Top home solar lender GoodLeap scores mammoth $800M investment

GoodLeap, the country’s top residential solar lender, has raised more than $800 million to boost its expansion into what it estimates is a $430-billion-per-year market in energy efficiency, electric appliances and other home sustainability investments.

Investors in Wednesday’s round, which values the company at $12 billion, include MSD Partners, the investment firm managing the money of Michael Dell, the billionaire founder and CEO of Dell Technologies. BDT Capital Partners, Davidson Kempner Capital Management and additional investors, including current shareholders, also participated.

This is the second major funding round this year for the company, which changed its name from Loanpal this summer to mark its shift beyond solar lending into broader home sustainability products. In January, it raised more than $800 million from investors including Brookfield Asset Management and New Enterprise Associates.

GoodLeap has deployed more than $9 billion in capital since 2018, most of it to finance rooftop solar systems from a variety of suppliers. In 2019 it captured first place in the growing market for home solar loans. In recent years, such loans have outpaced third-party solar financing products from competitors such as Sunrun and Tesla to account for a majority of residential solar installations.

The company’s move positions it to target an even larger market for energy-efficiency retrofits, more efficient appliances and other improvements that can reduce household energy use and carbon emissions.

Home efficiency is a notoriously fragmented market, with local and regional contractors, service providers and equipment suppliers working with an array of financing models. GoodLeap’s key innovation on this front is its centralized software for assessing cost-effective options for individual homeowners and bundling multiple improvements into loan products it can source to a variety of lenders.

Matt Murray, GoodLeap’s chief marketing officer, told Canary Media this summer that the company’s software-based analytics and customer-facing platforms allow projects to move more quickly and assess payback risks more accurately than traditional methods.

“Within four or five seconds, consumers accessing GoodLeap technology can find out what it would cost to replace their HVAC system with something that’s more efficient or install drought-resistant turf or energy-saving windows,” Murray said. Combining multiple investments into a single loan also smooths the process, as does allowing multiple contractors to be paid through a single loan, he said.

This approach is ​“fundamentally reshaping how the sustainable improvement industry can operate by removing friction between consumers, installers, manufacturers, and financial institutions,” GoodLeap co-founder and CEO Hayes Barnard said in a Wednesday statement.

GoodLeap’s chief solar loan competitors include Mosaic and Renovate America, as well as Sunlight Financial, which holds second place in the U.S. market and went public via a special-purpose acquisition company in July. News reports this summer suggested that GoodLeap was mulling an initial public offering within the year. The company has declined to comment on whether it plans to go public.

GoodLeap and its solar competitors have also turned to financial markets to lower the cost of capital for the home improvements they enable, by bundling portfolios of loans into asset-backed securities that can be sold to institutional investors. Last month it issued an asset-backed securitization sponsored by Goldman Sachs, backed by $369 million of residential solar loans — the first of its kind to receive a rating by one of the country’s three major credit ratings agencies, in this case S&P Global.

Finding ways to similarly bundle home energy-efficiency improvements would be a key step in achieving the major increase in efficiency needed to reach the country’s decarbonization goals. The Biden administration and Democrats in Congress have proposed tens of billions of dollars in spending to boost residential efficiency, including programs that would offer incentives to speed the installation of electric-powered heaters and other appliances to replace natural-gas-fueled ones.

While the home efficiency market hasn’t yet reached the same level of financial sophistication and securitization as the residential solar industry, the scope of the efficiency opportunity is much bigger. Forecasts indicate that growth in U.S. residential solar installations could yield a market of $35 billion to $40 billion over the next five years. Based on GoodLeap’s projections, the home efficiency and sustainability market could exceed $2 trillion over that time.