By Ucilia Wang
The deal, which marks the thin-film company's entry into the residential market, calls for Tempe, Ariz.-based First Solar to deliver 100 megawatts worth of solar panels to SolarCity over five years beginning in the first quarter of 2009.
SolarCity, based in Foster City, Calif., installs solar-power systems on residential and small commercial properties in California, Arizona and Oregon. The company also offers leasing options, paying part of the upfront cost of a system, which could set homeowners back roughly $30,000.
The $25 million in funding is part of a $30 million round the company raised, with investors including JP Morgan, Draper Fisher Jurvetson and DBL Investors. The round brings SolarCity's total capital to $56 million.
First Solar announced the deal the same day it is due to release its third-quarter earnings after the market closes. In recent trading, First Solar shares rose nearly 10 percent to reach $124 per share.
The thin-film maker's entry into the residential market – and its interest in SolarCity – is perhaps not surprising. Its CEO, Mike Ahearn, complimented SolarCity at the Solar Power International conference in San Diego two weeks ago during a panel that also included SolarCity CEO Lyndon Rive.
Speaking about the residential solar market, Ahearn said it wasn't far from being cost effective and efficient.
"You still have to be an enthusiast and get it done," he said. "SolarCity has done a better job than most."
Both Ahearn and Rive expressed concern that consumers might have trouble evaluating goods and services when the market is so new and new installers are popping up quickly.
"If you look at the warranties today, it will be difficult for consumers to understand where there is a claim proven and who's responsible," Ahearn said. "You can get wide-spread disappointment over time, and it will come back to bite us."
Some industry insiders expect the residential solar market to grow rapidly as a result of a recently passed federal tax credit, which can make a solar-energy system 30 percent cheaper (see Lawmakers Approve Energy Tax Credits, Bailout).
Residential solar installations may also see a boost from states and cities that are setting up their own incentive programs. San Francisco and Berkeley both set up financing programs this year that will make buying and installing solar energy systems more affordable for residents and businesses (see Berkeley to Launch Solar Financing Program and San Francisco Solar Incentives Become Official).
But whether more consumers will spend money on solar during the economic downturn remains to be seen (see Solar Mergers: Guarding Against a Slumping Economy).
SolarCity launched its residential leasing program in April 2008. By July, one of its executives said revenues from the program had surpassed all sales from 2007, when the company brought in $29 million in sales (see SolarCity Sees Sales Spike).
While the partnership with SolarCity marks First Solar's first announced deal with a residential installer, it's not its first foray into installation. First Solar in November acquired Ted Turner's company DT Solar, which installs commercial solar projects, for $34 million.