SunPower (SPWR 5.85%) has announced another financing option for customers, this time in Australia. The company is teaming up with Community First Credit Union to offer borrowers two loan options that can be used to buy solar systems. This is different from the leasing option that's prevalent in the U.S., but may be a sign that more financing options will become more readily available here and abroad.
Terms of the deal
The SunPower Solar Loan program is an unsecured personal loan, which I think will change to secured financing if loans expand to help lower costs. Borrowers can choose an introductory variable rate of 6.99%, or a fixed rate of 7.49%, for the first five years, and varying after that.
That looks expensive when compared to mortgage rates in the U.S., but Australia's mortgage rates are around 6%, so it's only about 1% over that right now. Variable rates are also more standard there.
What it means for homeowners
The reason loans may become more attractive going forward is that solar installation costs are dropping rapidly. According to GTM Research, the average installed price for a residential system is down 22% over the past two years, to $4.93 per watt. For SunPower's average system size of 8.2 kW, that's still a $40,000 installation, making leasing an attractive option for homeowners who don't have that kind of money laying around.
The picture changes if we project lower costs in the future, and look at areas that are already low cost. Texas averaged $3.55 per watt for residential solar in Q1 2013, and if we assume another 22% reduction over the next two years, the total system cost falls to $22,700, which becomes easier to justify for homeowners, and may make ownership with a loan more attractive than a lease because you would be able to keep not only the cost savings, but tax benefits, as well.
Loans won't make sense everywhere or for every homeowner, but the more financing options available, the better it will be for solar installers.
Are loans coming to the U.S.?
Solar loans are already available in the U.S.; they're just not as popular as leasing options right now. As I stated above, I think that dynamic will change as costs fall, secured loans are introduced, and homeowners see the value in capturing all of the benefits of solar.
Right now, Public Service Electric and Gas offers loans to its customers in New Jersey, Velocity Credit Union offers solar loans through Austin Energy, and there are many more options nationwide. SunPower is obviously interested in opening these doors in Australia, and I could see them making loans broadly available in the U.S., too. SolarCity (SCTY.DL) has been focused on leasing systems, but also sells systems to customers, and has offered loans for home efficiency, so they're a natural fit, as well.
The more options available to customers, the more viable solar will be for homeowners. We've seen that leasing can be successful in the U.S., and loans may be the next big thing for the solar industry. Look for SunPower and SolarCity to lead the way.
