The Growing Appeal of Residential Solar as an Asset Class: Insights from Matt Myers

In a recent solar solutions webinar, Matt Myers provided a comprehensive overview of why residential solar is increasingly seen as a compelling asset class for investors and lenders alike. Myers emphasized the macroeconomic factors fueling the industry’s growth, highlighted the unique credit characteristics of solar assets, and discussed current industry dynamics and opportunities for new market entrants.

Myers points out that the energy market in the United States is characterized by rising utility prices, grid instability, and an over-supply of energy in certain sectors, such as data centers. These factors create a persistent demand for alternative energy solutions. He notes that while nuclear power has long-term potential, its lengthy development timeline of eight to ten years limits its immediate impact. In contrast, residential solar can be installed within six to nine months, offering homeowners rapid relief from high utility costs and grid unreliability.

Myers shares a personal perspective, citing recent local energy issues: “In Southern California, utility prices are constantly rising, and outages are not uncommon. It’s a reality that makes investing in solar a smart way to de-risk yourself from the grid.” Such experiences underscore the value of de-risking from the traditional grid through solar investments.

One of Myers’s most compelling points is the positive return on investment that residential solar offers, a rarity in consumer lending. Unlike credit cards or personal loans, which typically result in a net outflow if unpaid, solar loans tend to generate a substitution effect. If a customer stops paying their solar bill, the system is usually shut off, and they revert to drawing power from the grid, often paying more in utility costs than the solar loan payment. Myers explains, “Typically, you find that customers are paying more for their utility bill than they were paying for residential solar. So, while stopping paying your solar bill might benefit you in the short term, ultimately, the utility bill gets turned back on.”

This dynamic creates a natural buffer for lenders since the risk of default is mitigated by the fact that unpaid systems are likely to be shut off and customers will resume paying higher utility bills. Moreover, Myers highlights that the customer profile for solar loans tends to be high-credit-quality homeowners with an average FICO score around 745, adding to the asset’s stability.

Myers delves into the customer payment hierarchy, noting that even in financial distress, consumers prioritize essential obligations like cell phone bills and mortgages. Residential solar fits into this hierarchy, often ranking above home improvement loans and other discretionary expenses. “Home improvement loans, and in particular residential solar, tend to rise to the top,” Myers says, emphasizing the product’s stability.

The typical loan terms range from 10 to 25 years, with some clients extending to 30 years to align with the panels’ expected useful life. Such long durations produce manageable monthly payments and further enhance the attractiveness of solar as a long-term investment.

Myers discusses the current industry landscape, noting that recent policy changes and shifts in incentives introduce headwinds, most notably the removal of the 30% Investment Tax Credit (ITC). However, he views this as an opportunity for maturation and innovation within the industry. “The removal of the ITC prompts a rationalization of sales practices and installer margins, which I believe is ultimately healthy for the industry,” he says.

Myers also points out the diverse set of participants in solar financing including state and regional banks, credit unions, large asset managers, and insurance companies. The market’s liquidity remains strong with approximately $10-15 billion in residential solar securitizations annually, complemented by private-rated ABS.

Myers highlights emerging financial products designed to adapt to utility rate trajectories such as periodic re-amortization of loans and escalator-based payments that increase over time, mirroring rising utility costs. These innovations aim to keep solar payments below utility bills, providing ongoing savings for homeowners.

Myers concludes with an optimistic outlook, emphasizing the sector’s potential: “Residential solar generates real value for customers, attracts high-quality homeowners, and is experiencing innovation and macroeconomic support. For investors looking to deploy capital, I strongly encourage exploring this space.”

Finally, Myers stresses the importance of strategic partnerships for investors. Since most residential solar sales occur at the point-of-sale through installer partnerships, he advises investors to collaborate with point-of-sale platforms integrated with installers to effectively reach customers.

He offers his own assistance to interested parties: “If there’s more I can ever provide insights on about residential solar or if there are connections that investors want to make into facilitators, please, feel free to drop me a line.”

Matt Myers’s insights paint a promising picture of residential solar as a resilient, profitable, and innovative asset class. With its favorable macroeconomic backdrop, positive credit characteristics, and ongoing product evolution, the sector is positioned for sustained growth. For investors and lenders seeking long-term, stable opportunities, residential solar presents a compelling case, one that is worth exploring in today’s rapidly evolving energy market.