Leasing the Sun

With low or no up-front costs, solar leases are increasing in popularity among homeowners who can’t afford to purchase a PV system outright or don’t want the
burden of ownership and maintenance. But the concept is still relatively young and not all of the kinks have been worked out.
Being able to recognize a good deal, or a bad deal, is an important part of successful solar leasing. It’s all about the “fine print.”

Between the Lines

So what should you look for—or look out for—in a contract? It would be due diligence to talk to your attorney and accountant before signing a lease. Alternatively, you could solicit contracts from multiple vendors and compare the
verbiage.  Make sure you understand the type of agreement you’re
considering. There are different types of “leases”—some are true leases and some are power purchase agreements (PPAs).
With a solar lease, you lease the solar equipment; with a solar PPA, you are only paying for the energy the system generates. In both cases, the PV system installed on your home is owned and maintained by the lease or PPA provider, and is
connected to the grid so you can buy any additional energy you might need from the utility.
Your paramount concern should be whether the contract can be amended and what, if any, rights you have in those cases. There are cases where lease companies have amended the original terms and raised rates for one reason or another—if the contract allows amendments, then you might have no recourse and have to take whatever comes your way. Most contracts, even those outside of the solar
market, have a clause that stipulates the contract can be transferred in certain events, such as the company’s sale, bankruptcy, or dissolution. The legalese tends to be too complex for the average homeowner to understand, and the devil is in the details as to what that clause might mean for you down the line. In most cases, the PV system cannot be repossessed, and the homeowner cannot be held liable for
the company’s debt.
When evaluating any solar lease, keep your expectations in check. Often, the investment rate of return on buying a system outright is substantially higher. After paying for the lease payment and accounting for any extra power you might
buy from the utility, the savings on a solar lease are somewhat small, usually $20 to $50 per month. However, those savings might increase over time as electricity rates rise—plus, there is the potential savings that come from having a third party
monitor, maintain, and guarantee the system.

Choose Wisely

When evaluating a solar leasing company, take your time and consider all available information and choices before signing—it’s a long-term relationship and by no means a small decision. Don’t be pressured into signing a contract, such as
being threatened by losing out on government incentives for not acting quickly.
A good starting point is the company’s track record.  How long has the company been in business, what kind of reputation does it have, and how many leases have they sold?
Most lease companies are only a few years old. The biggest and oldest probably have made more than 10,000 leases and, in the process, worked out a lot of kinks. New leasing companies are showing up regularly, and while some of these might end up being real winners, apprehensive consumers may want to stick with more established companies.
Another factor is how long the company’s program has been active in your state. Many of the larger companies have started leasing programs in one state and branched out into other states. While participation is necessary for these programs to grow and survive, you may not want to be a guinea pig for a company navigating the incentives and guidelines in a new territory. Sure, you might get a more favorable deal, but the trade-off may be long lead times on installation, potential administrative snags, and/or undeveloped customer relations. While a contract protects you, it is important to remember that it is only enforceable if you are willing to take legal action.
A key consideration in selecting your leasing company is the PV system installer they use. There are essentially three types of solar lease companies: stand-alone financing companies that partner with installers; module manufacturers that offer leases through a network of independent dealers; and full-service shops that provide everything—financing, design, installation, and monitoring.
Depending on which company you choose, you may have little control over which installer you work with. Some companies pick an installer for you, and there could be a wide range in capability. For any solar energy project, you should work with a licensed and qualified installer. Just as you would with any contractor, be thorough and ask the rightquestions.
• Does the installer have the required licensing for your
area? (Ask for proof.)
• Which products does the company use?
• Does the installer use subcontractors, or their own installation crew?
• How long has the company been in business, and what certifications (such as “NABCEP PV Installer” certification) does its staff have?
• Can the company provide references from other homeowners?
You also should ask how the installer assesses a project and designs a system. The installer should first discuss the project and your energy needs, and then survey the roof, identify shading issues, determine the amount of energy that can be anticipated from an installation, and lastly, specify a system and lease.

