Lease Solar Equipment and Put Renewables Within Your Reach
Aahhh...finally...a business model to lease solar equipment is making solar electricity affordable for the rest of us. The concept is not new. Back in the day, when I worked for a solar inverter manufacturing company in New Hampshire, my colleagues and I would brainstorm on profitable ideas that would commercialize renewable energy fast, and leasing to homeowners was always at the top of the list.
The solar lease model would not only be hugely profitable, but also useful jump starting the solar industry, if you will. Only, there was a big problem with execution: cost. Cost in addition to inventory, and financial backing.
It took a great deal of initiative and collaboration between government, banks, manufacturers and solar integrators, but after several years of back and forth, formulating the approach to lease solar equipment became reality. This is a prelude to a new type of utility company, where the homeowner is generating electricity, paying a private company to lease solar equipment (or wind or fuel cell, etc.), have it maintained and repaired, AND feed any extra electricity back into the utility grid (net-metering).
Solar panel leasing has a great potential for creating a win-win for the consumer and there are now a few solar leasing companies offering services in several states. Leasing solar panels is a long-term deal, longer than leasing a car. Typical periods are between 10-20 years, with an "electricity rate" that is locked in for that period. This rate is usually comparable to the rate you are currently paying to your utility company (plus or minus), and is guaranteed for the duration of your lease. This is one of your primary benefits - insurance against the rising cost of electricity in the future - the other, of course is reducing your carbon footprint.
I, particularly, like the solar lease model versus a large centralized solar utility generating power from a solar farm. Distributed power is less vulnerable to large system glitches, and has a lower environmental impact. When you lease solar equipment, you claim a certain amount of autonomy. If one home goes down, there is no impact on your home. It can also be customized to each home's usage, and it creates more awareness of electricity use. If homeowners are properly educated in their energy use, and learn how to time their appliances properly to not oveload their system (not run the dishwasher and washing machine at the same time, etc.), we would naturally learn to conserve energy. Or, so is my hope.
With all of this, however, there are pros and cons to dealing with companies that lease solar equipment. A while back, I received a great question from a reader about solar leasing pros and cons, which I share below.
From Bob Lawrason:
I came across your site and was particularly looking for solar leasing info. Your site is one of the best ones I have seen and the only one recommended by SBIs link exchange I would consider. I am in search for solar leasing and would be interested in any leads comments or whatever you may feel helpful.
First, thank you for your question and comments about my "infant" website, much appreciated. I hope you keep revisiting as it grows...
Cutting to the chase, I do know of three companies that lease solar equipment; they all operate similarly with similar equipment/panels, services and rates. The "big" 3 are SunRun, Sungevity, and SolarCity. They all provide a zero down or $1000 down solar lease, with generally a 20-year period, charge a fixed monthly electricity rate which would still be slightly less per month than a utility company's. They seem to own all the equipment, and therefore, have total control.
I don't know much about Sungevity yet, but SunRun has been getting some buzz in the news lately, and I see SolarCity's Google ads on the internet pretty often.
Here are the pros to these companies:
- The no-money-down to lease solar equipment is a very attractive option for people, and the surest method of commercializing solar electricity for you and me. This is a great way to get solar into every home, especially, subsidized housing. Renters in subsidized housing as well as lower-income households can particularly benefit from and impact the solar market on a large scale...
- These companies have bargaining power, so, they can adjust rates because of economies of scale. For YOU, that translates to your own bargaining power, especially if they are in new territory and hungry for customers to subscribe. E.g., drive a hard bargain and haggle the rate down - after all, they will have your business for 20+ years.
- The solar lease companies maintain all of the panels and balance of systems parts (electronics, etc.) - something goes wrong, you call them, they'll switch out a panel, or an inverter, etc. That is sweet, until a whole bunch of homes go down, and they get swamped with repair calls (not so much snowstorms, more like wind storms).
For each one of the pros above, there is the flip side con:
- Usually, zero-money-down to lease solar equipment means that you will pay a higher price in the long run for the system, even at a lower-than-utility-company fixed price.
If you buy your own system and have it professionally installed by qualified/certified solar installers, you will likely be able to benefit from substantial incentives, credits (exemptions on your taxable portion of utilities and property) and tax credits from federal, state, local or utility programs.
Depending on where you live and what programs you apply for, your payback period can be dropped from the typical 25 years without these subsidies down to 8-12 years.
Also, if you decide to buy the system yourself, you can add in other energy improvements into an energy project and apply for an energy efficient mortgage (OK, you probably know that I believe I'll see fairies before a real EEM, but prove me wrong).
One other consideration is that if you have a home equity loan and can purchase the system through it, your rate will likely be lower than an EEM loan (~2.5-5%), and your interest payment might be tax deductible as well.
- The solar equipment installed by most of these companies generally employ "traditional" solar panels, with average efficiencies of 8-12%, and a "one size fits all" approach.
That's not a bad thing, since standardization also provides efficient installation, maintenance, etc. However, if you buy the system, you have a choice in the solar panel technology you support. New solar photovoltaic technologies have higher efficiencies, therefore reducing the cost per watts of installed solar electricity. As of this writing, the installed cost of solar electricity without any rebates or subsidies is about $8 to $10 per watt. An average household of 4 people reasonable uses 3,000 to 5,000 watts (3 to 4 kilowatts).
My guess is that the solar panels installed on your roof or property will be obsolete and/or drastically lose their efficiency by their 12th or 15th year, or maybe even sooner(?)
- You are entering a long-term contract with a company to lease solar equipment, and agreeing to its terms, who will hopefully be there for the duration of your contract, but what if...?
- The leasing company is the beneficiary of all the incentives, rebates, credits, etc. I am not sure how net-metering works if you lease solar equipment. I imagine, the lease company directly negotiates with the power utility regarding net-metering. Be sure to find out who gets the credit for net-metering.
Just some food for thought. If you do decide to lease solar equipment here are a few final comments:
- Make sure that your system is properly sized.
- It would be in your interest to get the best quality solar panels for your system.
- Most importantly, before you launch your renewable energy initiative, button up your home, and find ways to reduce your electricity consumption. Without energy efficiency measures, your home will still be generating waste, and your solar system will probably be sized larger (more expensive) than it needs to be.
If you decide to pursue the buy-your-own option, remember to check www.dsireusa.org for current information on incentives. While it is mind-numbing and challenging work, the financial reward is well worth it.
In addition, qualified solar contractors should know about the applicable incentive programs, and help, if not, file the applications for you. One final thing to remember is that a professional energy audit will often help get higher rebates due to a home energy rating.
This is the best picture I can paint of the current solar lease status. All in all, it is a promising market-driven endeavor.
Return from Companies that Lease Solar Equipment to Energy Rebates, Credits, etc.
Return from Energy Efficient Mortgage Lenders to HomeEnergyFaire Home