Now that the cost of building a solar system is competitive with the cost of electricity from the grid, one of the challenges is financing billions of dollars worth of solar projects. First Solar (NASDAQ:FSLR) and SunPower (NASDAQ:SPWR) paved the way for debt financing when they sold bonds for utility-scale solar projects and, in recent years, SolarCity (NASDAQ:SCTY.DL) has expanded lease financing by partnering with banks and other institutions to offer leases with $0 down.

A solar community with panels from SunPower, which offers loan, lease, and cash sales for systems. Image courtesy of SunPower.

I think that the next phase of the financing evolution will be through solar loans. As the difference widens between the cost of electricity from the grid and power from solar systems, homeowners and commercial building owners will want to own the revenue-generating asset rather than hand the value over to a SolarCity or SunPower. But to do so, they need to have a way to finance the upfront costs in an economical way.

Enter RGS Energy and Mosaic
Wednesday, RGS Energy (NASDAQ: RGSE) and Mosaic announced a partnership that will bring loans to the residential solar market, as well as the opportunity for individual investors to provide financing. RGS Energy is one of the largest residential solar installers in the country, and offers leases, loans, and cash sales, while Mosaic is a financing company that allows investors to put as little as $25 into financing a solar project. It's crowdfunding for solar; for more on the company, you can see my write-up here.

A solar home community with installations by SolarCity, which primarily uses leases to finance projects. Image courtesy of SolarCity.

The Mosaic Home Solar Loan will allow individuals to finance projects, and can even incorporate the solar tax credit into the payment process. Depending on the project, there may not even be a down payment for the solar project. The advantage over a lease is that the homeowner keeps any upside or profit from the project and owns the system, unlike a lease, where the third-party owner keeps the upside.

Initially, the financing, like Mosaic's other offerings, will begin in California, where the company has regulatory approval to offer financing and crowdfunding investments. But that will likely expand quickly around the country in coming years.

I'll also note that this is somewhat similar to the recent announcement from SolarCity that it will allow individual investors to fund solar projects, but this is a loan financing option, not financing lease payments the way SolarCity would structure a deal.

Different ways to look at solar
The differentiation between solar installers is starting to emerge, with RGS Energy and SunPower offering a range of options from cash to loans to leases for consumers. SolarCity has explicitly stated its goal to own the system through leases, and actually runs a negative margin on the projects it does sell.

I think the more diverse route is going to play better long term; I predict that loans will play a larger role than leases long term. It's going to be appealing to own a solar system that saves you money long term rather than giving that value to a third party.

At the very least, the offering from RGS Energy and Mosaic opens up new financing options, and that's good news for the future growth of solar.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.