Lease, Finance, or Buy?
Industry Experts Weigh the Options

Residential solar leases and power purchase agreements (PPAs) can significantly reduce, if not eliminate, up-front costs to homeowners. Under a solar lease, the homeowner makes monthly lease payments that are offset by electricity bill savings. Under a PPA, the homeowner purchases the electricity generated by the PV system. In both cases, the homeowner continues to make monthly payments
to the local utility for additional electricity needed. At the end of the contract term, the homeowner normally has three options: purchase the system, extend the contract, or request that the system be removed.
In addition to third-party finance options, there are other non-mortgage options for purchasing a PV system—dealer financing and unsecured loans. In all cases, the credit quality of the homeowner is considered. Availability, and terms and
conditions for all of these financing options can vary.

The least-expensive way to get a PV system is to pay cash. This way, you
keep all of the benefits. The second least-expensive way is to take out a home-equity loan, which typically has low, tax deductible interest. In this case, you pay interest on the loan, which shares some of the energy savings with the bank. If the
cost of the loan payment after factoring the tax deduction for the loan interest is less than the savings on your electric bill, then you are way ahead—in a few years, you will own the system outright and no longer have a loan payment.
The third least-expensive way to get a PV system is a lease or a PPA. Your monthly cost will usually be more than a bank loan payment because you are now sharing the benefits with at least two other parties: the company providing the lease/PPA services and the investor/bank funding them. Generally, the more parties involved, the less the customer’s benefit will be. Some lease/PPA monthly payments may match or even be below the loan’s cost, but remember, once the loan is paid off, you own the system. At the end of the lease/PPA term, you’ll have the option to buy the system at fair market value. By then, there will likely be no incentives available, but the cost should be substantially lower than a new system.
This cost/benefit trade-off makes sense in another way—with cash, the homeowner takes on all of the risk. With a loan, the bank is taking a little bit of risk. With the lease/PPA, the provider is taking anywhere from a lot to almost all of the risk on the deal. The more risk one takes, the more they expect to
be rewarded.
The most expensive way to get solar is to do nothing now and wait until all of the incentives are gone. So, if you can’t buy with cash, take out a loan. If you can’t get a loan, do a good lease or PPA.

Even if you can secure other solar financing, a PPA or lease is worth considering. Although raising your own financing is usually cheaper in the long run, if you don’t want to worry about maintenance and repairs, the turnkey nature of these
programs can be attractive.
This is also an advantage if you think you might sell your home, because the new homeowner may be less comfortable with solar technology and may like a third party to take care of everything.
The relative value of a lease or PPA depends on the particular terms, which are not uniform. I tend to prefer the PPA format because a PPA company makes more money as its systems produce more energy—an incentive to keep the
systems operating at peak performance.
The simplest way to compare financial advantages is to use “internal rate of return” (IRR). This gives you the effective interest rate earned on your investment. If you had the choice of solar financing option A, with an IRR of 3%; option B, with an IRR of 2.5%; or keeping the money in the bank earning 2% interest, then you’d be better off with either solar option. Option A is better than B because it has a higher IRR.
It’s risky to rely upon the vendors’ savings calculators to compare, because they will tend to use the assumptions that make them look best, so you would not be comparing apples to apples.

There is no “best” financing option for a residential PV system—it depends upon an individual’s financial situation, motivations, and the incentives available.  Many states, utilities, local governments, and nonprofits offer direct cash incentives (a grant, rebate, or performance-based incentive) to reduce the cost of residential PV systems—which may make buying outright an affordable option. State tax credits and deductions may further reduce the cost, as does the federal 30% tax credit, which is available to all U.S. taxpayers with a tax liability.  State loan programs may also be available, and some homeowners may be able to finance a PV system via a home equity loan. In addition, an innovative financing mechanism called Property Assessed Clean Energy (PACE) program, is available in a handful of jurisdictions (see “Keeping PACE”).
If a homeowner cannot buy or finance the up-front cost of a PV system, third-party, or retail, PPAs are available in21 states. Where PPAs are unavailable, solar companies may offer leases instead. With a lease, you’ll pay per kilowatt
(kW) installed. With a PPA, you pay per kilowatt-hour (kWh) generated.

