Dutch investment firm PGGM announced a new €200 million ($218 million) investment into a portfolio of SolarCity residential solar contracts today.
The large investment by a respected investment firm shows that institutional investors see renewables and specifically solar energy systems as stable investments based on proven technologies. PGGM manages upwards of €206 billion in assets and has publicly shared its plan to build a ‘chain of investments in sustainable energy’ with the SolarCity investment being the most recent addition. In 2010, the firm invested in the Walney offshore wind farm in the Irish Sea.
The investment ties PGGM directly to solar installations on more than 38,000 American homes with the investment expected to generate predictable returns for Pensioenfonds Zorg en Welzijn, a pension fund for the Dutch healthcare sector over the next twenty years. The addition of the solar portfolio investment is the crowning gem for PGGM as it now holds investments across nearly the entire sustainable energy spectrum.
SolarCity has historically preferred leasing systems to homeowners which requires massive capital up front. The resulting debt is then bundled with the forecasted residual income into a single portfolio which is what PGGM has bought into. In this case, it includes 38,000 systems that PGGM will reap the proceeds of over the life of the leases in the portfolio.
Moving forward, SolarCity announced that it would be shifting away from lease deals, preferring to sell systems to homeowners outright instead. Selling systems allows SolarCity to provide a simpler one-time transaction as compared to leasing which comes with financial and maintenance overhead lasting 20-30 years. This shift eliminates the requirements for SolarCity to raise capital and instead allows homeowners to purchase outright or to finance their systems directly through financial entities.
Since the Tesla acquisition of SolarCity last year, the company has begun selling its low-profile Tesla solar roof panels and announced plans to begin installing solar roof tiles later this summer. Solar roof tiles are expected to be preferred by customers as they offer the benefits of solar without the need for block panels bolted on top of an existing roof. The tiles are also expected to outlast traditional roofing materials as Chief Elon Musk noted in his recent Ted talk, stating that if the house were left alone, the entire house would deteriorate but the roof tiles would remain intact for many, many years.