A cool-down in European solar markets combined with an over-supply of panels from China has led to a massive decline in solar panel prices. Over the last year, prices for solar panels have fallen 50 percent. In the U.S., falling prices spell competition, and many solar providers are hustling to position themselves to take advantage of a rapidly changing solar industry.

While solar panel manufacturers have taken a hit from the 50-percent reduction caused by the glut of supplies, home solar contractors are seeing their profits rise.

As solar providers stabilize their bottom line, they attract more investors. Previously, investors have been drawn to large-scale solar energy projects, but as the market shifts, they are increasingly backing smaller installation contractors. Investment firms are predicting that if solar brands succeed with public offerings, the market could experience exponential growth.

To See New Lower Solar Pricing, click here.

Homeowners have enjoyed lower installations costs as well. According to the Lawrence Berkeley National Lab’s Tracking the Sun report, the cost of installing home PV systems has dropped 43 percent over the last dozen years.

The most recent drop in solar panel prices, however, has been slow to make a difference in what homeowners pay. Savings from lower component prices first impact distributors, integrators and providers before showing up in installed prices.

A fragmented industry makes it harder to pass on savings to customers, too. As yet, there are no major wholesale solar parts distributors. Most solar contractorspurchase the various equipment needed for installations from a number of manufacturers, driving up costs.

The industry is beginning to address this issue as well. You can expect to see installation costs continue to drop as players in the competitive solar market find their niche.

Source:  Calfinder

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