New financing methods are making solar more affordable and available. Solar financing choices are now similar to options for buying a new car or home. Homeowners have to look carefully at their individual financial situations. For
some, the cash or financing option makes sense—you’re buying your electricity up-front for decades, and lowering or eliminating your utility bill. Recent studies show that PV systems boost home resale value—a Lawrence Berkeley National Laboratory study released this year found that for a homeowner in California, an average-sized, relatively new PV system adds $17,000 to the sale price of a home.
Leases are also soaring in popularity. In 2011, more than a third of all residential installations in California and Colorado were leases. Just two years ago, only 10% of residential installations in California were solar leases, and there was no market for leases in Colorado just a year ago. With many of the same benefits as purchases, but avoiding the up-front cost and maintenance, solar leases will continue to be attractive to homeowners.
As with any major home improvement project, do your homework. Ask contractors about their experience installing PV systems and check references. But no matter the financing mechanism, the decision to go solar can be cost-effective.

-Kelly Davidson

What Makes a Good PPA or Lease?

So you can compare programs, get multiple bids. In most parts of the country, there are enough lease and PPA companies to enable you to review at least three potential contracts. Then analyze the following points:
• Payment escalation rates. Over the last 20 years, the national average electric rate increase has been about 2.5% per year. Make sure that the contracted rate of
increase for the system’s payments is no more than 4%. Do the computations to make sure that your payments will remain reasonable through the term, which may be10 to 20 years.
• End-of-term provisions. Make sure the buy-out at the end of the term is an option, not a requirement, in case you don’t like the offered price. This allows you to negotiate based on what a new, replacement system would cost. Make sure that if you request the system be removed, they will do so at no cost and agree to
restore your roof to good, attractive condition—with the exception of unavoidable fading of the roof where not covered by the PV array.
• Midterm transfer/buy-out terms. The agreement should allow you to sell the home and transfer the system contract to another party if they can meet the credit standards. It should also allow you to pay off and terminate the agreement for a reasonable price—either with retention or removal of the system—if your home buyer doesn’t qualify for or doesn’t want the system. Make sure there are no
“hidden” transfer fees.
• Reasonable performance guarantee. The system should be guaranteed to perform within a few percent of what the NREL’s PVWatts calculator shows—unless it can be shown to be different due to shading, local climate, etc.  Evaluate the terms of maintenance, repairs, and system monitoring. What maintenance will be your responsibility, and what will be managed as part of the agreement?
What specific services are you entitled to, who performs the services, and what kind of replacement equipment can be used should your system require it?
• Insurance. Some companies require you to add the system to your homeowner’s insurance. If so, talk with your insurance provider before you sign, and understand
the costs and coverage.

These “reasonable” requests will keep the customer in control and the contract flexible, making a higher-quality lease agreement. In return, the customer should expect to have higher monthly lease/PPA costs when compared to a cheaper, inflexible (i.e., risky) lease or PPA.
—Andy Black

Source: Homepower Magazine

This is a quick reference guide on California Renewable Energy Credits (RECs).

One Renewable Energy Certificate (REC) represents the positive environmental attributes from one megawatt-hour (or 1,000 kWh) of renewable energy generation.  The California Energy Commission recently described RECs this way:

“When electricity is generated using an eligible renewable energy resource, two commodities are created.  The first commodity is the electricity, and the second is the renewable energy credits representing the non-energy, environmental attributes associated with the electricity”

There are two types of REC buyers: voluntary and compliance. Voluntary buyers are progressive organizations like Whole Foods, Intel, and PepsiCo that purchase RECs to offset their dirty energy consumption.  By purchasing the rights to green power, these organizations can offset their greenhouse gas emissions and further support the development of the renewable energy industry.

Compliance buyers of RECs are electric utility companies or energy suppliers, who are required to get a certain percentage of their energy from renewable sources; this is called a Renewable Portfolio Standard (RPS).  Currently about 30 states have some form of an RPS requirement.   California recently approved one of the most aggressive RPS mandates in the country requiring utilities to get 33% of their portfolio from renewable sources by 2020.

