Innovations in rooftop solar system financing may be driving the growth of solar more than anything except, possibly, Chinese government subsidies. But China’s subsidies are unsustainable, if not illegal, while financing advances like the just-announced Clean Power Finance (CPF) partnership with Vivint Solar are transforming the industry.

The basic idea behind CPF, explained CEO Nat Kreamer, is “to connect the capital market with the solar market.”

Backed by a group of the biggest names in greentech venture capital, including Kleiner Perkins and Google, CPF is a business-to-business service in the form of a software tool that allows solar installers to make financing available to system buyers.

“We started selling financing for solar systems in April 2011,” Kreamer said, "and by August 2011, we were financing more than a million dollars a day of residential power purchase agreements and leases.”

By adding Vivint Solar as a partner, CPF took another step forward. “It shows how this market is advancing very quickly that you’re having players like Vivint come into it,” Kreamer said. “This is a trend of companies that have been very successful in other markets that are bringing that success to the solar market.”

Vivint began as APX Alarm Security Solutions Inc. in 1999 and expanded into home energy management automation, and then, six months ago, into solar installations.

“Vivint has built a tremendous base of something like 600,000 customers,” Kreamer said. CPF’s part of the deal, he added, "is to provide them with a variety of finance products that they can use to sell more solar.”

In the short time that Vivint has been in the solar installation business, it has won $ 75 million in financing from U.S. Bancorp and made itself, Kreamer said, “one of the largest U.S. providers of solar.”

In Vivint’s first six months, “our run rate is ramping toward 3,000 to 5,000 installations per year,” said Vivint Solar President Tanguy Serra. Based on its current annual 150,000 home system installations, Serra said, Vivint’s goal is 150,000 yearly solar installations. “But that level of financing for solar doesn’t yet exist,” he explained. “That’s why we’re partnering with CPF.”

“To them, 150,000 customers doesn’t sound like a lot,” Kreamer said. “To the rest of the solar industry, it does. But it shouldn’t. That’s what Clean Power Finance is all about.”

Because of the specific federal, state and local incentives that apply to solar financing, the CPF backing will not be used in Vivint’s other businesses. Although such a convergence will likely come eventually, Kreamer said, “You can’t blend the two products right now.”

But in building the kind of customer base Vivint has, Kreamer said, “you learn something about how to do high-quality installations fast. Vivint has taken all of that knowledge, those same systems and technology, and applied it to solar.”

Vivint Solar uses Enphase Energy microinverters and Zep Solar mounting systems, but it is not rapid construction at which Vivint excels. “One of the holy grails when you think about consumers,” said Kreamer “is instant gratification. They figured out that instant gratification is getting to that install as quickly as possible.”

Because CPF’s software tool was built to be flexible, Kreamer said, Vivint will be able to use the CPF white label software for the solar part of its business while maintaining its own IT systems for security and energy management.

Serra echoed Kreamer. “We have invested $ 40 million in the last 10 years in IT systems,” he said. “The relationship is around integrating our work flow into their financing process.”

Estimating an install at roughly $ 35,000, Kreamer said, the lowest projected Vivint volume of 3,000 installs per year would require $ 105 million per year. That would be in addition to the $ 1 million per day, or $ 300 million per year, of its funders’ money CPF is already putting into solar.

“We have enough capital to meet our customers’ present demand and their future demand for some time,” Kreamer said. Investors “want to put their money to work and this is a great asset class so we have a lot of capital interested in working with us,” he explained. “People who own homes pay their electricity bills,” Kreamer said, which means “there is low likelihood of default, and investors like that.” Default rates, he said, are lower than default rates on AAA bonds.

Rooftop solar, Kreamer said, is a low-risk, high-reward investment in what is essentially a long-term asset. In addition, with the federal Investment Tax Credit (ITC) available through 2016, as much as 45 percent of an investor’s capital outlay comes back as a tax benefit in the first year of the loan. And the overall return on investment in residential solar is “anywhere from the high single digits to the mid-teens.”

