Summary:

In 2019 solar loans were responsible for 54% of the U.S. solar financing market, but due to the coronavirus, 2020 will not show the same solar financing growth.

Main Article:

Loans Still Lead the Rooftop Solar Finance Market, But Volumes Set To Tumble This Year

Solar loans accounted for 54 percent of the U.S. solar financing market in 2019, according to WoodMac’s new report — a 31 percent jump from 2018. 

All major solar loan providers experienced growth in 2019, and more solar installers are now offering loans to customers. 

Loanpal retained the top spot in the field, and both Loanpal and Sunlight Financial gained market share last year by adding new solar installer partners and gaining more share of the business flowing from their existing solar installer partners. 

The impact of COVID-19 on residential solar finance  

2020 will not tell a similar growth story for solar financing, WoodMac notes in the report. 

Of the different financing options, cash will be hardest hit due to the coronavirus pandemic, declining 42 percent this year versus 2019 levels. Third-party ownership and loan volumes will both drop this year, by 21 and 23 percent, respectively. 

Default rates on U.S. solar loans are in the spotlight. Although consumers have mostly kept up with their payments so far, it remains unclear how long this will last as government support winds down. However, in WoodMac's view, it’s unlikely that higher default rates would actually drive loan providers out of business in the short term.

A more pressing concern is that solar installers are vulnerable to the risks inherent in a prolonged economic downturn and are at risk of going out of business, potentially creating a gap in the market for financeable projects as financiers lose solar installer partners. 

Wood Mackenzie has reduced its 2020 and 2021 U.S. residential solar installation forecast by 31 percent and 26 percent, respectively, due to the economic impacts caused by the virus. 

ABS transactions 

One bright spot: Recent solar power asset-backed securitization (ABS) transactions point to a faster-than-expected recovery for investments in the industry and provide evidence that investor confidence remains high. 

2019 was the biggest year for solar power asset-backed securities, topping $1.9 billion. Following this banner year, there was just one transaction in 2020 before the coronavirus pandemic upended markets. After four months of no activity, the market woke up in June with four completed ABS transactions. 

Loanpal was the first financier to be involved in a solar securitization after the onset of COVID-19, when Goldman Sachs pooled Loanpal originated loans and sponsored two transactions totaling $373 million. Loanpal also announced an additional transaction with GoodFinch in July 2020. 

Solar power asset-backed securitizations had reached nearly $1.5 billion in transaction value in 2020 as of July, according to WoodMac.

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