SolarCity Launches SolarBonds Offering Investors a 4% Return

Solar panels by SolarCity

SolarCity is the largest installer of solar panels for residential homes. According to their press release yesterday they provide one out of every three solar systems installed in the U.S. To date they have installed around $5 billion worth of solar panels in 15 states and the money for this has been raised from large institutional investors. Now, they are looking to do something different.

Yesterday, SolarCity announced the launch of Solar bonds. They intend to raise $200 million from individual investors in all 50 states. There are no minimum income requirements to invest – as long as you are over 18 years of age, have a U.S. bank account and can afford the $1,000 minimum investment then you can invest. Like most investments like this offered to the public there is a prospectus on file with the SEC where you can read all the details including the many risk factors.

An Unsecured Investment Paying 2-4%

For Lending Club and Prosper investors the returns on solar bonds will seem paltry. Here is the breakdown of loan terms and interest rates:

  • 1 year – 2%
  • 2 year – 2.5%
  • 3 year – 3%
  • 7 year – 4%

Keep in mind that these are unsecured loans to SolarCity, there are no assets backing these bonds. So, if you are looking at this as a purely financial transaction the returns are not very compelling. However, there are plenty of impact investors who are looking for a financial return while at the same time being socially responsible. According to this Forbes article published late yesterday on their first day there was very strong demand for these solar bonds from investors.

Even though this can’t really be considering p2p lending there is a direct link between this industry and SolarCity. Prosper co-founder John Witchel is also the co-founder of Common Assets a company acquired by SolarCity in December last year. Common Assets is providing the technology platform to make this solar bonds offering happen and Witchel is now the Senior Technology Architect at SolarCity according to his LinkedIn profile.

The Solar Industry is Growing Rapidly

Mosaic was the first company in this country to allow every day investors to invest in solar energy; I wrote about their platform back on January last year and have made a small investment myself. Mosaic focuses on refinancing large commercial solar projects but there have been no new investments available for me as a Colorado investor all year.

The prices for solar panels have come down considerably over the last few years and the industry is expanding rapidly. I know of one new startup looking to target an offering to p2p investors and I expect more will follow next year.

However, to get broad acceptance from the p2p lending community I think yields need to be higher. While there will always be a subset of investors who believe in solar energy for its environmental impact I don’t see the popularity of solar reaching Lending Club-type levels without higher yields.

  • Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.

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