VentureBeat

In another sign of the torrid growth of solar services — the industry that moves solar cells from manufacturers to their new homes on rooftops and in utility installations — Recurrent Energy has secured $75 million from a private equity firm to expand its business.

Recurrent is the firm behind projects like San Francisco’s planned 5-megawatt municipal installation, which will be installed and owned by the company, with the city buying electricity at a set rate. The large financing reflects the large projects Recurrent wants to take on; the company leaves household installations to firms like Solarcity and SunRun.

There’s plenty of evidence that the commercial and government markets Recurrent wants to serve are taking as strong an interest as homeowners are in solar. From Google to Wal-Mart, large corporations have shown an interest in blanketing their rooftops with solar panels. Big institutions like airports and universities have also seen the benefit in using solar to help alleviate peak daytime energy prices.

That leaves plenty of room for Recurrent and its competitors to expand. One of its main competitors, SunEdison, recently took on $161 million to build up its own business, which includes building big solar farms for utilities.

The backer in this funding was Hudson Clean Energy Partners, which noted that it could be “just the beginning of an even larger financing relationship.” Recurrent is based in San Francisco, Calif.

There has been plenty of noise lately about residential solar financing strategies, like SolarCity’s lease program and Sun Run’s power purchase agreements, in which a consumer agrees to buy power from solar panels on their roof without paying the hefty up-front cost for them. San Francisco may be entering into a similar deal next month for a 5-megawatt installation within the city limits, which would be the country’s third-largest completed project.

The idea of small municipal power plants, built on unused land within cities and thus lowering transmission costs for the power, is quickly gaining popularity in the solar industry. Electricity utilities are also in favor of the idea, because it could save them from the need to build more costly power plants. However, cities and solar panel manufacturers face a challenge in getting projects going, because installations are expensive.

San Francisco’s Public Utilities Commission has nimbly avoided that problem by leaving the financing to Recurrent Energy, a solar services firm that essentially acts as a go-between, contracting out the installation of panels and arranging for funding from outside sources like Morgan Stanley. SFPUC, which provides power to city-owned buildings, will only need to sign a contract to buy energy at a fixed, incrementally increasing rate for the next 25 years.

The plan should work well. Cities shy away from projects that require a lot of capital up-front, but the SFPUC is only agreeing to buy electricity it will need anyway. The city’s board of supervisors still needs to approve the project next month, but without any need for immediate funds, opposition should be minimal.

For Recurrent, the plan also looks like a winner. Because the costs for electricity are determined beforehand, the company can project a repayment schedule for the panels. The actual financing, as noted above, comes from outside sources, with Recurrent just taking a cut of profits. And local solar installers will also benefit from the work, which is expected to be completed in July 2009.

For San Francisco, there are also fringe benefits. The city will benefit from the positive publicity of having a major solar project within its borders. Other cities in the state will likely begin looking more seriously at projects for their own electricity needs. Recurrent’s CEO, Arno Harris, says it won’t be a problem if more customers come knocking; the outsourced setup of his company is “really built to scale,” he told me today. “We’re at an interesting turning point in the history of solar. We’ve seen a lot of districts kicking the tires — there’s going to be a ton of interest from other cities,” he said.

The majority of the panels will be installed on the empty roof of the covered Sunset Reservoir in the western portion of the city (seen at right), with a about 250 kilowatts going into a separate installation at Pier 96. The final board vote is scheduled for June 23rd, with construction beginning afterward if approved.