Wells Fargo & Co. has started offering solar power financing for homeowners, helping to spur a fast-growing industry that faces long-term issues with financing and affordability.
San Francisco-based Wells has broadened its home equity loans and lines of credit to cover home solar energy systems that cost $15,000 or more.
The financing is a test for Wells and runs through the end of the year. It started in October throughout Southern California.
Wells is believed to be the first big bank to offer solar financing.
Bank of America Corp. has dipped its toe in the water with a promotional pact with San Francisco’s Suntech America Inc., which promotes BofA home loans along with its solar panels.
Verengo Solar Plus of Orange is one of three Southern California solar panel installers working with Wells.
The company has been growing and expects to attract more business as Wells promotes its solar power lending, Chief Executive Randy Bishop said.
“It’s a great way to raise awareness,” he said.
Verengo expects to add nearly 200 workers in the next year as homeowners look to save money on energy bills by adding solar power. The company now employs about 75 people.
Wells is promoting solar lending in talks with customers and through brochures, branch banners and at 1,712 ATMs across Southern California, including 287 in Orange County.
For now, solar power is a small industry catering to businesses and well-to-do or environmentally conscious homeowners who can afford the high costs of installing a system.
Rebates and other incentives from the government and utilities are helping to spur rapid growth. Wells’ financing includes a $1,000 rebate for qualified borrowers
High costs and a lack of affordable financing have stymied wider adoption of solar power, according to analyst Brian Kremer, a senior research analyst who follows clean technology at Newport Beach-based Roth Capital Partners LLC.
“Prices need to continue to come down, which would make the product more appealing to a larger customer base,” he said. “(Financing) has become a much more pronounced issue during the recession as most homeowners no longer have home equity they can tap to finance solar installations.”
Smaller solar power systems can cost a few thousand dollars. Bigger ones easily can top six figures.
A typical system is around $40,000.
Getting a return on a solar power system takes five to seven years, according to Verengo’s Bishop.
OC is seen as a stronger market for solar power, since home prices have not fallen as much as in other parts of the state.
So far, alternative financing has dominated the solar industry.
Leases comprise more than half of Verengo’s business.
San Francisco-based SunRun Inc. finances leased solar power systems for Verengo costumers. Verengo installs the system, and SunRun buys it for the owner, who leases it back.
“The more legitimacy and credibility financing brings to the equation, the more consumers will feel comfortable with it,” Bishop said.
Customers are interested in solar but affordable financing has been a hurdle, said Rob Myers, Wells’ regional president for OC.
The company decided to test solar financing in Southern California because of the area’s affluent borrowers and eco-conscious residents, he said.
California made up two-thirds of solar installations in 2009, according to the Washington, D.C.-based Solar Energy Industries Association.
OC is among the top solar markets in the country, according to the association.
Verengo installs about 75 systems a month. Orange and Los Angeles counties account for about 80% of its business.
Wells estimates that Southern California Edison homeowner customers who install an average solar system can reduce energy costs by $40,000 in 30 years through its financing.
“We know there are a large number of households in Orange County with available equity,” Myers said. “Wells Fargo has an appetite for these types of deals.”
Interest rates depend on a borrower’s credit history, loan value and other factors. The best rate on credit lines has been less 5%, according to Myers.
“This is the first project we’ve done around solar energy on the consumer side,” Myers said. “We want to see how the pilot goes and evaluate the value to the customer. We’re not making any assumptions.”
Besides Verengo, Wells is working with Acro Energy Technologies Inc., which is based in Houston and has a sizeable California operation, and San Luis Obispo-based REC Solar. n
