The latest Google foray into clean energy could hold lessons for many other companies interested in clean energy investment.
It was announced a few days ago that Google has made what is reported to be a $280 million investment in SunCity, a company that leases solar panels to homeowners, thus eliminating a large up front capital cost. This leasing model has become an industry standard in solar and fuel cell projects. Bloom Energy, a much hyped fuel cell company, is using such a leasing model for its data center projects.
Once you dig a little deeper, this is not just a typical company investment. Rather, Google is reportedly setting up a “tax equity fund” that SunCity can tap to finance its projects. This is a way for Google to directly offset its corporate taxes with solar tax credits. It is most common for banks to be part of this kind of tax equity project finance to offset their profits- but with the financial crisis many banks pulled out of this market as they didn’t have large tax liabilities. This is one of the first examples of a large corporation using this vehicle.
The lesson from this new financial device? Virtually any large company with a serious balance sheet and corporate taxes to pay could use such a solar tax equity vehicle. This approach could open up billions of dollars of new equity for clean energy companies.
One of Google’s top energy officials, Rick Needham, confirmed as much in a recent article.
Needham thinks that there is a lot of opportunity for other large corporations, especially other technology companies, to make investments in renewable energy. If Google sparks interest from such sources of capital in providing equity, particularly tax-driven equity, to renewables, the knock-on effect on yields could be truly transformative. Google’s ability to break the tax equity oligopoly could be a market-moving event.
A major push should be undertaken to bring this new approach to the larger corporate community.