RECs have not started trading quite yet for the California RPS market.  We are waiting on a key piece of policy that will allow Distributed Generation (i.e. residential and commercial solar) facilities to sell their RECs into an RPS market.  The California Energy Commission (CEC) is expected to approve and implement this eligibility ruling in January of 2012.

In order participate and sell your RECs for income, you must register your system with WREGIS (Western Renewable Energy Generation Information Systems) and get certified by the CEC.  The Leaf Exchange provides a simple way for residential and commercial solar system owners to get educated, get registered, and get paid for their Renewable Energy Certificates.

Source:  Leaf Exchange

30 years ago, Mayor Tom Bradley recommended that “The DWP should pay the highest justifiable cost for surplus power generated by its customers who invest in solar electric systems.”  Nothing happened.

14 years ago, Councilwoman Ruth Galanter and DWP General Manager David Freeman committed to “100,000 rooftop photovoltaic systems…by the year 2010.”  

LADWP’s mission is to provide clean, reliable water and power in a safe, environmentally responsible and cost-effective manner with excellent customer service to the communities we serve. Their vision is to be a world-class publicly-owned integrated utility, innovatively transformed to provide sustainable water and power to a green, robust and prosperous city. How they do this is in their plan. See https://www.piersystem.com/external/content/document/1643/280504/1/LADWP%20Strategic%20Planning.pdf

LADWP has had 6 General Managers in the past 4 years (9 in the past 10 years) which clearly shows that the Mayor and City Council do not and can not manage LADWP. Instead, LADWP career bureaucrats manage to keep the lights on and the water flowing and rates low while adding $200 million annually to the City General Fund. However, they do not support customer-owned renewable energy distributed generation beyond the legal mandate. They listen politely and follow their plan. So if you want LADWP to change their plan, then change the law.

Esteemed CLEAN LA Solar Coalition members and Solar Feed-in Tariff advocates,

Outcome of 11/2 City Council FIT hearing:

 The 11/2 hearing was a success in that each of the coalition members and FIT advocates had the opportunity express their grievances with the LADWP 6MW solar demonstration program in front of the entire Los Angeles City Council. And…the Councilmembers heard you loud and clear as expressed best when Council President Eric Garcetti recognized our “unparalleled coalition!”

 We will head back in the City Council Energy and Environment Committee (E2) on December 1^st at 9am. E2 Chairwoman Perry has promised to address the following issues on 12/1:

• establishing a fixed price or at least a floor for the demonstration program and the 75MW FIT program
• streamlining the application
• eliminating administrative overhead
• implementation timeline for 75MW

Many contractors have stopped installing solar electrical systems in LADWP territory because of expensive changes required by the LA Building and Safety Department and new requirements by LADWP. The new rules and regulations that started September  1, 2011 add thousands of dollars for on-site energy audits and special custom equipment built just for LADWP projects. The new safety requirements that cost thousands of dollars in equipment upgrades extend solar electrical systems payback periods by many years. LADWP union leaders cite safety concerns as the reason for the additional equipment that adds thousands of dollars to the price of a $10,000 solar electrical system. No other utility in the country has the same extreme requirements as LADWP.  SCE, Pasadena, Glendale and Anaheim electric utilities do not have these requirements. LADWP as usual has its way of managing their $40 million per year Public Benefit Fund for solar and is not answerable to Public Utility Commission oversight.  It is looking very dark for solar power systems in LADWP territory again.

Solar photovoltaic (PV) companies manufactured a record 24,000 megawatts of PV cells worldwide in 2010, more than doubling their 2009 output. Annual PV production has grown nearly 100-fold since 2000, when just 277 megawatts of cells were made. Newly installed PV also set a record in 2010, as 16,600 megawatts were installed in more than 100 countries. This brought the total worldwide capacity of solar PV to nearly 40,000 megawatts — enough to power 14 million European homes.

The City of Anaheim may be one of the happiest solar places on earth.

Known around the world as the home of Disneyland, Anaheim’s solar incentive program is a something of a better-kept secret. The program has received little publicity since its launch in 2008, but for Anaheim residents who want to enjoy deep (read: unheard of) discounts on a home solar system, the savings warrant far more attention.

