Skip to main content

Rooftop Solar Leasing Dominating Residential Market in California

Support Provided By
rooftop-solar-install-7-16-12-thumb-600x337-32402

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.


Related

pv-solar-thermal

Explained: Understanding PV and Solar Thermal

understanding-distributed-energy

Explained: Understanding Distributed Generation
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.

ReWire is dedicated to covering renewable energy in California. Keep in touch by liking us on Facebook, and help shape our editorial direction by taking this quick survey here.

Support Provided By
Read More
Gray industrial towers and stacks rise up from behind the pitched roofs of warehouse buildings against a gray-blue sky, with a row of yellow-gold barrels with black lids lined up in the foreground to the right of a portable toilet.

California Isn't on Track To Meet Its Climate Change Mandates. It's Not Even Close.

According to the annual California Green Innovation Index released by Next 10 last week, California is off track from meeting its climate goals for the year 2030, as well as reaching carbon neutrality by 2045.
A row of cows stands in individual cages along a line of light-colored enclosures, placed along a dirt path under a blue sky dotted with white puffy clouds.

A Battle Is Underway Over California’s Lucrative Dairy Biogas Market

California is considering changes to a program that has incentivized dairy biogas, to transform methane emissions into a source of natural gas. Neighbors are pushing for an end to the subsidies because of its impact on air quality and possible water pollution.
A Black woman with long, black brains wears a black Chicago Bulls windbreaker jacket with red and white stripes as she stands at the top of a short staircase in a housing complex and rests her left hand on the metal railing. She smiles slightly while looking directly at the camera.

Los Angeles County Is Testing AI's Ability To Prevent Homelessness

In order to prevent people from becoming homeless before it happens, Los Angeles County officials are using artificial intelligence (AI) technology to predict who in the county is most likely to lose their housing. They would then step in to help those people with their rent, utility bills, car payments and more so they don't become unhoused.