How to Execute a Residential Solar and Storage Asset Securitization: A Step-by-Step Guide

Introduction

Securitization has become a vital tool for companies like Sunrun—America's largest provider of home battery storage, solar, and home-to-grid power plants—to unlock capital from their renewable energy assets. In 2026, Sunrun priced its 16th securitization since 2015, a $584 million transaction backed by leases and power purchase agreements (PPAs). This guide walks you through the process of structuring and executing a similar residential solar and storage asset securitization, using Sunrun's proven approach as a reference. Whether you're a renewable energy financier, a solar developer, or an investor, understanding these steps will demystify how billions of dollars flow into the clean energy economy.

What You Need

Before diving into the steps, ensure you have the following prerequisites in place:

• A portfolio of residential solar and storage contracts, including leases and/or PPAs with homeowners (typically 3,000–5,000+ contracts to diversify risk)
• A special purpose vehicle (SPV) – a bankruptcy-remote entity to hold the assets and issue securities
• Legal counsel with expertise in asset-backed securities (ABS) and renewable energy regulations
• An underwriter or investment bank to manage the offering and pricing
• Credit rating agencies (e.g., Moody's, S&P) to rate the tranches
• Financial modeling and due diligence teams to analyze historical performance, cash flows, and default rates
• A servicing platform for ongoing customer billing and contract management

Step-by-Step Guide to Securitizing Residential Solar & Storage Assets

Step 1: Assemble and Underwrite the Asset Pool

The foundation of any securitization is a high-quality pool of income-generating contracts. For a solar and storage ABS, these are typically leases or PPAs with residential homeowners. Start by selecting contracts with strong credit profiles—e.g., high FICO scores, consistent payment histories, and favorable geographic diversification. Sunrun's 2026 deal pooled thousands of such contracts. Perform detailed due diligence: verify contract terms, check for any legal or regulatory issues (like net metering agreements), and stress-test cash flows under various scenarios. The goal is to create a pool that can reliably generate the expected payments to bondholders.

Step 2: Establish a Special Purpose Vehicle (SPV)

Next, set up a bankruptcy-remote entity, usually a trust or LLC, that will purchase the asset pool from Sunrun (or your company). This SPV isolates the assets from the originator's risk—if Sunrun goes bankrupt, the securitization assets remain ring-fenced. Transfer the solar leases and PPAs into the SPV, ensuring proper legal assignment and perfection of security interests. The SPV will be the issuer of the securities, so it must have no other liabilities.

Step 3: Structure the Transaction and Define Tranches

Work with your underwriter and financial advisors to design the capital structure. Typically, securitizations have multiple tranches with different risk and return profiles. For Sunrun's 2024-2026 deals, you might see senior tranches (AAA-rated) and subordinated tranches (BBB or lower). Decide on the size, coupon, and maturity of each tranche based on the asset pool's cash flow waterfall. The senior tranches get paid first but offer lower yields; junior tranches absorb losses first but offer higher returns. Also, include a reserve account or excess spread to enhance credit quality.

Step 4: Engage Rating Agencies and Obtain Preliminary Ratings

Submit your transaction structure and asset pool data to at least two credit rating agencies. They will perform their own analysis—evaluating historical performance, contract characteristics, and structural protections. Provide all necessary documentation, including legal opinions, cash flow models, and servicer quality assessments. The agencies will assign preliminary ratings (e.g., AAA, AA, A) to each tranche, which directly impact investor demand and pricing. Sunrun's repeated securitizations benefit from a track record that helps secure favorable ratings.

Step 5: Price the Offering

With preliminary ratings in hand, your underwriter markets the securities to institutional investors—pension funds, insurance companies, asset managers, etc. Conduct a roadshow presenting the asset pool's strengths, the SPV's structure, and the ratings. Gather indications of interest and then set a final price (the yield or spread over a benchmark like Treasuries). In Sunrun's case, the $584 million deal was priced based on investor demand and prevailing market conditions. The price determines the interest rate paid to bondholders and the proceeds your company receives.

Step 6: Close the Transaction and Issue Securities

After finalizing the pricing, execute all legal documents—the sale agreement, trust indenture, servicing agreement, etc. Transfer the asset pool's ownership to the SPV (if not already done). Then, the SPV issues the securities to investors, and you receive the net proceeds (typically around $580 million after fees). Sunrun has closed 16 such deals since 2015, each time raising capital to fund new solar and storage installations. Post-closing, ensure the SPV is properly recorded and the collateral is pledged.

Step 7: Manage Ongoing Servicing and Reporting

After issuance, your company (or a third-party servicer) continues to manage the underlying contracts—collecting lease/PPA payments, handling customer service, and enforcing defaults. Provide regular reports to the trustee and rating agencies on performance metrics, such as delinquency rates, prepayments, and losses. Sunrun's servicing platform ensures consistent cash flows to investors, maintaining confidence for future securitizations. Also, comply with SEC and exchange requirements if the securities are publicly traded.

Tips for a Successful Securitization

• Build a strong track record: Sunrun's 16 securitizations show that repeat issuers get better pricing and terms. Start with a smaller deal and grow.
• Focus on contract quality: High credit scores, long remaining terms, and stable regulatory environments (e.g., net metering) reduce risk.
• Time the market: Interest rates and investor appetite fluctuate. Work with your underwriter to launch when spreads are tight.
• Consider green labeling: Solar and storage securitizations can qualify as green bonds, attracting ESG-focused investors. Sunrun often highlights environmental benefits.
• Maintain transparency: Disclose detailed pool data and performance history to earn investor trust. Over time, this lowers your cost of capital.
• Plan for contingencies: Include credit enhancements like overcollateralization, excess spread, or a reserve fund to protect against unexpected losses.

By following these steps, companies can unlock billions in capital to expand residential solar and storage adoption, just as Sunrun has done repeatedly since 2015.