SolarCity is taking aim at the small and medium business (SMB) installation market.

The #1 US residential installer will allow SMBs to pay less for solar compared to utilities under a new offering. SolarCity will allow for flat & fixed payments over 20 years for the solar electricity. This allows SMB customers to save if future utility rates go up.

Meanwhile, California SMBs will pay 5–25% less for solar electricity than they normally would through a utility, according to SolarCity. The California-based solar company plans to create SMB solar plant systems between 30 kW and 500 kW in size for buildings that have 5,000–50,000 square feet of flat roof space.

The SMB market is potentially a huge market for solar installers. Considering 99% of US businesses are small businesses, which also create most new net private sector jobs (64%), it’s a no-brainer that SolarCity is tapping into this area.

SolarCity Chief Executive Nelson Rive told the Los Angeles Times this type of service has never been available to SMB’s:

“No solar company has successfully addressed this market on a large scale,” Rive said. “Why don’t these companies have solar on those roofs? There’s no product available to them.”

The trouble, Rive said, is that it generally has cost too much to develop and install a solar array on the roofs of small businesses. The solar companies had to spend time customizing the system, which created design costs and legal fees. And with installation of the panels farmed out to subcontractors, the deal never made economic sense.

The challenge for SMBs in having solar installed has largely been due to lack of credit access. Solar Energy Industries Association (SEIA) Vice President Sean Gallagher also told the LA Times that companies that fix solar financing issues for SMB installations will see massive demand from small businesses.

SolarCity is leveraging three critical pillars to give the best deal in solar for SMBs.

First, with its installation process, SolarCity does not subcontract its installation work, unlike many of its commercial competitors. Rather, it has a wide base of network installers, which reportedly install solar for SMBs at a lower price compared to its competition. Using in-house technology and its own force of installers, SolarCity predicts a 30% savings in the cost of small commercial projects. This is vital as SolarCity uses its extensive reach to give efficient services and the best value to SMB consumers looking to go solar.

Second, SolarCity innovates through financing. By partnering up with Renew Financial, SolarCity has a low-cost financial option for SMBs, and Property Assessed Clean Energy (PACE) financing via the CaliforniaFIRST program. Here, SMBs can sign up for a standard leasing option, where SolarCity takes on the upfront costs. Later, the SMB makes its solar payment on its property tax bill through PACE. SolarCity will handle all aspects of maintenance, operation, and installation of the solar system.

The third pillar is through its technology. By using its own solar mounting system, the ZS Peak, this allows for 20–50% more panels installed in a SMB solar energy system. Another advantage with this system is that it allows installers to put panels up more quickly, increasing efficiency, decreasing cost, and improving energy production.

SolarCity will roll out its initial SMB service in California, with expectation of further expansion on the East Coast by 2016.

I will be curious to see how well this service does this quarter, given its potential in an area which has largely gone untapped till now.