Sungevity, a venture-backed residential solar company in California, said Friday that it recently raised $70 million in equity. But that’s not the most interesting part of the announcement.
What’s more intriguing is what Sungevity plans to do with one of the new investors in this round, E.ON E.ON, one of the largest investor-owned electric utilities in the world. Sungevity’s executives hinted that they are working with E.ON to expand their market reach, but they wouldn’t say how.
“This is not just about capital but a partnership with one of the leading utilities in the world,” said Andrew Birch, CEO of Sungevity, which runs operations in nine states and in the Netherlands and Australia. Sungevity has raised over $200 million in equity since its start in 2007.
Germany-based E.ON is in the electricity generation and distribution business. It owns about 61 gigawatts of generation capacity, including natural gas, nuclear, wind and solar power plants in Europe, Russia and North America.
It’s conceivable that E.ON will market Sungevity’s services in some of the territories it serves. Sungevity sells solar energy contracts to homeowners, designs the layout of the solar panels on the roof and hires people to install the equipment.
The contracts are one way for consumers to use solar electricity without paying tens of thousands of dollars to own a set of solar panels. A homeowner who signs a contract, which typically runs 20 years, agrees to pay a monthly fee for the solar electricity. Sungevity raises funds from banks and other types of investors to finance installations.
E.ON’s interest in Sungevity reflects a few trends. A growing number of power companies are seeking to add renewable energy generation or related investments to their portfolios. They also see fewer risks in betting on solar than they did even just a few years ago as they witness a continual growth in the U.S. solar market. The residential solar business has been growing quickly. New home solar installations jumped 60% in 2013, and its growth will likely outpace the commercial and utility market segments again in 2014, said GTM Research.
Energy firms like E.On could be hunting for solar investments because they anticipate a decline in their nuclear or fossil fuel-based power generation business in the long term, a result of policies to minimize climate change or safety concerns. They also could be responding to demand from their large customers, such as data center operators, who want to draw more renewable electricity from the grid.
Here are examples of big energy companies putting money into the U.S. rooftop solar business:
*Just last week, NRG Energy NRG Energy said it had bought Roof Diagnostics Solar for an undisclosed sum. Back in 2011, NRG bought Solar Power Partners to enter the rooftop solar business.
*Edison International Edison International, which owns utility Southern California Edison, bought SoCore Energy, a Chicago-based rooftop solar installation firm last year. Edison also took a stake last year in Clean Power Finance, which offers solar energy contracts to installers who market them to homeowners. Dominion and NextEra Energy also reportedly invested in Clean Power Finance.
*NextEra, incidentally, bought rooftop solar project developer Smart Energy Capital last year.
*Direct Energy, part of Centrica in the United Kingdom, and SolarCity created a $124 million fund to finance rooftop solar installations for Direct Energy’s business and industrial customers in 14 states. SolarCity also inked a deal to serve TXU Energy’s customers in Texas.
Article source: http://www.forbes.com/sites/uciliawang/2014/04/04/4298/