CPF, Kreamer said, has ample capital, and adding a customer like Vivint means there is “deal flow” for the capital. Then, alluding to “good news coming” that he could not yet talk about that will expand CPF’s resources, Kreamer simply said, “we’re not throttling back on our deal flow,” adding that Vivint is ”ramping its business at the same time we’re ramping our capital.”

“We’re seeing hundreds of millions and billions of dollars come at this sector,” Kreaemer said, “and a partnership like this one just makes it more attractive.”

Go Green

CPF was founded in 2007 as an online tool to connect solar buyers and sellers with financial products and help them design solar systems. By 2010, it had 800 solar businesses, including marquee names like Suntech, BP Solar and Real Good Solar, as customers. Forty percent of all residential and small- and medium-sized commercial solar sold used the CPF software platform.

White-label financing in the software package offered solar business customers the ability to make available, under their own brands, the full range of financing options to solar system buyers, from leases and power purchase agreements to loans and tax credits.

“The company worked for four years to develop the software,” Kreamer said, “and grow its customer base.” While perfecting its tool “to design, quote and propose solar,” the company was accruing an enormous database, from the price and amount customers pay for electricity to the cost and performance of their solar systems.

As a result, Kreamer said, “we really get solar, we really get software, and we really get finance.”

Equally importantly, Kreamer said, the CPF deal flow is voluminous.

In December 2010, with backing from Kleiner Perkins Caufield & Byers and Google Ventures, as well as Claremont Creek Ventures, Sand Hill Angels, and Clean Pacific Ventures, Clean Power Finance added solar financing to its CPF 2.0 software tool.

“We remained in stealth mode through summer 2011,” Kreamer said, while perfecting the software and securing “third-party investors who wanted to 100-percent own residential solar systems and offer power purchase agreements and leases.”

With the tool, the money and a marketing team in place, “We started selling financing for solar systems in April 2011,” Kreamer said, and “by August 2011, we were financing more than a million dollars a day of residential power purchase agreements and leases.”

By comparison, Kreamer noted, SunRun, which he founded and which is one of the giants of solar finance, “took years to get to a million dollars per day.” CPF is a B2B play, while SunRun, Sungevity, and SolarCity reach out to the end customer. Other firms are reaching out to roofers.

CPF also went, between April and August, from having the 800 customers it won between 2007 and 2010, to 1,400 customers.

But CPF, Kreamer said, is just getting started. The software is used in 50 states, but the financing is only in use in California, Colorado, Massachusetts and New Jersey (though a project is also pending in Arizona). But there are 45 states left, which explains why Kreamer said CPF has no present plans to expand internationally.

On the recent China trade war and Solyndra controversies, Kreamer noted that CPF customers’ 2011 volume is up 40 percent over 2010. “That means the market is growing despite negative press.”

There are two key reasons for the success, Kreamer said. Because CPF’s model is B2B, the acquisition of customers costs less, resulting in more competitive financing terms. And because CPF has no ownership of the systems it finances, it can operate on a lower rate of return, again lowering the cost of capital to consumers and installers.

CPF was able to attract capital in the current economic climate for two reasons: because their voluminous deal flow promised to put investors’ money to work, and because, Kreamer said, “residential solar as an asset class is a really attractive investment.”

Financing solar, Kreamer said, “is refinancing someone’s electricity bill.” He added that “solar ends up being a great deal for consumers. They save a lot of money.” In addition, Kreamer said, “It turns out people pay their electricity bills and people who own homes do so even more consistently. So there is low likelihood of default, and investors like that.”

With the federal Investment Tax Credit (ITC) available to system purchasers through 2016, as much as 45 percent of an investor’s capital outlay comes back as a tax benefit in the first year of the loan. Kreamer said the overall return on investment in residential solar is “anywhere from the high single digits to the mid-teens.”

Proof that solar systems financed through CPF 2.0 provide the claimed 10 percent to 50 percent utility bill savings, Kreamer said, is that it has attracted so many new customers and so much money in such a short time.

