90% Of EnergySage Shoppers Choose Solar Ownership Instead Of Leasing
Originally published on Solar Love.
According to EnergySage’s recently released Solar Marketplace Intel report, the first in what is said to be a regular series for the solar price comparison service, some 90% of those who ask for quotes and then get solar installed are opting to buy their systems, not lease them.
The report, which details the trends on residential and small-scale solar for the period of July 2014 through June 2015, looked at data on more than 10,000 quotes in the top 10 residential solar states. The company found that instead of solar leasing, which was once hailed as a renewable energy gamechanger (and which can still be an appropriate choice for some), customers are now either paying for their solar installations outright or taking out a loan for the costs.
“Online solar shoppers are buying their systems outright – instead of leasing. Ninety percent of EnergySage’s solar shoppers elected to own their system, either by paying in cash or financing with a solar loan, rather than sign up for a third-party lease or PPA. This statistic is significantly higher than the 40% of solar shoppers nationwide that choose to own their system.” – EnergySage
Although the data from EnergySage includes quite a few transactions, none of them include quotes or installations from SolarCity, the leading residential solar installer, which doesn’t participate in the program, so the trends noted on the report may differ a bit from a ‘real world’ perspective.
Also noted on the report is the fact that the cost of solar continues to come down, with an average price of $3.79 per watt and a payback period of about 7.5 years. The solar costs ranged from $3.21 per watt for standard installations to $4.37 per watt for “high efficiency equipment packages.”
“The economics of solar are rapidly changing for solar shoppers, installers, and financiers alike. As demonstrated by the data within our Solar Marketplace Intel Report, it’s becoming more affordable for U.S. households to adopt solar.” – Vikram Aggarwal, EnergySage CEO
Another highlight of the state of the current solar market in the report was the indication that small-scale solar isn’t just a token effort (albeit a very visible one) toward home energy production, as the data showed that solar “is helping homeowners generate almost 85% of their electricity needs in 2015,” and that the average home 7.9 kW solar array “generates about $2,000 worth of electricity each year.”
Get the rest of the solar insights in the downloadable report at EnergySage.
Reprinted with permission.
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I look at these charts and get lost. Avg cost of system $29k, avg electric generation per year $2k. How do I get a payback of 7.5-8.1 years. OK so the story is written poorly. They should have include that tax rebates and other item bring the cost down to $(14-16?)k, and then the it would add up. But fed is only 30%, so do I just assume the story is garbage in/ garbage out?
Derek, if you are going to re-post a PR piece, at least so the basic math a point out the holes.
ROI still isn’t great in most of the U.S. The chart I posted shows some Australians with larger systems paying .75USD/watt after their incentives. This is the future of solar. These low prices will not be delivered residentially by large companies.
I think many Australians pay about .30AUD/kw for electricity.
The statistical relation between the average cost, generation, and payback is not the same as the statistical relation between the cost, generation and payback of an actual system. While cost and generation are correlated, the ratio between them depends on local fees, policies, and grid prices. Thus it is perfectly reasonable for the average payback time, as calculated for each individual system, to be different from the payback time for an imaginary system with the average cost and generation. They are not mathematically identical
That being said, I just tried to run a simulation with random costs and random generation-to-cost ratios, and I found the average of all the payback times appeared to be *higher* than the payback time of an average system (not half of it), so there does seem to be something non-intuitive (or just wrong) about their data.
The purpose of solar leasing is for the lessor to capture the value of solar from the lessee. It is good to see that many buyers understand the economics.
Solarcity seems to still be selling systems at a flat $5.10 per watt.
Solar prices in Australia, post incentives:
STCs accounted for a price reduction of approximately 78c/W for Zone 3 cities (Sydney, Canberra, Perth, Adelaide, and Brisbane), and around 60c/W for Melbourne & Tasmania.
http://www.solarchoice.net.au/blog/solar-pv-system-prices-october-2015
(AUD $ is .71 U.S. $ today)
Yes, I like the Solar choice monthly tables. More Cleantechnica readers should be aware of it. Notice that in Perth the low rates for 5 kw systems are less than $1 watt Aus. That is 75cents watt U.S! These are subsidized prices by about 25% but even without the subsidy residential is installed at cheaper than the very best Utility installed American rate. At $1 in Perth the electrical LCOE is about 5cents kwh. Staggering. Why isn’t this the case in the U.S? It is a mystery that many an energy detective has tried to solve.
In the U.S. solar so far has been mostly an upper middle class phenomenon, dominated by solarcity and similar selling complex financial products by trained sales people.
In Australia, as I understand it, the solar boom occurred by homeowners of more limited means finding a way to counter high electricity rates. This has resulted in a more mature, efficient market for solar.
In others word, an Australian plumber who is tired of high electric bills wasn’t going to put up with the b.s. from solarcity and similar. He gots his electrician neighbor to install a system, paying for a couple days labor and a modest parts markup.
This grew in Australia into an efficient and competitive market of mostly small solar business who, as I understand it, are frequently electrical contractors with other lines of revenue.
Well, there’s our problem. In America we no longer have electrician neighbors, and the small-town contractors are doomed by big-box retail chains like Home Depot and Lowe’s. The more recent rise of DIY, 3D printing and the maker movement might restore America’s supposed home ingenuity. Still, I wonder if the rest of the difference is accounted for by the politics of those Americans who have the right combination of geography and real estate to rationally pursue solar.
