Aaron Gillmore, vice president of development with SolarCity, talks about the company’s solar lease program, plans to power military homes across the U.S. and why the company was unable to close on a federal loan guarantee.
Sharryn Dotson: We know SolarCity has signed some pretty big deals. You have the investment from Google. You also have the big deal that you signed with Walmart for the stores in California. What do you think is the appeal of your company that is getting these other big-name stores and companies to sign on with you?
Aaron Gillmore: I think that we are the only full-service company in this space. We provide financing, custom design for each project, installation, and monitoring and performance guarantees. The customers are really attracted to that. We’ve been able to attract a large number of customers. So if you’re talking about a company like Google and why they are attracted to that, we’ve proven our motto. We pioneered the solar lease, certain types of solar financing. We’ve been very successful at implementing that. Because when you can give customers the chance to pay more or less the same price for electricity as they pay for utility power, that’s something that they find very attractive.
Dotson: You mentioned your solar lease program. How did you come up with that idea and do you think that sort of system will be a game changer specifically in the residential solar market?
Gillmore: We introduced it in April of 2008, but we were working on it for quite a bit of time before that. We noticed in our initial work, especially in the residential solar side, that the upfront cost of solar was a major barrier to adoption, so there were a number of homeowners who could see that solar is a great investment. But we felt that there was another segment that, if we could eliminate the upfront costs and allow them to begin saving immediately, or saving sooner, that would make solar attractive to them as well. I think that’s what’s happened. Basically, solar financing, whether it be leasing or PPAs, makes solar attractive to a larger group of homeowners that otherwise wouldn’t consider it.
Dotson: Is this something that you think you may, in the future, want to branch out to larger-scale programs and still do the same type of lease financing or do you have something else set up for possibly larger-scale projects?
Gillmore: We do quite a few large-scale projects. Obviously, the financing options that Walmart and, most recently, King Estate, the winery in the Pacific Northwest that we recently announced; schools and universities, we have more than 100 schools and university customers; Intel, the financing options that they take advantage of are very, very similar to what we make available to homeowners. They have the chance to pay as you go for solar power, or to pay a lower monthly payment for solar power than they previously paid for electricity. We can make the same financing option and value proposition available to homeowners that we make available to large organizations like Walmart or schools and universities and vice versa.
To add to that, the homeowner not having enough capital up front to pay for the system and that makes them not want to do anything besides a lease or a PPA-type arrangement. The same can be true of corporations, of governments, of non-profits, those larger entities. Government and non-profits are a perfect example of those that don’t have tax liability or tax capacity. And so what we’re doing by keeping the ownership with us and with our investment partners is we’re taking advantage of the federal investment tax credits and accelerated depreciation in a way that the customer perhaps can’t, even if they have cash. So, it’s not only trying to find a way to get a cash-up-front solution for them, but it’s also, in many cases, a way to utilize incentives that are available to the federal government, tax incentives that a customer cannot get.
And just another example, a larger-scale project on the residential side, our projects with privatized military housing. We completed a project at Davis-Monthan Air Force Base in Tucson at its Soaring Heights private housing community, and that’s a 6-MW project that provides renewable power to hundreds of military families there. And we have a similar project underway at Joint Base Pearl Harbor-Hickam in Hawaii that will again be several hundred rooftop installations but is expected to provide power to 2,000 homes there.
Dotson: Just piggybacking off of that point, I know you guys recently had to scale down the Solar Strong project with the military housing. What is the new, revised plan for that? You mentioned that you had gotten some installed, but what is the ultimate goal for that plan now?
Gillmore: We plan to continue to move forward with the Solar Strong projects and, again, the first project is underway in Hawaii. So, we don’t have a – we’re not going to speculate yet on what that project looks like exactly going forward, but we do plan to continue to move forward with the projects.
Dotson: But how many states were you planning on putting it in now, or is that still a work in progress?
Gillmore: Essentially, we still have to put the projects together without the loan guarantee, and we still plan to do that, but we’re not ready to define the scope yet.
Dotson: About the loan guarantee, what happened? I know the Solyndra thing kind of hampered a lot of people’s ability to get the loan guarantees. What exactly happened in the process with SolarCity?*
Gillmore: We received the conditional commitment in early September. We expected to close by the (loan guarantee) deadline at the end of September. We do believe that Solyndra slowed down the process a bit and, essentially, we just ran out of time in working with DOE (Department of Energy) to get everything finalized before the deadline.
Dotson: Was that the only loan guarantee that you were working on?
Gillmore: Yes. But again, we’ve raised over $1.4 billion in project financing, including more than $700 million this year alone. It’s important to note that that project is still seen as a very strong credit project.
We’re very optimistic we’re going to be able to work that project with just private financing. Size yet undetermined in terms of specifics, but certainly looking favorable to still close that project.
*Editor’s Note: After this issue went to press, SolarCity announced private financing with Bank of America Merill for the SolarStrong program. Read our news coverage here.
Dotson: I don’t know if you have been keeping up too much with (SEIA President) Rhone Resch and others who say that the government needs to extend the 1603 tax credit and maybe implement other subsidies and other tax credits. Do you think that’s needed to help solar or do you think projects can move on and be funded without the help?
Gillmore: Well, you know, we are planning for an environment without the 1603 program. I think it’s critical that the ITC, which is in place until 2016 and has really encouraged everyone to invest in the solar industry and create jobs, I think it’s critical that that program stay in place as it is supposed to through the end of 2016.
But I think the entire industry is focused on reducing costs in line with incentive declines, and continue to make solar more affordable than retail electricity. We’ve hired over 500 people in the last 12 months, and we have around 150 to 200 openings that we’re hoping to fill before the end of this year.