Citigroup on Monday said it would create a tax-equity fund to finance the installation of $50 million worth of residential solar systems bySungevity, a fast-growing California startup. The move follows a $105 million fund Citigroup launched three weeks ago for SunPower, the Silicon Valley photovoltaic panel maker and developer.
The tax-equity fund for Sungevity will boost the Oakland company’s expansion to the East Coast by financing residential solar leases. Such leases allow homeowners to avoid the steep upfront costs of going solar – a typical rooftop array can run $30,000 or more before tax breaks. Instead, they pay a monthly fee over a 10 or 20-year contract in exchange for the electricity the solar systems generate.
The federal government gives the owner of the solar array a 30% tax break. Since startups like Sungevity typically have no use for such tax credits, they assign them to financiers like Citi in exchange for funding the solar leases. Citi joins U.S Bancorp and non-bank companies like California utility Pacific Gas & Electric in creating solar tax equity funds.
That solar lease financing innovation has spurred an explosion in residential solar installations by Sungevity and rivals such as SolarCity and SunRun even as the economy has sputtered.
For Sungevity, the Citi fund will also help support a recent deal with home improvement giant Lowe’s, which will host kiosks in its stores to allow customers to go online and price and preview solar systems for their homes using Sungevity’s satellite imaging technology. SunPower, meanwhile, last week announced a partnership with Ford to sell solar arrays to buyers of the company’s forthcoming electric Focus model.