Overview
Securitization has become a critical financing tool for the residential solar and storage industry. In early 2026, Sunrun, America’s largest home solar and battery storage provider, priced its 16th securitization since 2015 — a $584 million transaction backed by leases and power purchase agreements (PPAs). This guide walks through the entire process of securitizing residential solar and storage assets, using Sunrun’s landmark deal as a real-world example. You’ll learn what securitization is, why companies use it, the exact steps involved, common pitfalls, and key takeaways.
Skip to Prerequisites | Skip to Step-by-Step Instructions | Skip to Common Mistakes | Skip to Summary
Prerequisites
Understanding Asset-Backed Securities (ABS)
Before diving into the process, you need a foundational understanding of asset-backed securities. An ABS is a financial instrument backed by a pool of income-generating assets — in this case, solar leases and PPAs. Investors receive payments from the cash flows generated by those assets.
Key Stakeholders
The securitization process involves multiple parties:
- Originator: The company that owns the assets (e.g., Sunrun).
- Special Purpose Vehicle (SPV): A bankruptcy-remote entity that purchases the assets from the originator and issues the ABS.
- Underwriter: Investment banks that structure the deal and sell the securities to investors.
- Rating Agencies: Evaluate the credit quality of the ABS tranches.
- Investors: Institutional buyers (pension funds, insurance companies, etc.) seeking stable cash flows.
Data and Documentation
To replicate a securitization like Sunrun’s, you need:
- A portfolio of residential solar leases or PPAs with consistent historical performance data.
- Legal agreements for asset transfer, servicing, and investor rights.
- Cash flow models projecting prepayment, default, and recovery rates.
Step-by-Step Instructions for Securitizing Residential Solar & Storage Assets
Step 1: Asset Pool Assembly
Identify and aggregate a pool of solar leases and PPAs that meet predefined quality criteria. Sunrun’s $584 million deal likely included thousands of residential contracts with strong credit profiles. Key factors:
- Contract type: Leases vs. PPAs — both produce predictable monthly payments.
- Geographic diversity: Spread across states with stable solar policies.
- Customer credit quality: FICO scores, payment history.
- Equipment performance: Solar panel and battery efficiency data.
Use a data analysis framework to validate the pool’s homogeneity and cash flow consistency.
Step 2: Legal Structuring (SPV Creation)
Create a Special Purpose Vehicle (SPV) — a separate legal entity that will hold the assets and issue the securities. This ensures bankruptcy remoteness: if Sunrun were to go bankrupt, the SPV’s assets remain ring-fenced for investors. The SPV purchases the solar lease/PPA contracts from the originator. Legal counsel drafts:
- Asset sale agreement
- Servicing agreement (Sunrun often retains servicing rights)
- Indenture (trust deed)
Step 3: Tranching and Credit Enhancement
Divide the ABS into tranches with different risk-return profiles. For example:
- Senior tranche (AAA-rated): Low risk, lower yield; absorbs losses last.
- Mezzanine tranche (A/BBB): Moderate risk, higher yield.
- Equity tranche (unrated): Highest risk, highest potential return; absorbs first losses.
Sunrun’s deal likely included credit enhancement mechanisms such as overcollateralization (pool value > securities issued), reserve accounts, or excess spread to protect senior investors.
Step 4: Due Diligence and Rating Agency Review
Underwriters conduct thorough due diligence on the asset pool, legal documents, and cash flow models. Rating agencies (Moody’s, S&P, Fitch) assign ratings based on:
- Historical delinquency and default rates
- Prepayment speeds (e.g., customers buying out leases early)
- Economic scenarios (e.g., recession, changes in net metering policies)
Step 5: Marketing and Pricing
The underwriter markets the ABS to institutional investors through a roadshow. Pricing is determined by supply/demand and the credit quality of tranches. On the pricing date (like Sunrun’s announcement), the final terms are set: size ($584 million), coupon rates, and spreads over benchmarks (e.g., Treasuries or SOFR).
Step 6: Closing and Issuance
Investors wire funds to the SPV, which issues the securities. The originator receives the proceeds (minus fees), which can be used to originate new solar/storage projects, pay down debt, or fund operations. Sunrun noted this was its first issuance in 2026, signaling a continued reliance on capital markets for growth.
Step 7: Post-Issuance Servicing and Reporting
Sunrun (as servicer) collects monthly payments from homeowners and passes them to the SPV, which distributes cash flows to investors according to the waterfall structure. Regular reporting includes:
- Delinquency and default metrics
- Prepayment rates
- Portfolio performance vs. projections
Common Mistakes to Avoid
Inadequate Data Quality
Poor historical data on customer payments or equipment performance can lead to inaccurate cash flow modeling. Sunrun’s 15 prior securitizations gave it a robust data set; newcomers must invest in data infrastructure.
Ignoring Regulatory Risks
Changes in net metering policies, state renewable portfolio standards, or federal investment tax credits can affect asset cash flows. Sensitivity analysis should include worst-case policy shifts.
Overly Complex Tranching
Too many tranches with narrow credit spreads can confuse investors and increase costs. Stick to 2-3 tranches for most solar/storage ABS deals.
Misalignment of Servicing Incentives
If the originator retains servicing but has no equity stake, they may lack motivation to collect payments aggressively. Structuring a retained equity tranche (like Sunrun often does) aligns incentives.
Neglecting Legal Costs
Securitization requires expensive legal and accounting advice. Budget at least $1-2 million for a deal of Sunrun’s scale — underestimate legal fees and you’ll face delays.
Summary
Securitization of residential solar and storage assets offers a powerful way to unlock capital for growth, as demonstrated by Sunrun’s $584 million 16th issuance. The process involves assembling a high-quality pool of leases/PPAs, creating a bankruptcy-remote SPV, structuring tranches with credit enhancement, obtaining ratings, pricing the deal, and ongoing servicing. Avoiding common pitfalls — especially data quality and regulatory assumptions — is crucial. With the right team and preparation, any established solar/storage provider can replicate this financing strategy to scale their operations.
Keywords: securitization, residential solar, storage assets, Sunrun, asset-backed securities, ABS, solar leases, PPAs, credit enhancement, tranching.