The low-risk, high-reward value to investors of what is essentially a long-term asset, Kreamer said, is also substantiated by reports that default rates on solar financing (“20 basis points per year”) come in below default rates on AAA bonds ("0.33 points per year”).

Caltech’s Nate Lewis, one of the nation’s leading solar researchers, famously pointed out to The New York Times’ Tom Friedman that buying a cell phone in 1992 was worth almost any price because it offered something otherwise unavailable — but buying solar panels to generate electricity does not have that kind of substantial added value.

Nat Kreamer said Clean Power Finance’s new financing model has the potential to “change the paradigm and make solar a lot more like cell phones.”

“Solar is sold, not bought,” Kreamer said. “But when you refinance someone’s electricity bill with solar, you’re giving them more money. Who doesn’t want that?” With solar, he added, “you get to save money and you get to do a really good thing. How many times do you get to do that?”

Go Green

The firm just received a $ 75 million fund from Google to pursue that goal and finance residential solar projects.

Google has invested more than $ 850 million in renewable energy and comes fresh off of creating a $ 280 million fund to finance residential solar projects with SolarCity in June of this year. That fund is SolarCity’s largest project financing fund and the largest residential solar fund created in the U.S.

Kleiner Perkins and Google Ventures made a significant investment in solar SaaS firm Clean Power Finance (CPF) late last year and just recently provided $ 25 million for the firm. Until that time, CPF's business was providing a standardized software tool that lets solar panel installers speed up the sales proposal, rebate, and lead generation processes. Previous investors have included Claremont Creek Ventures, Clean Pacific Ventures, Sand Hill Angels, and clean tech investor Gary Kremen.

Kremen, even before Clean Power Finance's Sept 2006 incorporation, had asked publicly, "Why can't buying solar be like buying a car with POS [point-of-sale] financing? Solar is in roughly the same price range — you should get credit at the same time you make the purchase."

Unlike SolarCity or SunRun, according to CleanPower Finance, CPF "doesn't want to be branded in the entire equation." They'd like to consider themselves a "white label company" where "the integrator owns the customer."

There are a few big names in residential solar leasing — SolarCity, Sungevity, and SunRun. (SolarCity has their own installers; SunRun and Sungevity work with a network of installers.)  There are also other, smaller residential solar leasing firms such as Solar Universe, Ontility, SunPower, SolarCraft, Sun Edison, CentroSolar, and Suntech’s BriteLease program.

In a lease arrangement, the leasing company covers the cost of installing solar panels, typically on the rooftop of the customer’s home. In this model, the leasing company owns the system, rather than the homeowner. Solar leasing companies receive any state and federal tax credits and other incentives available for alternative-energy installations. The homeowner agrees to pay the leasing company a predetermined monthly payment over the term of the lease, and receives the financial and environmental benefits from all of the power produced by the solar energy system. Solar customers buy additional power as needed from their local utility at the going rate. They may also sell excess energy back to the local utility.

Solar leases typically run between 15 and 20 years. If the customer sells the home within that time, the lease agreement transfers to the new homeowner, pending credit approval.  

CPF joins the list of PPA providers — a list that can afford to be longer in order to make it easier to get solar on the roofs of more homeowners.

Go Green

My grandfather was a janitor in Charleston, West Virginia. While spending a summer vacation with my grandparents, I recall going to work with him as the sun was turning the sky red and night was coming. We walked from their apartment home to the building that he serviced each evening. It was my first introduction to the janitorial world at about ten years old. My grandfather was one of those “Salt of the Earth” kind of guys that seemed happy to be what he was. So, we cleaned desks, emptied trash, and swept floors. It was a god experience as I learned another aspect of my grandfather’s character.

We have come a very, very long way from the from those days, and the janitor now servicing your office, school, or building is expected to do more than clean the facility. As more and more rules, mandates, and regulation come out for the Green Office, Green Building, and Green Schools, the challenge falls upon the heads of this somewhat ignored workforce. So, it is no longer business as usual for the janitorial service.

