CleanTechnica is the #1 cleantech-focused
website
 in the world.


Clean Power solar leasing companies

Published on March 31st, 2013 | by Guest Contributor

12

Solar Leasing Companies More Diverse Than You Think

Share on Google+Share on RedditShare on StumbleUponTweet about this on TwitterShare on LinkedInShare on FacebookPin on PinterestDigg thisShare on TumblrBuffer this pageEmail this to someone

March 31st, 2013 by
 
Reposted from Greentech Media with permission:

By Shayle Kann

Last month GTM Research published a report on the U.S. residential solar financing landscape. We undertook that research partly because we perceived a general lack of understanding of both who the residential third-party ownership (TPO) companies are and how they are differentiated. This article describes the key areas in which we classify those vendors and updates our ever-growing vendor taxonomy.

Prior to 2010, there were few residential TPO vendors. SolarCity and Sunrun pioneered the residential third-party financing model, closely followed by Sungevity. SunPower entered not long after, offering residential leases through its enviable dealer network. Soon, as these companies garnered more attention, the market became crowded with companies promising the right variation on the initial models. We count at least twelve major TPO companies operating today, and a number of others still getting off the ground (SunEdison) or in stealth mode (Kilowatt Financial).

Each company has a unique business model. Some have an in-house solar renewable energy credit (SREC) trading business (Clean Power Finance), while others offer energy management services such as energy audits in addition to solar installations (SolarCity). Still others differentiate themselves via post-installation services such as system and/or fleet monitoring. Some (Vivint) are differentiated by customer acquisition strategy and back-end experience. Others (OneRoof) gain leads through unique channels. Centrosolar uses its lease option as a value-add in its distribution business, like SunPower does with its dealer network. And Sunnova differentiates itself through its capital structure. Still, despite all these intricacies, there are a few key areas to consider with any residential TPO provider.

In order to display major differences among the primary TPO vendors, we created the figure below, our residential third-party solar financing taxonomy. The taxonomy classifies the top TPO vendors based on six criteria:

  1. Lead Generation: Who is responsible for generating residential customer leads? Though many of these vendors use third-party lead generators, virtually all vendors also generate their own leads either themselves or directly through their installer partners.
  2. Sales: Who is responsible for closing the deal with the residential customer? Some TPO vendors close customers themselves, while others allow partners or dealers to do so.
  3. Financing: Who raises project finance (sponsor equity, tax equity, and/or debt) for projects? In times of undersupply of project capital, financing relationships will enable (or hinder) the ability of the TPO vendor to scale its business.
  4. Installation: Who has “boots on the roof,” so to speak? In other words, who installs the project? Again, this is an area of difference between the more integrated model and the partnership model.
  5. Monitoring: Once the system is operating, who monitors it? And in the same vein, who is responsible for operations and maintenance (O&M)? In short, this question speaks to who remains involved with the project for the long haul. It should be noted that in some cases, a TPO vendor will manage monitoring but subcontract the actual O&M services.
  6. Active Markets: Which state markets is the vendor active in? While some vendors have attempted as much of a national focus as possible, others have specialized regionally or in a few key states.

Not all of these companies are adversaries. 1BOG, for example, serves essentially as a customer acquisition platform for a number of residential TPO providers. EnergySage, another startup in the space, intends to provide a similar customer-choice model. In its early days, OneRoof served as a partner to Clean Power Finance, using the latter firm’s funds for OneRoof’s installations. And long term, there may well be room for a number of these strategies in the growing residential solar market.

If only the market could get past those pesky issues like raising project finance and avoiding net metering caps, we could really find out how far the residential TPO model has to grow.

FIGURE: Residential Solar Finance Taxonomy

Source: U.S. Residential Solar PV Financing: The Vendor, Installer and Financier Landscape, 2013-2016

Third-party ownership has taken the residential solar market by storm, and the model is still in its early days. Lyndon Rive, the CEO of SolarCity, has made an analogy between his company and a cable provider. Just as most of us view Comcast as a service provider, not a cable-box installer or financier, Rive hopes that SolarCity will ultimately be viewed as an energy service provider rather than a solar installer or project financier. Indeed, the residential solar leasing world may look entirely different ten years from now. Some of the likely developments:

  • The entrance of other home-service businesses such as electricity/gas retailers or cable/internet providers (Vivint, a home security and home automation company, is an example of this)
  • Increasing financial innovation, including the first securitized residential solar assets sometime in 2013
  • Increased linkage of solar with other home energy services (energy storage, home energy management systems, energy efficiency retrofits, electric vehicle charging stations)
  • Innovation to reduce so-called “soft costs,” particularly regarding customer acquisition (more on this in forthcoming work from GTM Research)
  • Further venture capital exits from other major TPO vendors (Sunrun, CPF and Sungevity are the most likely candidates), either through acquisition or IPO. (My bet is on Sunrun to first file an S-1.)

In the meantime, expect a big year for residential TPO in 2013. SolarCity’s public guidance calls for a 127 percent jump in residential installations this year, and other TPO providers are also gearing up for a big year (Sungevity recently raised another $40 million in venture capital). If these companies can execute on their ambitious plans for the next few years, residential TPO may ultimately be the most significant innovation in the U.S. solar market — provided that project finance and net metering caps don’t limit growth.

