Leasing may be a business model that enables more people to afford solar energy systems.
The sun is shining on homeowners in less affluent neighborhoods who are discovering they can afford solar energy after all — by leasing rather than buying the panels on their roofs.
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The new business model lets homeowners save money the very first month, rather than breaking even a decade after an initial investment of $5,000 to $10,000.
Analysts with the U.S. Department of Energy’s (DOE) National Renewable Energy Laboratory (NREL) found that the solar lease business is surging in southern California. And the model is being adopted in less affluent neighborhoods that had avoided customer-owned systems.
The NREL study found a positive correlation between customers outright buying solar energy systems and customers living in neighborhoods where the average household income was $150,000 or more.
But for third-party-leased solar panels, that positive correlation appeared in neighborhoods where the average household income was just $100,000 or more.
The study did not look at individual adopters, who can have many different reasons for installing solar. Still, the study strongly indicates an attraction for third-party leasing in neighborhoods with less affluence than those most likely to go for the customer-owned option.
If what’s true in southern California proves true for the nation, it means that rooftop solar power could attract an additional 13 million Americans — and that could push solar energy into the mainstream.
Leasing Opens Solar to New Markets
NREL’s Easan Drury is the lead author of the Energy Policy report “The Transformation of Southern California’s Residential Photovoltaics Market through Third-Party Ownership.”
“What is so interesting about the southern California data is that the strong decrease in PV prices — from lower retail costs and stronger federal incentives — didn’t pick up a new demographic,” Drury said. “But a new business model — leasing — did pick up a new customer demographic.”
Repackaging the value of photovoltaics (PV) as a simple savings on the monthly electric bill is an attractive alternative to the pitch that it will pay for itself in a decade, he said. “If someone comes up to you and says you can make money next month and forever, that totally changes how people see the value of solar.”
Immediate Savings is a Lure
This photo shows a woman standing next to her husband, who is holding their two-year-old. Enlarge image
The differences in upfront costs are stark between buying and leasing. Heather and Kit Lammers put $3,000 down for a 5.64-kilowatt system that is providing 62 percent of the electricity for their two-story home in Erie, Colorado. If they had bought the system outright, they would have had to pay more than $9,000 with incentives, or as much as $20,000 without incentives.