Clean Power

Published on May 12th, 2014 | by Zachary Shahan


Solar Leasing & PPAs On the Downswing?

May 12th, 2014 by  

Originally published on Solar Love.

Are Solar Leasing & PPAs Going To Suffer From Maturing Solar Market? (via Solar Love)

A representative of Soligent recently passed along an interesting note regarding a US movement away from solar PPAs and leases. Basically, as solar costs have dropped and banks have warmed up to solar, it has become more and more attractive for homeowners…

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About the Author

is tryin' to help society help itself (and other species) with the power of the typed word. He spends most of his time here on CleanTechnica as its director and chief editor, but he's also the president of Important Media and the director/founder of EV Obsession, Solar Love, and Bikocity. Zach is recognized globally as a solar energy, electric car, and energy storage expert. Zach has long-term investments in TSLA, FSLR, SPWR, SEDG, & ABB — after years of covering solar and EVs, he simply has a lot of faith in these particular companies and feels like they are good cleantech companies to invest in.

  • Kevin Gregerson

    Cash isn’t worth it, think about it this way. It takes about 10 years to save the same amount on a PPA vs a Cash deal as far as total savings goes. If you account for inflation the number of years to get to the same cash position increases until about year 18. So there is really no reason you shouldn’t lock in a lower rate on a PPA today when you look at the long term cash position.

  • ronwint

    The lease/PPA market may appear to be convenient on the surface, but they are absolutely not competitive when compared to an outright purchase at the sub $2.10 per watt after ITC pricing that’s available today.

    And as for “opportunity cost”, what safe investment can you name other than solar that yields a 10% to 12% return in today’s market?

  • Burnerjack

    I .looked at Solarcity but its a 20yr PPA. A lot can change in that time frame.
    Between the Arizona tax policy and the fact that there is no guarantee as to the proposed savings, it seems like that 20 yr commitment is a real leap of faith.

    • Kevin Gregerson

      A lot can change, but long-term historically it hasn’t changed. Look at the history of the last two decades. As for garruantee take a look at the locked in rates rather than the escalating ones.

    • Truth

      SolarCity (and, for that matter, ANY solar company) cant guarantee savings because there is no way to predict the rates that utility companies charge with 100% accuracy. All they can do is look backwards and see that historically utility companies raise their rates by 5% every year. Here in California, PG&E has proposed raising their rates by 30%(!!!) over the next three years to help pay for the neighborhood they blew up and all the pipe retrofitting/inspections they have to do as a result. Further, some people get solar and think they now have unlimited electricity for free and start leaving every light in the house on 24/7. SolarCity cant control the way their customers use energy either. The word “Guarantee” has a lot of legal ramifications when you start throwing it around.. however, what SolarCity DOES do is guarantee the amount of energy their panels produce for 20 years. If they produce less, they cut you check for the difference.

      • Burnerjack

        @Kevin and Truth: While “Past is not prologue”, as the saying goes, both of you have very strong arguments. While total bill may not be a guaranteed reduction, the rate should be less, as both of you and Solar City have stated.
        Call me “commitment adverse” if you will.
        I guess my point is this: If this is truly most likely to result favorably to me and others, eliminate the PPA . Let me judge the savings as we go along. Should I see it as an added burden, let me bypass it and Solar City can reap the benefit of selling the power back to the grid without me. Of course, if I’m taxed because the array is on my roof, I would expect to be reimbursed.

  • Matt

    To me the big issue is the extra cost toinstall PV in US verse Germany. Which has been studied a couple of times. One of the biggest difference is the cost from 3rd part (PPA/lease). PPA/lease is only “more attractive to average homeonwer” because of USA policy (both tax and zoning) is written to make it hard for the average homeowner to get there by themselves. Yes this is good for the tax equity market and for the PPA companies, but it means less get installed. With a FIT it would be easy to get a home equity loan, less so in current setup. Does anyone think that if total cost was 1/2 what it is now in the USA we would not see more panels installed.

