SolarCity's Financing Breakthrough Could Bode Well for Renewable Energy Sector
The deal shows that the private sector is willing to finance large-scale renewable energy projects without the benefit of loan guarantees from the federal government.
The announcement comes as good news so soon after the Solyndra bankruptcy scandal. SolarCity originally planned to obtain financing under the same federal loan guarantee program as Solyndra, but the deal came under greater scrutiny and ran into delays in the aftermath of Solyndra's bankruptcy.
SolarCity was able to move ahead with a plan to install rooftop solar panels at military housing installations after Bank of America (BAC) agreed to finance the project. The financing that Bank of America will provide won't be as cheap as if the loan had been guaranteed by the US government, so the project is being reduced from the original 160,000 homes down to 120,000 homes.
SolarCity will install the solar rooftop panels in military housing units across the United States over the next five years. The company will focus on areas where the cost of electricity is relatively high and charge customers a rate slightly lower than local rates after solar panels are installed for little or no cost.
The deal is a positive sign for the future of the solar energy industry and the renewable energy sector because it shows that the private sector is willing to finance large-scale renewable energy projects without the benefit of loan guarantees from the federal government. Although investing in renewable energy is a good public relations move for Bank of America, it wouldn't agree to finance such a big project if it didn't believe that the solar energy project stood a very good chance of being profitable.
The SolarCity financing breakthrough is sure to be appreciated by investors interested in the solar energy industry. It comes at a time when financing options for the industry were under question because of the Solyndra bankruptcy and as a possible trade war is about to break out between the United States and China over the solar power industry.
Bullish: Traders who believe the SolarCity deal with Bank of America is a positive sign for solar power's future might want to consider solar power stocks like Suntech Power Holdings (STP) and Yingli Green Energy (YGE).
Bearish: Traders who believe that the possibility of a looming fight between American and Chinese solar companies outweighs the positives of the SolarCity deal may consider shorting the previously mentioned solar power companies.
Editor's Note: This content was originally published on Benzinga.com by Daniel James Hayden IV.
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