Importance Of Third-Party Solar To Kickstarting A Solar Market

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Originally posted at

In about half of US states, an individual or business can have solar installed on their roof owned by someone else, and either buy the power or lease the array from that third party. These power purchase or lease models drastically simplify the process of going solar (at a price), avoiding the work of managing tax credits, utility or state rebates, and system maintenance.

It also appears that a state’s solar market doesn’t really start growing until solar gets simple.

Let’s look at the top 10 states in solar per capita. Guess which states allow third-party ownership of solar arrays?

State Capacity (MW) Population (Millions) Per Capita PV (MW/Millions of People)
Arizona 776 6.7 115
New Jersey 845 8.9 95
Nevada 214 2.8 76
New Mexico 152 2.1 73
Delaware 61 0.9 65
Vermont 39 0.6 62
California 1893 38.8 49
Massachusetts 267 6.8 39
Connecticut 106 3.6 29
Colorado 134 5.4 25

Every single one.

But it’s not just the top 10. If you look at the 26 states with more solar installed per capita than the national median — 2.3 megawatts per million persons — 21 of the 26 solar market leaders allow third-party ownership. In the map below, you can see the clear overlap of third-party ownership rules with solar capacity.

Note: the “Top 25″ is actually the 26 states at or above the median capacity per million persons.

top solar states 3rd party

These “Top 25″ states account for 99% of all solar capacity in the country.

In other words, people will go solar if it’s simple and — with the possible exception of Indiana — not before.

Third-party ownership — via a solar lease or power purchase agreement — makes solar simple, and this simplicity is necessary because financing solar remains so complex. In contrast, 75% of Americans choose ownership over leasing when acquiring a new car, because there’s financing available at the dealer and few, if any, federal, state, and utility-based incentives to manage. If solar ownership can be made as simple as owning a car (or even a home), expect solar ownership to swell.

So why doesn’t every state jump into third-party owned solar arrays?

Because there are substantial advantages to states in simplifying solar ownership. Ownership means more of the economic value of a solar array stays local, whereas the third-party market for solar is dominated by a few national firms. These firms are less likely to tap the in-state supply chain for everything from legal services to panel manufacturing. In other words, the cost of third-party provided simplicity is economic returns.

Unfortunately, few states (if any) have figured out how to make solar ownership as simple as leasing, and the data shows that states that want solar have to make it simple. It’s no easy choice.

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John Farrell

John directs the Democratic Energy program at ILSR and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. His seminal paper, Democratizing the Electricity System, describes how to blast the roadblocks to distributed renewable energy generation, and how such small-scale renewable energy projects are the key to the biggest strides in renewable energy development.   Farrell also authored the landmark report Energy Self-Reliant States, which serves as the definitive energy atlas for the United States, detailing the state-by-state renewable electricity generation potential. Farrell regularly provides discussion and analysis of distributed renewable energy policy on his blog, Energy Self-Reliant States (, and articles are regularly syndicated on Grist and Renewable Energy World.   John Farrell can also be found on Twitter @johnffarrell, or at

John Farrell has 518 posts and counting. See all posts by John Farrell

5 thoughts on “Importance Of Third-Party Solar To Kickstarting A Solar Market

  • Republicans are doing their best to solve the “incentives are sooo complicated” part of the problem by getting rid of the incentives.

    Residential leasing looks like an artificial bubble to me. It’s marginal outside the USA. Main Street US banks are waking up and realizing that a loan on solar panels (simple, bolted down and generating income) is much safer than one on a car. Kill the ITC and you kill the tax equity break that drives the too-clever financial engineering.

    My guess is that the future of solar leasing is in the commercial sector. A lot of businesses and public-sector bodies are strapped for capital or cash and will go for a scheme that improves cash flow without a large upfront payment, or investment of management and technical time. A lot of business buildings have complicated legal structures for ownership and occupancy. A lot of their roofs pose tricky, non-standard engineering problems for solar (car parks not so much). Letting SolarCity or a competitor handle the whole thing and assume the technical and even the financial risk will be an attractive option, independently of any tax breaks.

    • Ray is a solar installer. He has a dog in the fight.

      I haven’t finished reading the report in its entirety, but it seems at this point he’s overstating the case.

  • Of course simpler than 3rd party and PPAs (with pages of legal text) and much higher end user costs. Would have been a simple FIT

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