Rebates offered through Anaheim’s electrical utility are among the most generous of all California solar rebates. The $3.72 per watt rebate is incredibly high, especially when compared to Northern California’s current PG&E rebates of $0.25 per watt in most areas.

The extent of the program, however, is limited. Anaheim residents should prepare now to take advantage of next year’s program. Applications will be accepted for the 2012-2013 fiscal year beginning on January 4, 2012.

How much money can be saved by going solar in Anaheim? Start with an average American home’s utility usage, which in 2009, was about 908 kilowatt hours each month, according to the U.S. Energy Information Administration. In Anaheim, that generates a monthly electrical bill of about $130.

Next, consider a typical residential solar system, sized at about 2.7 kilowatts, and covering about 360 square feet of roof area. The average cost for such a system would be about $29,040.

Through the form of a tax credit, the federal incentive program reduces the cost of a residential solar installation by 30 percent. For the Anaheim PV system, that’s about $8,712, reducing the installation cost to $20,328.

The Anaheim public utility rebate for this system would be about $10,044, making the final installation cost just $10,284. It would take just six years to pay for the $10,284 PV system through monthly savings on electricity. Compare that with the typical 10-12 years for most systems, and you’ve got yourself a steal.

• Average Monthly Utility Savings: $109
• Average Annual Utility Savings: $1,308
• 25-year Utility Savings: $32,700

Anaheim also allows net metering, a process that automatically sends any excess electricity generated by your residential PV system back into the grid. Anaheim’s electric company then credits you, the customer, for that electricity. Since Anaheim enjoys sunny days for most of the year, you can expect your system to generate enough excess electricity to further reduce your payback period.

Why is Anaheim offering such a generous rebate program? Since 2007, California has expanded solar incentive programs from state-offered rebates to those offered through public utilities. The program is set up to reduce the amount of the rebates as participation increases. Smaller municipality-operated utilities must participate in the program as well, Anaheim included.

For the 2012-2013 fiscal year, Anaheim must offer solar rebates for a combined total of 330 kilowatts that are generated by residential PV systems.

The 330 kilowatt total means that only about 100 Anaheim households can take advantage of the program next year. Anaheim requires residents to work with a certified solar installer to verify certain installation specifications. The application is available through the City of Anaheim’s website. Once the application is submitted, residents can track progress through the city’s online PowerClerk application.

Source:  Calfinder Solar Blog

To predict the future costs of residential systems, it helps to understand not only how far prices have dropped in recent years, but what factors are behind those reductions in costs.

Two major organizations that track solar cost trends are the Solar Energy Industries Association (SEIA), an industry group, and the Lawrence Berkeley National Laboratory, funded by the federal government. Both organizations recently published studies that show reductions in all aspects of residential solar energy systems.

Overall, from 2009 to 2010, solar array installation costs have dropped by 17 percent. Costs for wafer and cells each dropped 25 percent, while the cost of a solar panel module dropped 12 percent. Non-module costs, which includes labor installation costs and the inverters that convert solar DC energy into household AC electricity, dropped 18 percent.

Both studies credited market growth as the major factor in achieving these across-the-board reductions. As the industry grows, more money is invested in cost-cutting technology and methodology. Creating solar panels with greater efficiency gives solar companies a competitive edge.

The better a solar panel becomes at converting every ray of available sunlight into energy, the more cost-efficient they become as well.

SEIA reports that the solar industry has now produced enough modules to double the current number of residential solar energy installations next year. It can take 18 months for a reduction in the cost of materials to affect installation costs.

The fastest-growing sector of the solar market in the United States is solar leasing.

The opportunity to lower monthly electrical bills without purchasing a residential system is a popular option for many homeowners.

SEIA predicts that the combination of solar leasing and dropping module costs will continue to drive the industry forward in the near term.

The Berkeley study noted that some of the solar rebate programs that have sparked market growth are starting to be cut or phased out. The federal incentive program that pays for 30 percent of the cost of a residential solar system is not scheduled to expire until the end of 2016.

