Private equity firm Energy Capital Partners (ECP) has invested $300 million in US residential solar company Sunnova.
Sunnova has become one of the largest US companies built on the solar-leasing model and has raised $1.2 billion in three years. The Houston-based company said it will use ECP’s investment to continue the company’s growth in the residential solar market.
ECP partner Rahman D’Argenio said the firm is excited to fund Sunnova’s “differentiated business model”. ECP has made $13 billion in capital commitments for traditional and renewable power generation, midstream oil and gas, electric transmission, environmental infrastructure and energy service sectors in North America.
Sunnova closed on another $300 million raise last October. Venture capital firm Triangle Peak Partners led the equity portion of the fundraising, which also included companies affiliated with Franklin Square Capital Partners, and Credit Suisse provided debt through a conduit facility. Franklin Square and Triangle Peak also committed $250 million to Sunnova in 2014.
The rise of the US residential solar market has been fuelled by policy initiatives that offer incentives for homeowners and the solar companies installing the panels.
Net metering allows the sale of excess power generated by on-site renewables. Nevada made the decision last December to cut back its net metering policy, resulting in several major solar companies shutting down their business in the state. A month later in California, considered the home of the US solar market, the state’s Public Utilities Commission decided to renew net metering to help meet renewable generation targets.
Another policy that has fuelled residential solar growth is the US government’s decision in December to renew the investment tax credit (ITC). According to a GTM Research study, renewing the ITC would add 25GW of solar over the next five years and catalyse $40 billion of investment. However, some companies, like Sunnova, actually argued to let the tax credit expire. Sunnova said the solar industry would be better off in the long term if it is not supported by tax breaks.