SolarCity has signed a backup service agreement that should pave the way for it to issue securities backed by its solar assets in the future.

The company announced the agreement on Thursday but didn't name the company, except to say that the company is an "AA- rated [double A minus] financial institution." Lining up backup services is an important step for developing a market for solar-backed securities, said Nat Kreamer, CEO of Clean Power Finance, when I caught up with him last fall. Like SolarCity, Clean Power Finance also raises funds to finance installations and markets leases in which homeowners, instead of owning the solar panels on their rooftops, pay a monthly fee for the solar electricity from the panels.

A backup service provider would take over the billing, maintenance and other tasks if solar service companies such as SolarCity or Sunrun lost their ability to perform them. Backup service agreements are common in businesses that offer asset-backed securities, such as mortgages and auto loans, because they reduce investment risks. Banks and other investment institutions could require that backup service agreements are in place before they would fork over money or lower captial costs for borrowers. Credit rating agencies also want this type of agreement in place before giving their assessments of securities to be issued. 

SolarCity went public last month and has been working on issuing securities backed by its solar leases. Sunrun is doing the same.  Solar-backed securities are only just emerging at this time because the solar energy business has been growing quickly in recent years. The $850 million bond that Mid-American Energy issued last year to finance a solar farm in California was the first public issuance of a photovoltaic asset-backed offering in the U.S., Bloomberg reported. But that came from a major energy company rather than new entrants into the solar business that still need to convince potential investors that they will be around for a long while.

Issuing the securities, like mortgage-backed securities, will enable solar service providers to raise money. Doing so also will reduce their dependence on tax equity funds, which so far have enabled SolarCity to expand quickly. Tax equity funds refer to the pots of money that banks and other investors have created to finance solar energy system installations in return for getting the 30 percent federal investment tax credit. That tax credit will disappear at the end of 2016.

“We’re continuing to create enhancements to our investment funds that will attract new investors and expand the sources of capital for the rooftop solar business,” said Lyndon Rive, SolarCity’s CEO, in a statement. “Our backup servicing is an optional enhancement that further reduces investment risk by placing an AA- rated entity as a backstop to ensure the continued servicing of our solar power systems.”

Other efforts to make solar a dependable investment have been underway. Solar Mosaic, a venture-backed startup in California, launched its online service last week that allows the public to invest in its solar power projects for as little as $25. The company raised funds for its first three public projects in less than 24 hours and believes that it could deliver a 4.5 percent annual return for a 9-year term.