BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

Google and SunPower Join Forces To Fund Solar Homes

This article is more than 9 years old.

Google and SunPower said Wednesday they are going in on a $250 million fund to finance residential solar leases, in which homeowners pay for solar electricity rather than the solar panels on their rooftops.

Google plans to contribute up to $100 million while SunPower would fork over $150 million, the companies said.

The deal is, of course, a boost for SunPower's residential leasing program, which it launched in 2011. The San Jose, Calif., company, which is scheduled to discuss its first-quarter earnings tomorrow, has seen some nice growth through its network of dealers that market those leases and installation services, though this line of business has yet to contribute significantly to its revenues. About 20,000 customers in the country have signed SunPower leases, which run up to 20 years.

Google also isn't new to the market. The search giant has set up funds of at least $355 million for residential leases through SolarCity and Clean Power Finance .

Google is a big booster of renewable energy, inking wind power projects in areas where its data center operates and investing in solar power projects in the United States and abroad. Yesterday, the search giant said it had signed a contract with MidAmerican Energy to buy up to 407 megawatts of wind energy in Iowa.

The residential solar market has heated up considerably over the past year. Its solid growth -- this segment outpaced the commercial and utility segments in 2013 -- has started to attract more conventional electric power companies that produce power mostly with coal and natural gas.

Some of these companies, such as Edison International and NextEra, are not just taking a stake in companies that sell solar services to consumers and businesses. They also are buying solar companies so that they could get into the business themselves.

More intense competition in the residential market also has prompted a series of acquisitions by solar companies, such as SolarCity and Real Goods Solar, to improve their sales and marketing and speed up their installation pace.

While investors continue to pump money into residential solar lease programs, evidence shows that the pace of growth for this line of business is slowing.

Some solar companies believe the trend will continue as solar energy equipment becomes cheaper and more affordable for an outright purchase.  As a result, companies such as Mosaic have started to offer loans. SunPower also works with banks to offer loans. A set of solar panels typically runs tens of thousands of dollars. The average price of a solar energy system fell 15% during 2013 to reach $2.59 per watt in the fourth quarter, said GTM Research.