News and analysis about energy in California with an eye toward renewables.

Rooftop Solar Leasing Dominating Residential Market in California

A mid-sized solar installation in Mello, California | Photo: Bernd/Flickr/Creative Commons License

If you've been to a large chain hardware store recently, you've seen the display kiosks in the aisles that tell you you can install solar panels on your home for no upfront costs. The companies behind these ads make up what just might be the fastest growing section of California's renewable energy trade: solar leasing companies.

The basic idea behind solar leasing is that a firm will inspect a property, determine whether it's suitable for solar and how much, then install solar photovoltaic panels. Property owners don't have to shell out thousands of dollars in upfront costs; many pay nothing upfront at all. Instead, they pay a fixed-rate monthly lease fee to the leasing company. The property owners pay less in lease fees than they did in monthly electric bills, and they get the satisfaction of consuming renewable electricity.

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If that seems like a sweet deal for the property owner -- and it often is -- it's arguably even sweeter for the leasing companies, which sell the power generated on your property to the local utility, as well as collecting any rebates or discounts offered by the utility. And unlike utility-scale PV developers who have to pay rent on or buy land to install their panels, the leasing companies installed their panels on your property and have you pay them for the privilege.

With a win-win business plan like that, it's no wonder solar leasing is growing even as other sectors of the PV industry are retrenching. According to SunRun, which pioneered the solar leasing business model, 73% of Californians who install PV on their property now use solar leasing firms. In addition to SunRun, firms such as Solar City, Sungevity, and Solar Leasing of California have entered the market aggressively.

There are critics of the leasing model. In late June Hagens-Berman, a Seattle-based law firm, started seeking interviews with SunRun customers to see if there were grounds for a class action lawsuit over deceptive business practices in California. At issue are the length and terms of the contracts. Most leasing firms' contracts include an escalating lease fee, explained away by the leasing companies as still less than increasing energy costs would have been.

But the assumption that grid electricity prices will continue to increase at 6-7%, a figure often cited by leasing companies, may not hold true in the medium term. Due to the controversial practice of hydraulic fracturing or "fracking," natural gas has been steadily dropping in price and is about to overtake coal as the U.S.'s main source of electricity. Customers locked into a 20-year contract with increasing fees while electricity from the gas-powered grid gets cheaper may find themselves regretting their decision to lease.

Still, business forecasters are optimistic enough about solar leasing as a business model that a number of banks announced last week that they are looking into the possibility of "securitizing" solar power. In other words, banks' underwriters are thinking about creating a new derivatives market based on future income from existing solar power installations. This would allow investors to gamble on the future of the rooftop solar market, theoretically generating capital that could be lent to solar leasing firms for new installations.

Will this be a shot in the arm for the industry, or gateway to yet another financiers' gutting of an entier industry? It's too soon to tell, but the between that and the possibility of a class action suit the next few months will certainly be interesting ones in the land of solar industry wonkdom.

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About the Author

Chris Clarke is a natural history writer and environmental journalist currently at work on a book about the Joshua tree. He lives in Joshua Tree.
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Believe me, a solar lease or PPA is no "sweet deal" for the consumer. First of all, there's absolutely no such thing as a $0 down solar lease or PPA and here's why. A requirement of both of these financing programs is that you agree upfront to give the leasing or PPA company the 30% federal tax credit which is worth thousands of dollars as well as any other financial incentives.

The CEC currently reports an average system price of $6.07 a watt. Even if you subtract a gracious 50 cent per Watt rebate, that's $5.57 per Watt. At that price a 6 kW solar system would yield a federal tax credit of $10,026.00!

With a $0 down loan instead of a lease, you'll get to keep the 30% federal tax credit as well as all other applicable financial incentives for yourself and you'll own your solar system instead of renting it, for a much greater return on investment.

Today you can purchase and own a completely installed, name brand, grid tie solar system for only $3.15 a watt before incentives, which is as low as 1/3 the cost that you'll pay with 20 years’ worth of leasing payments, especillay if you get suckerd into an annual payment escalator.

And if you do decide to lease instead of own, good luck ever selling your home with a lease attached to it. What homebuyer will want to purchase your home and assume your remaining lease payments on a used solar system on your roof, when they can buy and own a brand new solar system for tens of thousands less. Don't get fleeced by the solar leasing companies.