Wells Fargo Finances Solar for Verde Energy

Verde Energy said Tuesday it’s working with Wells Fargo to provide financing for renewable energy projects.

According to Verde, an online marketplace for U.S. renewable energy projects, it pursued the partnership because many of its customers have difficulty finding lenders familiar with renewable-energy projects. It selected Wells Fargo because it’s providing competitive rates with flat-rate pricing, the company said.

“This is the second-largest purchase most homeowners will make,” Verde CEO Rob Powell said.

“Our customers’ ability to buy these systems oftentimes hinges on their ability to get funding. We feel partnering with Wells Fargo and other national lenders is going to help them get these systems in place, which is good for the customers and good for the industry at large.”

The move is the latest attempt to grow the solar market by reducing the upfront costs that analysts say keep many would-be solar buyers away.
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Solar manufacturer Sharp in October partnered with CitiMortgage to launch a home-equity financing program for solar installations (see Solar Gets Home Financing), and another solar manufacturer, SunPower, announced a one-step financing program with New Resource Bank, the same month. Startups such as SunEdison and MMA Renewable Ventures also are providing financing.

Easier financing, along with Verde’s bidding service, could help simplify solar installations, said Jonathan Klein, founder of business consultancy Topline Strategy Group.

That’s a worthwhile goal because a complex process is one of the barriers to making solar mainstream, according to a study that Topline Strategy Group released in November with Sunlight Electric, a commercial solar dealer (see Wanted: Solar Salesforce.com, Solar Gets Simpler).

“For alternative energy to really take off, it needs to become as easy to buy as a car, and Verde’s service is definitely a step in the right direction,” Mr. Klein said. “The more they do to simplify the process, like offering financing, the more successful they’re going to be.”

The Business Plan
Verde provides free project consultations and then solicits bids from area contractors to help customers find the lowest price.

Here’s how it works: A customer fills out a survey describing the project (whether it’s a residential or commercial project, where the customer is in the process, when they plan to start the project, details about the roof size, condition, and material, and so on).

Then Verde Energy staff member calls back to get more information about the roof position, roof tilt, and trees and buildings that could obstruct the roof, and uses Google Earth to help verify the information. The customer gets a ballpark average price, and the bidding process starts.

After an on-site consultation, the customer gets accurate system-design plans and a more-exact quote.

The service is free to these solar customers. Verde makes its money from contractors, which Verde screens, checking their licensing, certification, insurance, bonding, and references, and which pay a commission of between 2 and 3 percent per installation.

The company has more than 150 contractors signed up for the service now, and expects to have 250 by the end of this year, Mr. Powell said.

Verde Energy, founded last year, said it has exceeded 3,000 installations since August and expect to breach 10,000 installations this year. That’s compared to fewer than 100,000 installations in the U.S. in the last two decades.

But Mr. Powell said he expects the market to grow rapidly. The company expects to reach profitability, as well as revenue of between $2 million and $5 million, this year.

More Incentives Needed
John Quealy, a principal and senior research analyst with Canaccord Adams, called Verde “an interesting idea.”

But the company’s success will depend on the success of the solar market at large, and that in turn will depend on helping customers make a return on their investment, he said. Verde needs government incentives to drive installations and boost its market, he said.

“All of these online marketplaces clearly [represent] an arbitrage against the standard cost of electricity,” he said. “If electricity prices from fossil-based sources are going to rise, then it makes sense, but you’d need a critical mass of alternative energy contracts to make this trading platform work.”

While those incentives haven’t kicked in yet in many places, Mr. Quealy said “this is a good time to think about that business plan to get in early as incentives kick in.”

In the meantime, Mr. Klein said Verde can use its influence to do still more to simplify the market and entice customers. One big problem is the difficulty of evaluating the true cost of different systems, and more information could help Verde’s customers better compare bids, he said.

First of all, Verde could use a standard rating system to help customers compare their bids, he said. Every manufacturer rates its modules’ electricity output differently, meaning the ratings don’t lend themselves to apples-to-apples comparisons.

“Imagine if every auto manufacturer had a different definition of horsepower,” Mr. Klein said, adding that the California Energy Commission publishes a standard rating based on industry association test conditions, and Verde could use those.

Secondly, Verde could compile data from its client’s projects to help future clients more accurately determine how much electricity they will get from their projects, he said.

Projections of how much energy a solar-power system will generate are typically based on data from the Renewable Resource Data Store, which groups a number of neighborhoods together into area averages, he said. But while it gives one data point for the San Francisco Bay Area, for instance, microclimates within the area actually vary quite a lot, resulting in inaccurate estimates, he said.
Red Herring