Solar leases and power purchase agreements (PPAs) have supercharged installation of residential photovoltaic (PV) energy systems in the U.S. At least this is the case in states such as Arizona, California, Colorado, Massachusetts, New York and others where energy industry regulators permit them to be offered.
Due to a variety of factors, including the scheduled ratcheting-down of the federal solar investment tax credit (ITC) at the end of 2016, U.S. solar energy finance-and-installation companies, such as market leader SolarCity, are increasingly turning to solar loans as a means of financing, however.
In two new reports, the U.S. Department of Energy's National Renewable Energy Laboratory (NREL) compares the costs and benefits of financing PV installations via third-party ownership (leases and PPAs) and direct ownership via solar loans and low-cost financing.
Comparing the total costs of alternative means of financing the installation of home and business PV systems, NREL energy analysts found that in general those who use low-cost financing to purchase their PV systems -- or do so by taking out solar loans -- can save as much as 30 percent compared to leasing them via third-party providers.
"Market interest rates on solar-specific loans currently range from 2 percent with special provisions to 8 percent," Travis Lowder, energy analyst and one of two co-authors of NREL's Banking on Solar: An Analysis of Banking Opportunities in the U.S. Distributed Photovoltaic Market, elaborated.
“Compare this to a weighted average cost of capital of 9 to 10 percent for third-party systems financed through tax equity investments. Using the lower cost rates provided by the loans could help to make solar power more affordable to more consumers, and more competitive with utility rates in more states."
Ikea owns it PV systems, whereas Staples leases them via PPAs and third-party providers. Key takeaways from this report include:
“With that said, if a company has less expensive sources of financing and is comfortable with the risks, it can often save on its energy bills by owning a PV system."
*Image credits: 1) Vivint Solar; 2, 3 & 4) NREL
An experienced, independent journalist, editor and researcher, Andrew has crisscrossed the globe while reporting on sustainability, corporate social responsibility, social and environmental entrepreneurship, renewable energy, energy efficiency and clean technology. He studied geology at CU, Boulder, has an MBA in finance from Pace University, and completed a certificate program in international governance for biodiversity at UN University in Japan.