A few weeks ago, American Honda announced an innovative financing partnership with Solar City, a major solar installer. (Full disclosure: My wife works for Solar City).  Under the terms of the deal, the carmaker will use $65 million its own money to pay for its customers and dealers to install solar panels on their properties and reduce their future electric bills.

The money involved is not a big deal in terms of corporate finance, so why do I think this announcement is a big deal? Because it could, if other companies follow Honda’s lead, be the key to providing the investment dollars the solar industry needs to make rapid inroads throughout the country.

What’s holding up the solar industry?

The cost to install solar energy is declining rapidly — panel prices fell by 41% in the fourth quarter of 2012 compared to the previous year.  This helped solar installations in the United States to grow rapidly in 2012, from 1,855 megawatts (MW) in 2011 to 3,300 MW.  (The average coal plant in the U.S. has a capacity of about 650 MW).  Even better, annual installations are projected to climb to an estimated 9,000 MW in 2016.

Right now, a lack of investment capital may be the biggest barrier to the industry’s continued  growth. Bloomberg New Energy Finance forecasts that the industry will need $3.1 billion of equity investment in 2013, compared to $1.8 billion in 2012.  This need for investment comes at a time when American corporations – excluding financial firms — are sitting on $1.7 trillion, some of which could easily be invested in the solar industry, earning substantial returns, in dollars and good will, for corporate lenders.

Corporate America has a Flare for Solar Industry Investment | Environmental Defense Fund.