The janitorial services are now being asked to be the “People who Bring the Green” of our offices, but this requires more than a microfiber mop, a double mop bucket system, or a non-ammonia window cleaner. We are only fooling ourselves by dumping all these mandates on people who only understand that the cleaners don’t work like the old products that have used for years. You can expect a backlash, non-compliance, and less-than-effective janitorial program to frustrate the Green program.

Green Clean certified is a training course offered by the Green Clean Institute that provides a solid training program for the janitorial workforce. This is not something that people want to do. It costs a few dollars per employee, and it takes a few hours to get the reading done and an exam completed.

A Green Office, Green School, and Green Building is missing a critical ingredient if they believe that a Green Agenda and Green products will create a Green Program. The most vital ingredient are the people who apply the products, use the HEPA vacuums and microfiber cloths, and understand how to sanitize against MRSA, Rhino virus, or the flu using Green products.

The Green Practices Initiative encourages all people in the decision-making capacities to insert a Green Practices Clause in all contracts, RFP, and quotation guidelines.

What has changed is essentially superficial. When the vacuums needed replacement, the owner replaced the old ones with HEPA vacuums. When it came time to place the order for more supplies, the salesperson convinced him to buy products from their Green product line. Maybe the owner got very proactive and even bought

With all the Green mania going on, it is easy to jump on the bandwagon, but this is not a hayride but a serious program that requires serious people. To be a Green Clean firm means a basic level of competence in the subject rather than the content of your janitorial cart. The higher expectations from the cleaning workforce means that knowledge must rise with claims of excellence.

A Green Program, correctly defined, is the combination of a Green Agenda by the decision-makers, the inclusion of Green Products, and the training and certification of the workforce for Green Practices. Anything else is not a Green Program.

Getting trained in Green Practices is not costly or difficult. It only requires a willingness to prove and certify that you are a true agent of Green change in the marketplace.

For any janitorial or cleaning service, the quality of their Green credentials will earn them or cost them business in 2008 and beyond. Green Clean Institute offers the only federal trademark program for Green Clean Certification.

- Oven – get rid of that abrasive oven cleaner! They’re corrosive, toxic and terribly damaging to the environment. Try this simple recipe from Bridget Gardner at Fresh Green Clean

Cleaning inside ovens:

Mix 1/3 cup bicarb with water to make a frosting-like paste in a small bowl. Use a pastry brush to paint the racks, walls and base. Turn on oven and ‘cook’ on low for 10 – 15 minutes. Turn off oven and leave to cool a little. Wear gloves and take the racks over to the sink. Lightly buff the racks with a stainless steel scourer which is rinsed regularly in a small bowl of warm water. Scrape the grease-filled bicarb from the oven sides, door and base with a plastic or wooden spatula. Fill the bowl with warm water and either a spot of detergent, soap or vinegar, then use it with a rag (i.e piece of old towel) to wipe away the remaining residue. Final note: if any white bicarb residue remains, don’t worry. It’s completely odourless and non-toxic, and now the grease will stick to it, instead of the oven and make it easier to clean next time.

- Dusting – forget all purpose chemical sprays for dusting. For most dusting jobs (picture frames, books, cds) a clean damp cloth will do the trick just fine.

- Donate your clutter – don’t just chuck it away. Magazines and Books can often be given away instead of just thrown out. Old clothes and furniture can be given to charities. Old electronics can be collected by recyclers.

- Be creative – re-use your “junk” as much as you can and give it new life. Boxes and books can be stacked up to make a side table with a nice cloth draped over it.

- Step up your fridge – make your fridge run more efficiently by vacuuming up the coils saving you money and helping the environment.

- Make your own deep carpet cleaner – mix borax and essential oil together, sprinkle over the rug, let it sit, and then vacuum.

- Cleaners – for cleaning agents, always look for agents that use minimal packaging, don’t use corrosive ingredients and provide proof of their eco friendly claims.

Find more cleaning ideas, green living and solar panels, visit the Green Pages Green Eco Directory