Some states, however, are cutting or reducing their solar rebate programs. Also, as the price per watt of solar energy lowers, those incentives based on dollar-per-watt formulas are reduced as well.

When predicting future reductions, it’s important to recognize that it is primarily the growing market for solar that is driving down costs. While experts believe costs will continue to fall in the short term, continuing cost reduction is linked to future market growth.

Considering the wide variety of generous incentive programs that are available now, such as those in Los Angeles, San Francisco, Oakland, San Jose, San Diego, New Jersey, Arizona and much of the East Coast, and the current reduction in residential solar installation prices, there may be no better time to switch to the power of the sun than right now.

Source:  CalFinder Solar Blog

Berkeley, CA– New research by the U.S. Department of Energy’s (DOE) Lawrence Berkeley National Laboratory finds strong evidence that homes with solar photovoltaic (PV) systems sell for a premium over homes without solar systems.

“We find compelling evidence that solar PV systems in California have boosted home sales prices,” says the lead author Ben Hoen, a researcher at Berkeley Lab. “These average sales price premiums appear to be comparable with the average investment that homeowners have made to install PV systems in California, and of course homeowners also benefit from energy bill savings after PV system installation and prior to home sale.”

The research finds that homes with PV in California have sold for a premium, expressed in dollars per watt of installed PV, of approximately $3.90 to $6.40/watt. This corresponds to an average home sales price premium of approximately $17,000 for a relatively new 3,100 watt PV system (the average size of PV systems in the Berkeley Lab dataset), and compares to an average investment that homeowners have made to install PV systems in California of approximately $5/W over the 2001-2009 period.

“This is a sizeable effect,” says Ryan Wiser, a Berkeley Lab scientist and co-author. “This research might influence the decisions of homeowners considering installing a PV system and of home buyers considering buying a home with PV already installed. Even new home builders that are contemplating PV as a component of their homes can benefit from this research.”

Approximately 2,100 megawatts (MW) of grid-connected solar PV have been installed in the U.S. California has been and continues to be the country’s largest market for PV, with nearly 1,000 MW of installed capacity. California is also approaching 100,000 individual PV systems installed, more than 90% of which are residential. Though an increasing number of homes with PV systems have sold, relatively little research has been performed to estimate the impacts of those PV systems on home sales prices.

The Berkeley Lab research is the first to empirically explore the existence and magnitude of residential PV sales price impacts across a large number of homes and over a wide geographic area. The research analyzed a dataset of more than 72,000 California homes that sold from 2000 through mid-2009, approximately 2,000 of which had a PV system at the time of sale. “This is the most comprehensive and data-rich analysis to date of the potential influence of PV systems on home sales prices,” says co-author and San Diego State University Economics Department Chair Mark Thayer.

The research controlled for a large number of factors that might influence results, such as housing market fluctuations, neighborhood effects, the age of the home, and the size of the home and the parcel on which it was located. The resulting premiums associated with PV systems were consistent across a large number of model specifications and robustness tests.

The research also shows that, as PV systems age, the premium enjoyed at the time of home sale decreases. Additionally, existing homes with PV systems are found to have commanded a larger sales price premium than new homes with similarly sized PV systems.

“One reason for the disparity between existing and new homes with PV might be that new home builders also gain value from PV as a market differentiator that speeds the home sales process, a factor not analyzed in the Berkeley Lab study,” says Berkeley Lab researcher and co-author Peter Cappers. “More research is warranted to better understand these and related impacts.”

This work was supported by the Office of Energy Efficiency and Renewable Energy (Solar Energy Technologies Program) of the U.S. Department of Energy, by the National Renewable Energy Laboratory and by the Clean Energy States Alliance.

Lawrence Berkeley National Laboratory addresses the world’s most urgent scientific challenges by advancing sustainable energy, protecting human health, creating new materials, and revealing the origin and fate of the universe. Founded in 1931, Berkeley Lab’s scientific expertise has been recognized with 12 Nobel prizes. The University of California manages Berkeley Lab for the U.S. Department of Energy’s Office of Science.

Source:  Lawrence Berkeley National Laboratory