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Google’s investment generates returns three ways. Google gets a tax credit from the federal government of 30 percent of the cost of the solar projects, in this case $84 million. It also can write off the total value of the systems in the year they are built, an accounting benefit called accelerated depreciation. The value of state and local tax credits also flow to Google.

Finally, SolarCity pays Google interest for the use of the funds through the rates it charges customers, though neither company will say how much.

Google also declined to compare the return on its solar fund with the company’s overall profit margin. In 2010, Google earned $8.5 billion on $29.3 billion in sales, a profit margin of 29 percent.

Google investors have questioned investments that have little to do with the company’s main Internet businesses and that may be potentially risky or generate lower returns. In a meeting with investors last month, Google CFO Patrick Pinchette said tax benefits of these projects can generate high returns.

“In order for us to invest in them they have to do very well from a returns perspective,” Pinchette said.

Nathaniel Bullard, a solar analyst at Bloomberg New Energy Finance, estimates that these types of residential solar funds generate returns for the primary investor of well over 10 percent, and perhaps as high as 20 percent, including the value of the tax benefits.

Google _ and solar installers _ hope that this investment will inspire other corporations to establish similar funds.

“The number one constraint for the last few years has been the lack of project financing,” said Lyndon Rive, CEO of SolarCity. “Once corporations start entering this space it will bring more affordable solar to millions of homes.”

Jonathan Fahey can be reached at http://www.facebook.com/Fahey.Jonathan

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