SolarCity expands into Mexico with $15m purchase of Ilioss

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U.S. solar leasing and financing company SolarCity confirmed Wednesday that it is to acquire Mexican solar installer Ilioss for $15 million in a venture that marks the company’s first foray into foreign markets.

Ilioss operates a similar business model to SolarCity, and has been in business for four years following its creation by entrepreneurs Manuel Vegara and David Arelle. SolarCity will pay $10 million in cash and a further potential $5 million in deployment milestones to acquire the company.

With excellent solar irradiation levels, high utility electricity prices, a growing middle class and close proximity to the U.S., the Mexican solar market is one of immense potential, and SolarCity sees it as the perfect "jumping off point" for any further expansion into Latin America.

Ilioss’s approach to solar growth has been largely similar to SolarCity’s, with the company even partnering with large Mexican department store chain Soriana to install solar panels atop the roofs of hundreds of its stores. The installer offers low upfront costs for customers, and charges them cheaper monthly rates for their solar electricity than the utilities, sometimes by as much as 15%.

Initially, SolarCity will work with Ilioss in the industrial and commercial market before venturing into the residential sector.

"Mexico is an exciting market for us," remarked SolarCity SVP of global strategies and global expansion Marco Krapels. "We believe we have an opportunity to dominate that market in the same way that we dominate the market in the U.S."

SolarCity CEO Lyndon Rive cited Mexico’s accelerating solar installation rates as a persuasive pull factor for the company, stating that growth will likely be faster in Mexico than the U.S. because of less red tape and a simpler grid interconnection process.

"I’m convinced that the Mexican market will scale way faster than the U.S. market," Rive said.

Mexico is targeting 5% renewable energy penetration nationally by 2018, and 35% by 2024. Recent energy reforms have been passed enabling big businesses and industrial consumers to buy energy directly from independent power producers rather than the state-backed utility behemoths. The effect is an ongoing liberalization of the energy market, with solar at the forefront of change.

SolarCity’s involvement on Ilioss’ patch will see the U.S. installer bring its installation, marketing and engineering expertise to the table, and will self-install all solar arrays themselves. Currently, Ilioss uses third-party contractors to complete installations, which brings an added cost dimension to the client.