Loanpal is now No. 1 in the booming solar loan market

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Solar loans began to outperform third-party owned solar in early 2018.

According to a new WoodMac reportthe first half of 2019 saw lending claim the majority of the solar finance market for the first time, with 55% market share.

Lenders continue to build networks of installation partners across the country. Many are also looking to home storage loans and the low- and middle-income customer segment for growth, including new solar loan provider, Loanpal.

Third-party property providers (TPOs) remain relevant with new customer acquisition strategies and new partnerships in the California new residential solar power market.

The rise of solar loans

More residential solar systems are financed with loans than ever before.

The solar loan market grew 40% year over year in the first half of 2019. Solar loan companies and traditional loan sources expanded their solar loan offerings, giving installers and consumers more convenience. financing options.

Small installers are driving much of the growth. These installers may find it difficult to partner with VSE vendors, and as WoodMac noted earlier this year, many are adopting loaner products as a result.

Lending is expected to maintain the majority of solar financiers’ market share into the 2020s. is largely made at the expense of cash sales.

Two lending trends to watch in the early 2020s: battery storage and risk-based lending products.

Storage financing opportunities have been relatively insignificant to lenders until recently. As the residential storage market doubles in 2020 and reaches a value of $1 billion for the year 2021, that could change. Many loan providers have started offering solar plus storage products and are reporting that more and more customers are beginning to finance battery storage through loans.

Loan providers are also increasingly looking for creative ways to responsibly serve low- and middle-income customers by offering products to customers with FICO scores below 650. Once considered unsustainable, these loan products “Risk-based” is slowly gaining traction, although it will be necessary for providers to monitor failure rates in order to gauge performance.

Sunlight and Loanpal already have risk-based lending products in the market to serve clients with lower FICO scores; Both Mosaic and Dividend report that they have products in development.

The future of TPO

Although there is a clear trend towards residential customer ownership through loans, TPO remains essential for residential solar financing in some markets.

TPO volumes were down year-over-year in the first half of 2019, but only modestly as major TPO vendors Sunrun and Vivint grew enough to partially offset the decline. Strong TPO performance can be seen in some northeastern states where Sunrun, Vivint and other major TPO providers have a large presence.

A few key TPO vendors dominate the new home solar segment in California, which will drive third-party ownership in the 2020s as this segment expands. Due to the common practice of offering power lease/purchase agreements or integrating solar power into the mortgage in the new home market, solar loan providers who do not offer financing mortgage will have fewer opportunities to acquire residential customers in new construction.

Competitive landscape

Loanpal entered the market just two years ago, but is now the leading residential solar financier in the United States, having overtaken Sunrun in the first half of 2019. Relationships with major residential solar suppliers have been key to the rapid growth of the company. (Read more about the newcomer’s rise here.)

Many loan providers recorded profitable growth in the first half of 2019. Almost every company in the industry is growing, with Mosaic being the only major loan provider to see its market share decline between 2018 and the first half of 2019.

Mosaic had raised its prices in 2018, slowing the company’s growth somewhat in order to make the company more sustainable in the long term. (Tesla, a major user of Mosaic loans, also saw its volumes decline over the period.)

Both Sunlight Financial and Dividend Finance entered the top five financials in the first half of 2019.

In the TPO space, Sunrun and Vivint Solar have begun to see benefits from changes to sales and customer acquisition tactics that were implemented in late 2018 and early 2019. However, the costs customer acquisition rates for Vivint and Sunrun remain stubbornly high.

Last year, Vivint adopted a dynamic pricing model in which sales staff are incentivized with higher commissions to sell more profitable residential systems. Vivint’s gross margins continued to improve in the first half of 2019.

Sunrun has maintained positive gross margins, but total operating expenses continue to outpace revenue growth. Additionally, labor shortages could strain the company’s ability to meet its 2019 guidance.

Sunnova went public in July 2019 and has lower customer acquisition costs as most of its TPO business comes from finance leases and power purchase agreements through local installer partners and regional. However, Sunnova’s operating costs also remain high. The industry is still waiting to see if Sunnova will be able to consistently achieve positive gross margins through its unique business model.


Curious to know how many American homes are switching to solar power? Free download abstract from our historical solar report to view charts and statistics on the growing industry.

Priscilla C. Carnegie