Before solar leasing came along, installing PV on a residential rooftop was expensive. The approach to achieving the allusive breaking point of “grid parity”, or when solar PV is the same cost or cheaper than fossil fuel generation, was to chip away at the expenses with government incentives. Rebates, small grants, and more recently renewable energy credit (REC) markets created new cash flows on top of electricity savings.
But this patchwork of incentives, and the process of installing rooftop PV, is convoluted. Land permitting, interconnection, state certifications and qualifications, and weeding through a slew of installers and their different offers make the process a serious headache. Solar leasing not only removed the issue of hefty upfront costs, which could still climb above $20,000 even with incentives, but it also made residential solar simple. Just review the terms of a contract which supplies green electricity to your home and pay less than you would have if you kept paying for dirty electricity. Boom. Done.
But this hasn’t changed the fact that the devil is in the details. Granted, this isn’t to say that the deal isn’t a good one from any number of perspectives. But there are a number of aspects of solar leasing that makes it less the silver bullet technology that it’s sometimes made out to be. For one, as we’ve written about already, the market for leasing companies (talking just about the SolarCity’s and Sungevity’s of the world) tend to move toward consolidating the stream of materials and labor rather than diversifying it.
On top of that, though, there are more straightforward reasons you might be getting jipped. Even though zero money down sounds great, and it is, the reality is the incentive that makes solar leasing possible – the 30% federal tax credit – is conducive to a lot of hidden costs. For one, solar leasing companies sell tax credits to equity investors that benefit from reducing their tax liability by financing large volumes of PV components. Rhone Resch, President and CEO of the Solar Energy Industries Association, argued
these tax credits are sold at a loss of 30-50 cents on the dollar when factoring in the transaction costs and markups of selling them in secondary equity markets.
This provides the incentive to markup the costs of the system parts. The larger the system costs, the larger the credit, often to the detriment of installation companies that compete to keep costs low. In the case of larger leasing companies, this process exacerbates the issue residential PV encounters with capturing price drops in global PV manufacturing markets; larger inventories stacked full of components sold prior to price drops equals higher-than-necessary costs to the consumer.
If you’re going solar but haven’t chosen an installer, get a free quote and be sure to ask questions about the source of their system components!
Posted by Stuart Ivy
Chip Gaul is a researcher and blogger on Residential Solar 101. He focuses primarily on solar PV markets, trends, prices, and additional incentives. He graduated with honors from the University of North Carolina with a BA in Public Policy Analysis, focusing on environmental and energy policies on both the federal and state levels in North Carolina.
See complete profile