SolarCity makes another buy, outlines expansion plans

SolarCity has expanded again.

For the second time this year, the residential solar company has made an acquisition to expand its business on the East Coast. The company said today it purchased the residential solar installation division of GroSolar to move into Massachusetts, New Jersey, New York and Pennsylvania — raising its nationwide footprint to 10 states and 21 operations centers.

Interestingly, the acquisition isn’t just about reaching more markets — it’s about staying competitive in a few years, when a key federal tax credit expires.

The move should give the company enough scale to make solar power as affordable as grid power without incentives by 2016, which is when the 30% solar investment tax credit expires, said spokeswoman Chelsea Guidice. The solar investment tax credit currently enables many solar financing businesses to charge attractive rates for energy generated by solar panels.

It may well be a smart move. Federal support for clean energy wavers all the time and is often unpredictable. A different Treasury grant for renewable energy projects was in danger of dying last year, until a last-minute rally renewed it — for only one more year.

SolarCity is one of the top players in what has become a popular form of selling renewable energy: leasing. Using a combination of federal and state incentives, startups can offer home owners solar panels on their roofs for little to no money down. They make money by selling the electricity generated back to residents (who have to sign a power purchase agreement locking in the rates for up to 25 years) on top of a leasing fee, and they typically only operate in markets where the combination will come out to less than what traditional utilities charge.

SolarCity is expanding aggressively, more so than any of the other players in the market. Just last month, SolarCity said it had acquired a solar installer that would enable it to expand to the Washington, D.C. and Maryland markets. But there are others entering the fray with leasing and financing-type options of their own — and investors willing to back them.

Lvestus said yesterday it had raised $750 million for no-money-down installation of geothermal heating and cooling systems. Sungevity just raised $15 million and is expanding to the East Coast. Buzzy fuel cell startup Bloom Energy launched a similar program for its fuel cell electricity generators. Solar Universe, a financing and installation startup, raised $7 million last month. And as of last year, another top solar leasing company, SunRun, still claimed to be two times larger than its nearest competitor and commanded 55 percent of the market share in California.

With the market getting crowded, SolarCity has looked to differentiate itself in a few key ways. For one, it now says it specializes in energy efficiency for homes. In (yet another) acquisition last year, the company added home energy audits to its business. It also has operation centers from which its own installers operate; by contrast, SunRun partners with local installers in markets it chooses to enter.