCity (NASDAQ:SCTY), and SunPower (NASDAQ:SPWR) are all leading the charge in growing solar leasing for rooftops, blowing to top off the traditional energy model. The biggest hindrance is consumer awareness at this point. 

Solar leasing has a big impact on utilities, customers, and financiers and today I'll focus on how installers, banks, and even utilities are looking at solar financing.

The utility scale boom
The current growth in residential solar wouldn't be possible without SunPower and First Solar (NASDAQ:FSLR) first proving the efficacy of solar on a large scale. The two companies have built hundreds of megawatts of projects over the past decade and have proved that you can model the output of solar power and turn it into an investable asset. Projects of 25 MW+ are still the biggest driver of installations in the U.S., and they're financed very much like mortgages or a depreciating assets. 

In utility-scale projects, the numbers get big very quickly. Berkshire Hathaway's subsidiary MidAmerican Energy just announced $1 billion in financing for the SunPower build Antelope Valley solar projects, now known as Solar Star 1 and 2. The notes are similar to a mortgage, paying 5.375% interest an amortizing semi-annually. 

Bonds or notes are an easy way to finance big projects like this, but for investors, the future is in residential and commercial solar. And that market has taken a lot more creativity to unlock. 

The solar lease is born
SunRun offered the first U.S. solar lease in 2007, revolutionizing the way we thought about energy. No longer was solar power an endeavor that cost tens of thousands of dollars; it was a possibility without a big investment from homeowners.

For consumers, the solar lease of today usually comes with zero down and a set rate for the energy sold to the utility through net metering or a power purchase agreement. This rate is usually lower than the cost of power from the utility, so for consumers it's a way to save cash with no money down.

The model installers use is different and varies from company to company, which means the lease risk is different for each company.

Boots on the ground
Outside of SolarCity, none of the major financers owns a solar installation business. Instead, they partner with local installers to do the heavy lifting and they provide the financing that makes an installer's business go.

SunPower has taken the approach that bigger is better. It has thousands of dealers worldwide and 400 in the U.S. offering its leases and sales to customers. SunPower provides the financing, monitoring equipment, and software, and then pays the dealer for their installation and other lease-related services.

Sunrun is very similar, except it has a smaller network of 35 installers and doesn't make its own modules. It, too, offers software and other back-office services to installers to assist in the sale process. Sunrun, SolarCity, and SunPower use primarily equity financing for projects, which means they take the risk that modules will go bad or underperform expectations 10, 15, or 20 years down the road. This is key for investors, because that's when the most value will be generated.

Clean Power Finance is a software and financing company that works for a fee and doesn't own the financing, lowering its operating risk. The company will offer white-label financing so installers can look like they're offering their own branded financing.

SolarCity is the only company to do all of the above. It doesn't manufacture modules but it designs systems, sells them, lines up financing, and services the installation. 

The big difference between the models is where the incentives lie. Clean Power Finance is about getting financing deals done, SolarCity and Sunrun have incentives to install quality installation but no module alliance, while SunPower provides modules as well, locking it into an upstream product. In the end, the leasing product they offer is very similar; it's just that the modules will be different. 

The money
The big change over the past six years in solar has been the involvement from financiers. Bank of America, Goldman Sachs, Wells Fargo, and many others are now lining up to offer hundreds of millions of dollars in equity financing for distributed solar. They get a quick payback with little risk and a tax writeoff to boot, and the leasing company is able to finance its product. Everyone wins. 

So, how will solar financing change in the future?

The future of solar financing
For the time being, I think the current leasing model will remain as is. Banks are offering plenty of funding, and leasing companies are rapidly building out their business models. 

In utility solar, I think the current wave of giant utility-scale projects will be the last we see in the solar market for the next few years. Instead, the industry will focus on residential and commercial projects and potentially open up new financing options.

The first change will probably be securitization of solar assets. SolarCity, SunPower, Sunrun, and Clean Power Finance are all in the running to securitize solar, and we may see the first wave this year. Securitization could involve splitting off tax equity components, renewable-energy credits, monthly payments, and long-term assets. According to Sunrun CEO Edward Fenster, there are "lots of smart people" on Wall Street trying to figure out how to split solar assets in the most efficient way possible, and I think we'll see this sooner than later.

The next phase could involve opening up MLPs or REITs to the solar industry, something Congress has discussed in the past. If that happens, we may see solar developments traded publicly, and SolarCity or SunPower could push assets down to a REIT or MLP, the way oil and gas midstream companies do today.

Wall Street and Main Street are both opening up to solar, and with so much potential for the industry, investors will find lots of new ways to finance solar. That's good for upstream and downstream companies that count on low interest rates to make solar viable. 

Fool contributor Travis Hoium manages an account that owns shares of SunPower. He also owns shares of SunPower and has long January 2015 $5, $7, $15, and $25 calls on SunPower. The Motley Fool recommends Bank of America, Goldman Sachs, and Wells Fargo and owns shares of Bank of America and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.