Solar Leasing Taking Off As Preferred Model

We’ve been hearing about this trend for awhile – the solar leasing model is really picking up steam, making solar easily affordable to people.

Rather than buying solar panels upfront – which is still unaffordable for many people – and saving money on electricity in 5-10 years after they’ve been paid off, they simply lease the solar panels and pay a monthly electric bill.

The solar company essentially becomes a utility. They sign a long term contract with the homeowner or business at a monthly price less than their utility bill. Besides saving money immediately, customers are shielded from rising electricity prices.

This solar leasing model is surging in Southern California, says e U.S. Department of Energy’s (DOE) National Renewable Energy Lab (NREL).

A NREL study finds that people who live in neighborhoods with average household incomes of $150,000 or more tend to buy solar systems outright, and for incomes of $100,000 or more go for solar leasing.

Applying this nationwide opens solar to 13 million Americans – and that could push solar energy into the mainstream.

"What is so interesting about the southern California data is that the strong decrease in PV prices – from lower retail costs and stronger federal incentives – didn’t pick up a new demographic, but a new business model – leasing – did," says Easan Drury, lead author of NREL’s report, "The Transformation of Southern California’s Residential Photovoltaics Market through Third-Party Ownership."

It’s not surprising though that people respond well to saving money immediately without upfront costs.

The study also found that solar leasing is more popular in neighborhoods with younger families.

In the Los Angeles and Orange County markets, customer-owned PV was five times more prevalent than third-party-owned PV in 2009. In 2010, the ratio had dropped to 2:1. And for the first quarter of 2011, the ratio was almost even.

NREL analyst Michael Mendelsohn selected SolarCity‘s "$0 Down Plan" and pays just $22 per month to lease a 3 kilowatt system – it covers most of his electric bill and already gives him a net savings each month.

On the other hand, Lori Bird, another NREL employee, bought her system outright two years ago before third-party leasing was widely available. Her 5 kilowatt system covers most of the electricity use. "We refinanced our house and rolled it into the new mortgage. We save more from the PV system than we pay extra in mortgage," she says.

Another family put $5,000 down for a system that provides 120% of their electricity (the utility’s limit). They pay $13 a month for the lease and get paid for sending the rest back to the grid under net metering. They plan to charge an electric car from the panels too.

Solar leasing companies vary in their prices, so it makes sense to shop around. Also, some companies’ lease terms remain the same over 20 years, but others rise 3% a year to counter inflation.

Here’s the report:

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Comments on “Solar Leasing Taking Off As Preferred Model”

  1. Chrisg1978

    Leasing seems to be surging. A lot of that is because its being sold as better than ownership-when it isn’t. Lease/PPA problems will start rearing their heads when people’s utility rates decrease and they are not saving anything at all , or worse spending more for solar electricity. Meanwhile, these leasing companies and the financial institutions backing them are going to be walking away with billions in tax incentives, energy credits and profits. When these problems start to rear their ugly head the solar industry is going to be bashed left and right(just like the beating it took with Solyndra). That is something no one in this industry can afford right now.

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  2. Mary J

    There are great solar incentives available now that may expire soon. Pushing for the feds to extend the incentives. We have observed exactly the same trend you are reporting. The higher income residents are installing solar and seeing almost an immediate savings. Younger homeowners who are more tech savvy are doing the same. The pilot program in California for residents to sell back to the grid has recently been published. I anticipate that eventually renewable energy will be the standard.

    Mary J

    http://solaruniversecalifornia.com/sce

    Reply
  3. Solarman

    I installed a 5KW system less than 3 years ago that I purchased outright for $5/Watt (meeting 85% of electric needs), before VA state $2 rebate and 30% federal rebates, which reduced the installed cost from $25K to $8K. I also was able to get registered for Solar Renewable Energy Credits and have been able to sell about 6.5 per year for the last 2 years at $250/MWH generated. Earlier this year, I locked in another 3 years of SCREC sales for $4500. I also installed a solar thermal hot water system and sold 10 years of SRECs upfront, meaning I actually got paid $500 more than total installed price and now save at least $20/month with this solar hybrid system. I also did super insulation on my home. Last month, my electric bill was $8. Since that time, solar modules have fallen to $.80/Watt, with turnkey systems able to be bought online for $2.25/Watt. I bought this micro-inverter system online, then negotiated a fair install wage. The point is that while solar leases are great that can’t get over the finance hurdle, there is a reason why these companies are in this business. My system will crank out steady profits for the next 22+ years – new manaufacturing tech should drive the cost down to $1/installed watt, which equates to $.05/KWH or roughly half what your coal and nuclear powered utility charges for retail. Solar is a superb investment, so good that I will soon be adding an additional 3KW to eliminate the need to buy gasoline, while saving $.10/mile. Batteries and LED lights will follow the same curve and every year the technology improves, while the cost falls, due to now global production. Time to get on the clean energy train!

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  4. Jonezin_va

    Chris1978~ Have you ever seen your electricity rate go down?

    Most people would say “never”. Most people have had their electric bill double in less than 5 years.

    Reply
  5. Joe

    Solar will not be “bashed from the left and right”, just from the Right. Solydra was hung in the tree next to Obama and I pray we all see what strange fruit we’ve been consuming.

    Reply
  6. ajaysmith908

    Lease is a great option for people who want to reduce their carbon footprint and produce their own solar energy. Invesetment costs are high, if you have the credit leasing panels is a great model

    Reply
  7. Ray Boggs

    A solar lease is one of the absolute worst ways to finance the rental of a solar system. First of all you have to forfeit the 30% federal tax credit which is worth about $10,000.00 on a typical 6 kW system. You’ll also have to forfeit any cash rebate.

    The leasing companies will tell you that they will apply the tax credit and cash rebate to the system price so that you’ll lower the acquisition cost but the leasing company’s pricing is so over inflated that the tax credit and rebate as large as they are will hardly make a dent in their price.

    Instead of an expensive solar lease or PPA, consumers are now getting $0 down solar loans that require no equity, that offer tax deductible interest and allows you to keep the 30% federal tax credit and any other incentives and own your solar system for a much greater return on investment than any lease or PPA.

    And good luck ever selling your home with a lease attached to it. What homebuyer will want to assume your lease payments on a used system, when they can buy and own a new state of the art system for less than $3.15 a watt, installed, before incentives? Don’t take my word for it, search the Internet and you’ll find many articles concerning homeowners who are having difficulty selling because they have solar leases attached to their homes.

    Reply

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