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Solar financier SunRun pulls in money

Start-up, which helps finance residential solar installation, says decreasing the cost is key in spreading solar power beyond the niche audience of "deep green" homeowners.

SunRun, a company that offers solar-electricity financing, announced Tuesday that it has raised $12 million from Foundation Capital.

The San Francisco-based start-up is one of handful of new companies looking to make solar panels an easier purchase for consumers through financing.

Solar electric panels have a hefty up-front cost--between $20,000 and $35,000-- depending on the size, before rebates.

Although buyers will generally recoup the initial outlay in lower electricity bills in about 15 years, the high cost has restricted solar electricity to a niche audience, say solar industry executives.

Rather than buy the panels, SunRun customers buy the electricity the panels generate. This model, called a power purchase agreement (PPA), is commonly used in large corporate renewable energy installations.

Customers pay a "minimal" up-front fee and then lock into an electricity rate that is lower than the retail utility rate. The arrangement makes most sense in places where there are high electricity rates and relatively good incentives, like California.

SunRun owns the panels and provides maintenance. The company benefits from solar rebate incentives, which help finance the contracts.

Meanwhile, as these solar financing options take hold, the cost of solar panels is dropping regularly.

Experts forecast the cost of electricity from home solar panels will be the same as retail electricity rates--called grid parity--in many places in the U.S. within three to five years.