    • Yes, this is one of the things that irks me when people act like the net metering + ITC system of the US is better than using FiTs. I see this quite a bit (just did today on a major site and practically in caps lock). If the US system is so much better, why are solar prices still about twice as high as in Germany? Why do we have a pitiful # of solar homeowners per capita compared to Germany? It’s absurd. I’m grateful for net metering and the ITC, but attacks on FiTs are very misplaced imho.

      • Chris Aloise

        @Zachary, my understanding for the higher costs is what is referred to as the “soft costs”, permitting, approvals, customer acquisition, etc. Some states have already eliminated or reduced these to a large extent. I believe VT is ahead of the curve on these issues. Having lived in Germany for the last 14 years, I have seen the boom in solar here. You can see solar on rooftops even in tiny villages and when you drive through the countryside you’ll come across a major installation on a farm. Solar is very widespread here and it’s very simple to apply. in fact, anyone who owns a roof may put solar on it. No one can be declined.

  • Loren McDonald

    Why are we always debating this PPA vs buy issue? Who cares? Solar City will adapt. As costs come down, people with$15k lying around gathering dust will opt to buy; some will finance using their home equity; but most will view solar like their monthly cell phone bill … but in this case that saves them money. Sure, they could save more buying … but we are talking about electricity … utility services … for the foreseeable future, PPAs will be more attractive to the AVERAGE homeowner …

    • ronwint

      The point that many miss (as Mr. McDonald puts it) is that costs have “come down” In fact they took a precipitous drop about a year ago. Today, most people don’t even need $15,000 “lying around” because the price of an average sized system which is about 4.75 kW, has fallen to less that $10,000 after the ITC.

      And if you don’t have $10,000 lying around, then you probably wouldn’t qualify for a lease’s higher credit standards anyway.

      The leasing companies have had their chance to adapt and they haven’t. Their systems remain much higher priced than the well established outright purchase market pricing that exists today.

      With a lease/PPA, you will always have a payment for the electricity that you consume, even worse many lease/PPAs include an annual payment escalator that will raise you monthly PPA/Lease payments by up to 2.9% per year for 20 years.

      With a purchase, at today’s sub $2.20 per watt, after ITC pricing, payback in most areas of the country will easily occur at year 4 to 5 and then there’s no more bill for the amount of electricity that your system produces for the remaining 25 to 30 year life of the system.

      With the exception of an inverter replacement (product and labor at less than $1,500 to $2,000 over 25 years due to falling inverter pricing) And possibly labor cost (+/- $150-$200) to replace a failed solar module or two with their 25 year performance warranty, your cost for power will only be a fraction of the cost of a lease or PPA.

      I have watched as the negative “chatter” surrounding solar leases and PPAs has grown more aggressive. The message that is being echoed time and time again, is that while solar leases and PPAs may seem more convenient, they are simply far more expensive than an outright purchase. Knowledge travels quickly in today’s connected world. When the knowledge of today’s much lower pricing has permeated the market, no consumer with half a brain will sign a 20 year lease agreement when they can buy the same system for less than 10k.

      Pricing and the industry’s minimal barriers to entry will be the downfall of the larger PPA and solar lease players. They have grown far too large and their sheer size (operating costs) simply will not allow them to adapt quick enough to survive.

  • Shiggity

    You almost need a degree in finance to do a solar finance deal yourself. That’s the whole point of SolarCity and Sunrun, they make it super easy for you.

    If you want to do it yourself, more power to you.

    • ronwint

      No you don’t. That statement is nothing more than a classic solar lease/PPA company scare tactic. You can go online on hundreds of websites today an apply for a $0 down FHA solar loan that offers tax deductible interest in minutes and get pre-approved in minutes. You don’t need any equity in your property and you only need a 650 credit score. The money is wired directly into your bank account giving you the freedom to shop for the lowest priced highest performance solar system that’s available on the market. You can’t do that with a solar lease or a PPA.

      Have you ever taken a look a solar lease/PPA quote ? Most of these companies don’t even tell you what brand or model of solar panel or inverter they’re going to install. Would you lease a car without knowing it’s brand or model ? It seems like some of these leasing/PPA companies think that their so almighty that only their brand matters. What a joke.

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