Solar power costs falling as investors follow Google

Financing solar power projects in the US is becoming cheaper as more companies take advantage of a tax benefit that has attracted companies like Google Inc.

PHOTO: REUTERS

16 Apr 7:15 AM

[NEW YORK] Financing solar power projects in the US is becoming cheaper as more companies take advantage of a tax benefit that has attracted companies like Google Inc.

Investors can see returns in the range of 15 per cent to 19 per cent from transactions that fund renewable energy projects, Ted Brandt, chief executive officer of Marathon Capital LLC, said Wednesday at the Bloomberg New Energy Finance Summit in New York. Google last month made its biggest investment in renewables with a US$300 million tax-equity commitment to support at least 25,000 rooftop systems installed by SolarCity.

"These are high teens returns with very little downside risk," Mr Brandt said. "There's a lot of money sloshing around in the system looking for a home and tax equity is a good deal."

Companies with income tax liability can lower their payments to the government by investing in credits that back renewable energy projects. SolarCity Corp, the largest provider of solar panels for homes in the US, pays from 7 per cent to 12 per cent to investors who buy the credits, according to Brad Buss, the company's chief financial officer.

"Tax equity transaction costs are coming down," Mr Buss said in an interview at the conference. "We're at a size now where we can say this is the standard, this is what we do."

Competition among investors will help bring costs down "a couple points" by 2017, Mr Buss said. In the past, tax-equity deals were provided by a handful of large banks.

"We're trying to make it very easy for more corporations and regional banks to get involved," Mr Buss said.

BLOOMBERG