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Google's $280M Clean Energy Play: Putting Solar Panels on Your Roof

Google's latest clean energy play -- a $280 million fund with SolarCity to help finance residential solar installations -- is a notable shift in the company's greentech investment strategy. For the first time ever, Google is going straight at the homeowner.

Google (GOOG) has been on a clean-energy investing tear for the past several years that's now on the verge of topping $700 million. Google has invested in two wind farms in North Dakota as well as geothermal start-ups AltaRock Energy and Potter Drilling, BrightSource Energy's solar thermal project in the Mojave desert and the Shepherds Flat, the world's largest wind farm in Oregon. And that's just to name a few.

But the investments have always been directed at cleantech companies or utility-scale projects. Google's investment in distributed renewable energy -- meaning power that's generated and used right at home -- represents an entirely new angle to its clean energy business model.

Unlike some of Google's philanthropic clean energy investments, this one is meant to generate returns, although the search engine giant hasn't revealed details about what that means. Based on hints to a few media outlets, it looks like a relatively low-risk investment meant to generate returns in the short term.

The cornerstone of SolarCity's business model

Surprisingly, SolarCity is one of only a handful of solar installers (Sungevity's another) out there that actually offer financing options. Customers can either lease the entire residential solar system for a monthly fee or sign a power purchase agreement, which requires them to pay for the electricity generated, but not the equipment.

Why more companies haven't made financing the cornerstone of their business model is beyond me. The upfront cost of solar equipment is a deal killer for many homeowners, even those who understand they'll see savings in the long term. It's simply cost prohibitive for the masses. But these are exactly the folks solar companies need if they hope to go mainstream.

For example, SolarCity has more than 15,000 solar projects completed or underway. More than 80 percent of those customers chose financing options. SolarCity has gone after this market with gusto. The company, founded in 2006, has set up 15 funds with seven different partners to finance $1.28 billion in solar projects. Up until now, most of these funding partners were banks like Citigroup (C). If Google's investment proves anything it's that the business of solar financing is no longer restricted to the financial industry.

Photo from SolarCity