One more aspect of the plan is what Shah calls “the hook that gets me in the door” to see the CFO. Not only do clients avoid upfront capital costs, they also avoid fixed lease payments, which according to accounting rules are equivalent to a capital cost. When CFOs are weighing where to spend capital, they want to know they’re going to get a sizable return on their investment. Some CFOs require that investments return at least 25 percent—significantly more than the savings that solar power can provide. SunEdison skirts this issue entirely, enabling companies to take the cost of solar panels off the books and treat them as an operating expense, just like utility bills.
The model has been doing well in the marketplace. SunEdison has installed over 125 megawatts of solar power for companies such as Anheuser-Busch and Kohl’s and government entities such as the U.S. Department of Energy. Staples, meanwhile, now wants “to scale it in a way that’s meaningful,” says Buckley. “Eventually, we’d like to have solar on most of the roofs” of the company’s retail and business operations.
Based on this promise of growth, Jigar Shah sold SunEdison in 2009 for $315 million to MEMC, a Missouri-based maker of semiconductors and solar wafers. Shah has moved on and now leads an organization called the Carbon War Room, founded by Virgin Group chairman Richard Branson.
SunEdison’s success has already spawned rivals. Solar City, a company chaired by the famed entrepreneur Elon Musk, has taken the model forward another step by aggressively applying it to homeowners and small businesses. The concept can look even better for small businesses than for large ones, since they have more trouble attracting cheap loans and have fewer staff available to process the often large amounts of paperwork needed to collect government subsidies. “We’ve removed most of the barriers to the adoption of solar,” says Solar City CEO Lyndon Rive. The thousand-employee company has installed solar panels in more than 10,000 locations, with about 25 large installations under way at Walmart stores.
To be sure, solar is still far from competitive with conventional electricity in most markets, especially in locations where it’s not sunny and cheap power is available from dams and coal power plants. Yet this financial model has made it easier for solar to attract funding. “There’s more money chasing solar projects right now than there are solar projects to finance,” Shah says. That in turn could lead to better loan terms and cheaper solar power that no longer requires any government incentives. “We’re damn close,” Shah predicts. “In a year you will hear from the lips of Warren Buffett that solar is a good investment.”