U.S. Bancorp Boosts Funding for SolarCity Projects

Sep.29.09 | About: U.S. Bancorp (USB)

By Ucilia Wang

The U.S. Bancorp (NYSE:USB) Community Development Corp. has roughly doubled a fund to $100 million in order to finance residential and commercial installations by SolarCity.

Bancorp announced the initial funding in June, and at the time the news was seen as a sign that investors were slowly regaining their appetite for project financing.

Foster City, Calif.-based SolarCity plans to use the $100 million to support its leasing and power purchase agreements with customers who prefer not to pay the upfront cost of buying and installing a solar energy system.

These financing models are fairly new, particularly for the residential market. It's difficult to assess their success as profit-making tools given that they are mostly offered by private and often startup companies such as SolarCity, which was founded in 2006.

What makes financing solar installations attractive to investors such as banks is the federal tax credit that is equivalent of the 30 percent of a project's cost. SolarCity also could apply for the cash equivalent of the tax credit from the U.S. Department of Treasury, which launched this cash grant program in July to provide speedier financing.

But so far, the program is benefiting largely wind energy developers such as Iberdrola (OTCPK:IBDRY).

Homeowners have a lot more choices for financing solar these days. Some of them live in cities that have programs that enable them to pay back the cost of buying a solar energy system as part of their property tax bill. The cities would issue bonds to finance the installations.