Keep up to date with all the hottest cleantech news by subscribing to our (free) cleantech newsletter, or keep an eye on sector-specific news by getting our (also free) solar energy newsletter, electric vehicle newsletter, or wind energy newsletter.

Print Friendly

Share on Google+Share on RedditShare on StumbleUponTweet about this on TwitterShare on LinkedInShare on FacebookPin on PinterestDigg thisShare on TumblrBuffer this pageEmail this to someone

Tags: , , , , , , , , , , , , , , , , , , , , , , ,


About the Author

is many, many people. We publish a number of guest posts from experts in a large variety of fields. This is our contributor account for those special people. :D



  • SpiffySolar

    Science Guru, it sounds like you’ve got an incomplete picture of how this works. Not to mention, as the article states, each company’s business model is different. I’m guessing that your experience was 1. with the wrong company for your situation and 2. you live in the wrong area for a solar lease to work. Do you really think that more than 70% (the number of leased systems) of consumers are “fools?” Even if the majority were, the industry wouldn’t get to that high number. Please read my response to a similar post by a solar lease naysayer—who, as it turns out was in the business and trying to compete with the TPOs. I hope I can shed some light and sway your opinion at least a little bit. Thanks http://www.renewableenergyworld.com/rea/blog/post/2013/02/solarcity-teams-up-with-honda-whos-your-non-solar-co-marketing-partner#readercomments

    • ronwint

      A solar lease is one of the absolute worst ways to finance the rental of a solar system. First of all you have to forfeit the 30% federal tax credit which is worth about $10,000.00 on a typical 6 kW system. You’ll also have to forfeit any cash rebate. The leasing companies will tell you that they will apply the tax credit and cash rebate to the system price so that you’ll lower the acquisition cost but the leasing company’s pricing is so over inflated that the tax credit and rebate as large as they are will hardly make a dent in their price.

      Instead of an expensive solar lease or PPA, consumers are now getting $0 down solar loans that require no equity, that offer tax deductible interest and allows you to keep the 30% federal tax credit and any other incentives and own your solar system for a much greater return on investment than any lease or PPA.

      And good luck ever selling your home with a lease attached to it. What homebuyer will want to assume your lease payments on a used system, when they can buy and own a new state of the art system for less than $3.15 a watt, installed, before incentives? Don’t take my word for it, search the Internet and you’ll find many articles concerning homeowners who are having difficulty selling because they have solar leases attached to their homes. Here’s a funny video that helps to illustrate this fact:
      http://vimeo.com/70888784

  • Otis11

    Any company with a SREC side business is selling the SRECs that are generated from your rooftop to other companies. This essentially means you are not actually using Solar power, but rather selling that solar power and using whatever grid power is available to the company that buys your share of the SRECs…

  • science guru

    Let’s see; you lease the system for 20 years, then you can extend it for 5 year blocks, THEN you can buy it at market value. This equates to 40 years to pay off the solar system. Why would you do this when it can be paid for in less than ten? When are people going to wake up and do the simple math? Solar leasing is a scam! Would you lease your home for 30 years then buy it at market value? NO! Then why would you lease a solar system for 30 years then buy it? FOOLS are abundant!

    • http://zacharyshahan.com/ Zachary Shahan

      I think you are overestimating the public’s ability and propinquity to do math. Unfortunately, solar leasing dominates bcs that’s what consumers think they prefer.

      • Bob_Wallace

        I suspect leasing will fade, not totally disappear but command a much smaller part of the industry, as system prices drop.

        A 3kW system at $2/W is a much easier debt to take on than a 3kW system at $6/W. $6,000 vs. $18,000.

        $6k financed at 8% over 5 years would mean monthly payments of about $122. People will look at those sorts of numbers and realize that they could pay about what they are now paying per month for electricity and then have almost free electricity for decades.

        There won’t be room for leasing companies when that happens.

  • science guru

    Solar leasing is nothing short of a scam that stupid Americans are buying into.

  • James Wimberley

    From the maps, there are unexploited opportunities in the Southeast: Florida and the Old South. They have plenty of sun and cash-strapped roof-owners.

    • http://zacharyshahan.com/ Zachary Shahan

      Yep, they just have horrible energy policies.

  • James Wimberley

    I agree with Matthew Petty that it’s a second best solution, but any port in a storm. Lessees usually get to own the panels eventually, and immediately gain an increase in the equity in their house (on average 3.5% according to a study by UCLA economist Matthew Kahn et al.)

    The post is written from a producer/investor viewpoint, not that of the consumer. Are there significant differences in the deals offered to consumers?

    The good news is that the market has sufficient numbers of players to be reasonably competitive, and superprofits will go away soon. The leasing companies will keep a structural advantage in their lower cost of finance and their economies of scale.

  • http://www.facebook.com/matthew.t.peffly Matthew Todd Peffly

    This does appear to be the way solar will happen on homes in the US. The good news is it gets PV installed. The sad part is that large corp end up getting much/most of the $ benefits. We get the decentralized benefit, but not the ownership distribution. It will be interesting to see what happens after 2017 when the tax credit goes away, if the model will change in the US.

    • http://zacharyshahan.com/ Zachary Shahan

      Agreed. Very interested in seeing what happens after the tax credit (assuming it doesn’t end up getting renewed).

Back to Top ↑