Newly minted Spruce Finance, the result of a merger between Clean Power Finance and Kilowatt Financial, has received $175 million from U.S. Bank for solar financing.
After finalizing the merger in December, the new entity (originally slated to be named Elevate Power) will provide financing for residential solar, water conservation and energy efficiency. Solar financing is available in 18 states, and water and energy-efficiency project finance is available in all states.
“’Elevate Power’ ended up being too specific,” said Nat Kreamer, CEO of Spruce Finance. “We finance so much more than just power.”
The funds from U.S. Bank’s U.S. Bancorp Community Development Corporation will be spent on financing residential solar in 2016. But the goal is to support more holistic solutions moving forward.
“If a consumer wants to go solar but also needs a new roof or wants to put in LED lights, the classic solar guys can’t do that,” said Kreamer. He noted that solar companies are starting to offer efficiency upgrades, and vice versa for some home improvement firms. By expanding product offerings, Spruce hopes to help its growing list of some 400 channel partners create stickiness with customers.
“With about half of U.S. residential solar now installed by vertically integrated companies, there is growing pressure on partner-model financiers to compete for the business of the remaining installers,” said senior solar market analyst Nicole Litvak. “This merger was likely an effort to reduce this competition by consolidating installer networks, as well as financial products.”
FIGURE: U.S. Residential Solar Market Shares by Financier
Source: GTM Research
Note: The market shares above account for all systems financed by the companies listed. ‘Rest of residential market’ includes other financiers and all cash purchases.
Spruce, which combines Kilowatt’s credit analysis expertise with Clean Power Finance’s financing platform, faces growing competition from other partner-model financiers such as Sunnova and Mosaic, notes Litvak.
The extension of the federal Investment Tax Credit in December will affect utility-scale solar the most, but Litvak said it also has implications for Spruce and its competitors. The local installers that work with firms like Spruce would have been the hardest hit by the tax credit reduction. The extension should also help to open up new state markets, she added.
Even with the surety of the ITC, net-metering policies are being challenged and rewritten in various states. Kreamer said that the home improvement business also insulates Spruce from some of the risk of changing solar policies.
The two merged companies have raised more than $2 billion and have worked together since 2012. In 2014, Kilowatt Financial deployed $250 million in residential solar through Clean Power Finance’s platform. Spruce will have more than $1.6 billion in project and loan financing under management.
“CPF and KWF were unique business models that solved different problems in the marketplace,” said Dan Oros, a partner with Kleiner Perkins Caufield & Byers, which has invested in both companies. “Over time, the products they developed converged on the same end goal: enabling consumer choice for home utility upgrades.”
Spruce is already working on new products for its channel partners, and one immediate goal is to make sales more straightforward for customers. People just want to spend less money on their utility bills, said Kreamer. “We have financing for them to save money on their entire suite of utility bills.”
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