PG&E Corp. is expected to announce Monday that it will invest $100 million in a partnership with solar developer SunRun Inc. to finance residential solar-energy systems in five states that offer special incentives for renewable energy.
As a result of its investment, PG&E will be able to take advantage of hefty federal and state incentives, including a 30% federal investment-tax credit.
A recent change in federal law made utility companies such as PG&E, based in San Francisco, eligible for the incentives as a way of encouraging them to make investments at a time when other investors were pulling back from the renewable energy market. Such operations were hurt by the poor economy and resulting slack electricity demand.
PG&E's investment will go toward solar systems in Arizona, California, Colorado, Massachusetts and New Jersey.
PG&E's investment in the new venture, called SunRun Pacific Solar, is important to SunRun because it isn't big enough or profitable enough to use federal and state tax credits, which can amount to 35% to 40% of a project's cost.
SunRun needs so-called "tax equity" investors to provide capital and support its growth.
SunRun, also based in San Francisco, has an unusual business model. Homeowners provide space for SunRun's solar panels but don't purchase the systems, which can cost $30,000 to $40,000 each. Instead, they agree to buy the electricity for about 20 cents a kilowatt hour for 18 to 20 years. SunRun maintains the systems.
"Our mission is to make solar energy affordable," said Ed Fenster, SunRun's chief executive, by eliminating the upfront cost to consumers.
The $100 million investment by PG&E, though a subsidiary called Pacific Energy Capital II LLC, will finance installation costs for approximately 3,500 home systems.
Revenue from solar-electricity sales will be split by PG&E and SunRun.
California's goal is to have one million solar roof installations in the next few years as a way to reduce emissions from power plants.
Brian Steel, PG&E's senior director of corporate strategy and development, said the company believes there are about 35,000 solar systems operating in the Northern California service territory of its utility, Pacific Gas and Electric Co.
This is the second tax-equity investment by PG&E. Previously, it invested $61 million in another renewable-energy partnership.
