Residential Solar ABS: Performance Divergence Between Loan and Lease Structures
The residential solar ABS sector has experienced a meaningful bifurcation in performance between loan-backed and lease-backed transactions. While both structures are exposed to consumer credit and energy market dynamics, solar loan ABS transactions have experienced weakening credit performance, whereas solar lease ABS transactions have remained broadly stable. This report examines the structural differences between solar loan and lease collateral, compares securitized credit performance, and analyzes the drivers of divergence.
Key Takeaways
Solar loan ABS has underperformed solar lease ABS, with higher losses and greater ratings migration. Solar loan cumulative gross loss (CGL) for 2018 to 2025 vintages ranged from approximately 1.5%-6% at 24 months of seasoning versus 0.5%-2% for solar leases. Consequently, solar loans had a lower KBRA rating stability ratio (KSR)1 of 83.6% compared to 98% for leases.
Although recent vintage solar…
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