Here come the solar tech financiers

Start-ups are using software and financing to try to crack open the big residential market for solar power.

Joseph Brakohiapa is thrilled to hear about how scientists are making solar cells more efficient at converting light to electricity. But he'd much rather be making a sale of solar panels.

Brakohiapa is the CEO of Clean Power Finance, one of a growing number of young companies that are spending their brain power on software and financing, rather than photovoltaics.

On Friday, his company announced a deal with German solar panel manufacturer Conergy, which will recommend Clean Power Finance's Web-based software tools and financing options to Conergy's network of distributors in the U.S.

Clean Power Finance was started by Gary Kremen, a serial entrepreneur known for having purchased popular domain names including Sex.com.

The founding idea behind Clean Power Finance, SolarCity, Sun Run, and other solar financing upstarts is that purchasing solar panels should be like deciding on a car lease.

That is, the math should be straight-forward: if you can save money on your monthly electric bills, then it makes sense.

Green pitch
Right now, buying solar panels is not an easy financial decision because of the large up-front costs--on the order of $20,000 to $35,000 before tax credits and rebates.

That means that rooftop solar installations are mainly going to "green" consumers, or corporations that can get beneficial long-term financing terms.

The problem is that many of those green consumers already have panels, Brakohiapa said.

"For the industry to continue to grow in the residential space, we have to appeal to the mass market and find ways for the everyman to step into solar and get the benefits," he said. "At some point, it's going to be difficult to convince people to make large investments simply based on the fact that it's green."

SolarCity is taking essentially the same tack with its solar lease program that it introduced to a handful of states earlier this month.

When customers choose to lease the equipment, they can expect the money they spend on energy per month to go down, according to company CEO Lydon Rive. They also have the option of purchasing the equipment at a certain point.

Clean Power Finance's is trying to develop lease program that would appear nearly the same to consumers. Right now, it offers loans to consumers through banks either based on their credit rating or secured by a mortgage.

Another financial product is a residential power purchase agreement , which means that consumers buy the electricity from the panels at a pre-determined rate--the same structure typically used by corporations.

CRM for solar guys
In addition to financing, Clean Power Finance has written what is essentially a version of Salesforce.com tailored for solar installers.

The hosted application keeps a database of state tax incentives, the electrical production information of panels, and utilities' electricity rates. Using it, installers can generate an accurate proposal that includes financing options.

Another start-up using Web-based software to speed up the sales process is Sungevity, which has a program for allowing people to quickly get an estimate on a solar installation using satellite data.

In general, solar installers are more technical and don't have the sales and marketing skills to close deals when they have consumers' attention, Brakohiapa said.

"Solar is still a technical sale. Installers are more comfortable talking about kilowatts but the consumer really isn't there," he said. "Tell me that if my monthly payment to the utility is $500, I can get it to $450. Then I'm in."

Tech to the rescue?
Solar start-ups garnered roughly $1 billion in funding last year to develop more cost-effective solar cells . Experts expect that the economies of scale in manufacturing will bring solar module prices down, too.

Many solar cell manufacturers are targeting utilities first for solar power plants or corporations but expect to eventually sell to consumers. Nanosolar CEO Martin Roscheisen this week said that a " fabulous residential solution " is in the company's near-term plans--in parallel to bringing the cost of solar down to $1 per watt.

That technical progress should aid companies developing software tools and financial products because it brings solar power closer to "grid parity," or the same price as fossil fuel electricity production.

The emergence of in-home displays that show consumers how much electricity they consume--and potentially generate with solar power--can make energy consumption more palpable for consumers than monthly bills.

But companies trying to make solar mainstream through better sales efficiency and financing still have a long way to go.

Solar is still a relatively small market and finding installers in a given region can be a challenge for consumers. The credit crunch--and down economy, in general--has put a damper on matters, making lenders more conservative.

But Brakohiapa expects that Wall Street lenders will eventually get into the solar residential market. They already participate in financing corporate solar installations through companies like SunEdison and SunPower, which signed a deal with Morgan Stanley.

"Some investment banks are realizing that they can reach consumers and they can start investing in energy portfolios," he said. "Over time, we are going to see more players in the financial space."

Clarification April 28 10:30 a.m PT: Clean Power Finance does not yet have a leasing program or residential power purchase program for solar panels. The text has been changed to reflect their current offerings.

 

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