VentureBeat

We may be in the depths of a credit crunch, but some banks still seem willing to give loans to renewable energy projects. This morning, solar services firm SunRun is announcing a $105 million commitment by U.S. Bancorp (USB) to buy about 2,000 of the residential projects it installs.

Keep in mind that this isn’t equity or debt money that SunRun itself will receive. Because the company leases out solar arrays that it installs on customers’ roofs, the financing is more like a guarantee that SunRun can keep working at full speed without worrying about how to pay for the installations. For USB, the investment will provide predictable returns over the next several years as customers pay for the power they receive from their solar panels.

To date, only a few companies like SunRun have brought in similar financing. “This is a specialty asset class,” says Nat Kreamer, the company’s chief operating officer. “It’s not like getting a home loan — it takes real expertise.” But as with any type of asset, if it supplies steady returns, experts will appear. The USB commitment is a significant show of confidence during hard times.

SunRun is also adding David Buzby, the chairman of SunEdison, to its board. As one of the largest commercial and government solar installers in the country, the company has some real synergies with SunRun’s home installation business. Kreamer wouldn’t speculate on whether the two might collaborate, though.

The last equity funding SunRun received was a $12 million round in June. It’s based in San Francisco, Calif.

Like a new car, a solar system is a big investment. Some home owners can front the $10,000 - $30,000 for the panels and installation, but most need help. SunRun is one of a new breed of companies that’s figuring out ways to set up almost anyone with solar panels, whether or not they have lots of money.

The earliest solar vendors were expert mainly in setting up and maintaining solar systems. SunRun, on the other hand, is a bit more like a leasing agent. Instead of just selling panels, SunRun sells its customers something called a Power Purchase Agreement (PPA), which locks into a low electricity rate for a period of 18 years. The customer agrees to host the panels and pay for the power, but never needs to invest a large sum.

The model is a variation on a new business category that has been dubbed “solar services,” and contains several strong startups. These include SolarCity, which provides leasing or payment plans; Sungevity, which tries to make solar dirt cheap; and Recurrent Energy, which sells power to businesses and government. For its part, SunRun limits itself to the residential business.

Like all good ideas, solar services is a bit more complicated than it seems on the surface. The companies have to contract out the actual installation to specialists, or train their own installers. They also have to figure out how to cover their financing options, either through banks or their own on-hand cash. And they have to plan well into the future, because most remain responsible for servicing the panels they install.

The practical considerations aren’t stopping their rampant growth, though. SunRun co-founder Nat Kreamer told me recently that demand is exceeding the company’s expectations, and that he sees solar service “emerging as the dominant business model.” In one example, a contract for multi-residence installation the company won rights to bid on in San Jose saw three quarters of the households choose SunRun’s PPA agreement, while only a quarter opted to buy their systems outright.

There’s plenty of room for growth. Although the majority of these companies operate mostly in California — with some notable exceptions like Standard Renewable Energy — they’ve got around a million rooftops to cover before they have to start fighting for customers. And as costs for solar go down, the other 49 states will await.

The $12 million funding was led by Foundation Capital, and is SunRun’s first venture round. The San Francisco company was seeded by angel investors and its management team.