Solar Loans Take Lead Over Leasing

US residential solar finance update: H1 2019

May 2019 (Wood Mackenzie)

“…Solar loans now claim a 45 percent share of the residential market, while third-party ownership (TPO) has fallen to its lowest point since 2011 at a 33 percent market share…[and] Mosaic maintained its position as the top solar loan provider last year, claiming a quarter of the loan market…[The ITC stepdown is expected to] give TPO providers an edge in the early 2020s and likely foster increasing competition in the solar loan market as loan structures simplify…Last year’s stagnation in the TPO market can be attributed largely to Tesla’s changing customer acquisition tactics, which led to a decline of overall installation volumes in 2018…The rise of smaller solar installers worked in favor of loan providers in 2018 as those local installers turned to loan providers for consumer financing…

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Other sources of consumer finance are usually unavailable to those installers…Strong residential solar growth in Texas and Florida last year also played a part in the relative ascent of solar loans, as third-party-ownership is currently limited in those states…The growing solar loan industry is characterized by very thin margins. Lenders felt pressure to raise prices incrementally last year, with some eliminating low interest products or raising dealer fees. Some solar loan providers are also expanding into verticals such as storage and home improvement where margins may be higher…[Though the elimination of the ITC will boost leasing, solar] loans will also become simpler, enabling traditional commercial banks to offer direct to consumer loans…Dedicated solar loan providers will likely still have a competitive advantage…[because] of large installer networks…” click here for more

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