Leasing PVs is a Growing Market

published: 2011-11-30 10:07 | editor: | category: Analysis

Manufacturers of PV panels have a potentially huge market for residential rooftop systems worldwide, especially in countries like the U.S. which offer rebates and tax incentives on both a state and federal level. But these rooftop systems can be expensive, costing $30,000 or more to purchase the PV panels and have them installed. In the U.S., where the economy is in the doldrums but homeowners who can’t afford to finance solar projects still want to “go green,” those homeowners are taking advantage of the latest trend in solar sales: Leasing.

Solar leasing, or “third-party agreements,” is a new concept, but it is growing rapidly and has allowed the industry to continue to sell PV panels. In fact, five years ago there were no solar leases, but companies like Sungevity say leasing is now 50 percent of the residential market, according to David Kennedy, President and Founder of Sungevity.

The PV Solar Report, a California solar market data firm, announced on October 17, 2011, that such third-party solar lease agreements had eclipsed cash PV purchases and now represented approximately 59 percent of California's home solar market in Q3 2011 and will mark 51 percent of the market year to date.

Win-Win – How it Works

Normally when a homeowner buys a PV system, they must not only finance the up-front costs, but also be responsible for the long-term equipment maintenance.

In this case the homeowner can take advantage of any rebates and tax credits that may be available – something that is not expected to last much longer in the U.S. But these residential markets for PVs are more and more being driven by creative finance solutions.

With a solar lease’s third-party agreement, the same homeowner would pay no money down and only pay a set monthly fee to a solar lease company – a fee roughly equal to what they had already been paying the local electric utility company. That lease company finances the cost and installation, maintains the system for the length of the agreement (usually a 20-year term), and would continue to own the system.

While the homeowner saves money and avoids all the financial risk, the company gets to take advantage of all the available solar incentives from the purchase of the equipment. And because the lease company is buying the PV panels in “volume” as opposed to a homeowner’s individual purchase, they are getting the panels cheaper and the PV manufacturer is selling more.

PV Manufacturer Leasing Programs

A number of established PV manufacturing companies have been adding solar leasing programs to their business models in order to expand their customer base. This usually involves partnering with a firm that specializes in leasing installations while applying a few marketing tricks:

  • Oakland, CA-based Sungevity,which has been doing solar leasing since 2007, currently has a partnership with Lowes home stores in California and New Jersey that allows the company to offer solar leasing via the store. Sungevity plans to expand into more of Lowes’ over 1,500 stores in the near future. Sungevity uses Internet aerial photographs to design solar installations, as well as uses customers' own utility bill data to estimate the rebate.
  • Cupertino, CA-based SANYO North America Corporation’s Solar & Smart Energy division is partnering with New York-basedfinancial services company Brightgrid Solar to offer a 3-tier leasing program that each include installation costs and a 20-year maintenance program. Inverter repairs and replacement panels are also covered under the terms of the lease. The three options include putting no money down, putting down a partial payment, or paying for the system in full. Each plan also includes a SANYO 3D television in the deal. In fact, SANYO hopes that these televisions will soon be able to display a home energy management system where customers can monitor their PV system’s efficiency, manage their own power habits, share the info through an internet connection, and even play educational video games about energy efficiency.
  • The U.S. division of German-based CentroSolar is also partnering with Brightgrid to establish their “CentroLease” program, which involves a 3-tier payment option not unlike SANYO’s. One difference in the inclusion of theft insurance, and revenue grade monitoring.

The California Leasing Model

The number of solar power systems installed on California rooftops continues to grow as residents seek alternatives to the state’s high electric utility bills. And many of them are taking the more affordable route of solar leasing.

According to the report by PV Solar Report, 2011 will be the first year that leased or third-party-owned residential solar systems will outpace cash sales of rooftop installations, with third-party solar systems making up 51 percent of the installations, based on information from the California Solar Initiative.

Stephen Torres, founder and managing director of PV Solar Report, believes that much of the growth in the solar industry as a whole is apparently is being fueled by homeowners leasing rather than buying PV panels. And PV Solar Report thinks that there is a lot of room for growth potential for these third-party systems, compared to the old model of cash-sale systems.

Conclusions

As solar leasing options grow, more manufacturers of PV panels will be looking to get in on the business of residential solar leases because it will increase their sales of panels. And the current success model seems to be to do these third-party agreements through partnerships with solar installers and financial services companies.

Currently, the SANYO - BrightGrid Solar program is only available in California, New Jersey, Arizona, Colorado, and Hawaii, but is expected to be in additional states over the coming months. But as a PV panel provider worldwide for over 30 years, SANYO has some market advantages that other firms need to take note of. First, SANYO grows its own silicon ingots and makes wafers in factories in California and Oregon.

And their panels make for good marketing: SANYO is known for its HIT panels' high power density per square foot. According to company data,  the HIT PVs (Heterojunction with Intrinsic Thin-layer) “employ a proprietary technology developed by SANYO whereby hybrid solar cells composed of single crystalline silicon wafers are surrounded by ultra-thin amorphous silicon layers. The unique structure minimizes defects within the p/n junction of the cell, producing highly efficient cells capable of achieving up to 17.8% module efficiency while producing more power even at higher temperatures.”

So SANYO’s selling point is that the panels “maximize roof availability so fewer panels are needed.”

What solar leasing ultimately does is provide a way for more homeowners to adopt solar while helping manufacturers to sell more panels. At this point, much of the solar leasing programs are based on the difference in financing and the fact that it is the companies, rather than the homeowner, who gets the benefit of government rebates and incentives. It is a win-win situation: The incentives go to the provider, the cost savings are passed to the homeowner. What needs to be factored-in by future companies designing such lease programs for the U.S. market is that in these tax and rebate incentives will – sooner or later – go away.

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