Permitting and inspections are simpler in Australia. Customer acquisition costs are low when trusted local business are used.
In the U.S., customer funds are need for solarcity’s government affairs employees, lobbyists, PR people who read these threads, and the top people becoming multimillionaires without running a profitable company.
If the Reeves had stayed in South Africa, their solar business might have been forced to provide a product that produced a financial benefit for their customers. No reason for that nonsense when they can come to the states and legally scam low information consumers with complicated financial products.
The average posted by Energy Sage is more in line with my real world data collected from friends. The average of $3.79/Watt is more realistic compared to the one posted by GTM!
Simple payback period can be calculated on a per Watt basis. It also depends upon the tier rate of electricity that it is replacing.
For example, you are in Tier4, with a rate of $0.32/kWh. You receive the 30% tax credit, and let us say that because of your location your 1 Watt produces 2 kWh/year.
The payback period is Net Effective Cost/Retail Value of Electricity produced
($3.79 less 30%)/(2 kWH x $0.32/kWh/year) = 4.1 years.
Now if you have financed through HERO program, and you happen to belong to the higher income tax bracket of 35%, you can get further tax deductions, and your payback period could be shorter:
($3.79*(1-0.3 Fed tax credit)+ $3.79*0.07 fin. charge-0.35*(3.79+0.07*3.79)income tax deduction from property tax payment)/(2 kWH*$0.36/kWh/year) = 2.3 years.
Now if electricity you are replacing is at the lowest tier, right now at $0.18/kWh and considering only the fed tax credit, the simple payback is 7.4 years
And with financing from HERO and additional deductions from property tax the simple payback period for the lowest tiered rate is 4.2 years.
Some of my friends got $3.23/Watt from an A+ rated by BBB local company with systems that are better than that of SolarCity’s, their payback period based on the average tiered pricing of $0.29/kWh and financing through HERO is only 2.2 years.
Solar is great nowadays. So don’t be saddled by PPA or leasing and high purchase prices of SolarCity, SunPower, Sungevity, SunEdison….
Sorry people I still say this PR piece is a waste of ink. If you want to use it to help convince some one, then unless they are dumb it is not useful. I’m not talking about researching all the data on the web, I trying to read this piece. The number either fit or they do not. If they do not fit then either something is WRONG or they LEFT OUT important information. Yes using the average will not be exact, but should be in the ball park.
average price of $3.79 average size 7.9 kW ($29941) which matches their ($29225). !!!!
Producing ~$2000/yr in electric.
Now payback, simple divide would be about 14.5 years; which I do not believe.
So we have to ask what they used in the calculation but did NOT talk about. Likely include Federal tax rebate (30%), state and local rebate/refunds (???), maybe assumed value of SERs, maybe assumed Santa bring more gifts. The point being that the items were not mentioned in the graphic or in the story. So based on what is include it does not compute and therefore is not a useful story. UNLESS you already believe and then it is just an echo camber.
The Federal Tax Credit is always factored in the payback calculations when Gross Price of installation is used.
According to my real world data from my friend’s installation, they’ve got better paybacks because 1) the retail rate of electricity that they are replacing is higher, 2) they take advantage of paying through the property tax which is 100% deductible from your income and that includes the principal and finance charges and 3) they got better prices for installations. And the best payback scenario is 2.2 years.
At any rate, the payback period is truly shorter than what they have shown. So argue against the 2.2 years payback calculations and I will show you that this number is realistic.
Yes, the numbers in the article above are not consistent with themselves.
Average payback time: 7.5 years
Average money saved: 2K/yr
So the system would have had to cost 15K.
Say 1/3rd has already been paid by ITC so the system would have originally cost 22.5K. Yet the article says the average system costs 29.2K. So there is ~7K discrepancy in this story. Good catch.
Let’s not forget about the “Earned Energy Credits” for those who buy their systems and don’t lease. There was a serious drop in what was originally out there and what is out there now that people took into account when the invested in the solar system for their house to help shave off some of that “payback period”.
As in this?
https://www.irs.gov/Credits-&-Deductions/Individuals/Earned-Income-Tax-Credit/EITC-Income-Limits-Maximum-Credit-Amounts-Next-Year
We find your information very helpful for people like us, low electric bills of $22 to $66 a month (solar sales people usually leave as soon as they find out how little we use). I’m thrilled that those with more disposable income invested in the early systems, whether or not they considered the rapidly dropping prices, or the conundrum of trying to get replacement panels for non-warrantied (or even warrantied) panels that are now so far from more competitively priced panels. (I’m reminded of J.C. Penny and their “Lifetime” warranty on batteries, and how financially unrealistic it became.)
We are more interested in standardized, efficient enough, durable and maintainable panels that are affordable (and perhaps cost effectively up-gradable with the old panels still good enough for re-sale to recover some cost when moving on).
It seems the Australians are showing that can become more realistic for us late adopters.
I’m starting to think replacing broken panels will be impossible. One may have to toss in panels that are slightly different in size. So maybe it is important to use micro inverters on each panel to ensure future compatibility.
I believe the micro inverters that came out not too long have made that much more practical.
The only thing I can think of for those with obsolete “stranded” assets is to form groups or even solar panel “junk yards” to exchange or sell parts that can still be used in the older systems.
Perhaps solar enthusiasts could set up a fund to help those pioneers trapped by the rapid decrease in prices, since their stranded assets don’t get anything like the compensation the big utilities (ever more privatized) like to demand.