Clean Energy Finds a Broader Market

Energy represents a critical challenge for our country (and the world). Moves to make the US more independent from the Middle East OPEC oil oligopoly was critical. With new technologies in fossil fuel production, we have made tremendous progress. We can now influence global oil and gas pricing for the first time. Yet mid- to long-term, it will be imperative to move away from environmentally detrimental fossil fuel. And we can. Solar, wind, hydro, and nuclear are viable alternatives. Yet these renewable energy technologies have to grow their market in order to eclipse our dependence on oil. The entrenched fossil fuel interests are powerful and they won't give up without a fight, yet science has proven the damage fossil fuel is doing to the planet. The threat of climate change requires immediate action, yet clean energy's future is importantly dependent on its economic viability. Last month, one company introduced a new business model for solar power that could make it available to the average homeowner.

Until recently, the average investor couldn't find an easy way to diversify into the new alternative energies. And it's been tough for many homeowners to switch to solar power because of the relatively high up-front costs associated with installing the needed solar panels. Those who do are often substantially rewarded, not just in the way they can feel good about the contribution to a cleaner environment, but also in the lower electricity bills and even in the discovery of a new source of income. Those who have the capacity to generate more electricity than they can use in a given month can often sell their excess power back into the existing power grid--sometimes making more than they spend on power each month. That's an enormous paradigm shift. But until recently there haven't been easily affordable ways for most people to switch to solar power or even buy securities in the industry, as a long-term investment.

In December, SolarCity, a company that finances and installs rooftop solar power systems in homes and businesses, issued $200 million in bonds, available as an investment to ordinary folks with at least $1,000 to invest and a bank account. The short-term bonds will yield at least 2 percent, while those held for seven years will return 7 percent. Until now, solar bonds have been available mostly to institutional investors. The New York Times quoted a spokesman from the company:

"By expanding the pool of people who can participate in financing solar with us, we're diversifying our sources of capital," said Mr. Tim Newell, who was president and chief executive of Common Assets, an investment platform developer that SolarCity bought this year. "That also makes us more resilient in any economic environment and over time should help us be able to have the lowest cost of capital."

What's interesting about Solar City is that it's essentially becoming an alternative power company--raising the money to install a growing network of power-generating tech on its customer's roofs. A homeowner, for example, will get the installation for free but will pay a monthly utility bill to Solar City. Bond holders will be paid back using revenue from these customers. As the Times goes on to say:

Several companies, like Mosiac, are already using crowdfunding to funnel money into solar projects. But those largely pool money from investors to provide loans for small- and medium-scale projects. SolarCity's platform will instead pay back the bonds it issues with the income from the monthly solar electricity payments made by its customers, which include homeowners, schools, businesses and government organizations in 15 states and Washington, D.C.

Company executives say they hope to appeal to people who want to help finance the growth of clean energy but desire the security of bonds. "But this is new -- no one has done this before -- and we're going to have to see how it proceeds," Mr. Newell said.

Without being able to know for sure what the future holds for Solar City in particular, this is an encouraging step in the right direction. It creates a business model for how to bring ordinary middle-class homeowners into the burgeoning alternative energy industry, both as investors and as customers. In March, the Solar Energy Industries Association reported that demand for solar power has been skyrocketing. In 2013, according to the SEIA, installations of solar power systems rose by 41 percent, compared to 2012: "Solar was the second-largest source of new electricity generating capacity in the U.S., exceeded only by natural gas. Additionally, the cost to install solar fell throughout the year, ending the year 15% below the mark set at the end of 2012."

If Solar City succeeds in this new effort to expand solar power's reach, let's hope more companies follow its example. Renewable energy is the future, and everyone should try to participate. It promises a better future for all of us and our planet.

Peter Georgescu is the author of The Constant Choice. He can be found at Good Reads.