Solar Leases Will Drive Solar Home Growth to $5.7B ? World ...

Solar Leases Will Drive Solar Home Growth to $5.7B

A financing mechanism that has made solar energy more affordable is set to propel the growth of the residential market in the?United States?from $1.3 billion in 2012 to $5.7 billion in 2016, according to a report released Monday.

The mechanism makes it possible for homeowners to pay little or no money down to have a set of solar panels installed on their roofs. Instead of forking over, say, $20,000 to install and own the equipment, they pay a fee each month for using the electricity produced from the panels. Homeowners typically sign a long-term contract of 15 to 20 years with the companies that pay for solar equipment and labor and make sure the solar panels work properly during the lifetime of the contract.

This model, called ?solar leases? or ?third-party financing,? was rare five years ago. Now it?s available in 14 states. It now accounts for over 70% of all residential installations in?California,?Arizona?and?Colorado, said the report by GTM Research.

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California is the largest solar energy market and, unsurprisingly, it also is the first market for solar leases. That?s mainly because?the state has budgetedroughly $2.2 billion for rebates to support the installations of 1,940 megawatts of solar electric systems for homes, businesses, nonprofits and government agencies from 2007 through 2016.

The market potential made California the base of some of the largest solar lease providers in the country. In fact, the four largest all headquartered in the state: Sunrun, SunPower, SolarCity and ClearPower Finance. Sunrun, SolarCity and Clear Power Finance rose to prominence by raising a lot of venture capital and funds from banks and other investors to finance solar leases. SolarCity has its own fleet of workers who install solar panels while Sunrun and Clean Power Finance contract with installers to set up the solar panels.

SolarCity, which also is the largest solar installer in the country, went public?last December.

SunPower has only been offering solar leases since 2011, yet it already has signed over 14,200 leases in nine states, its executives said during a conference call to discuss its fourth quarter earnings last week. The company uses its large network of dealers for its solar panels and equipment ? something that non-manufacturers such as Sunrun and SolarCity don?t have ? to help market the leases. SunPower plans to roll out a solar lease program outside of the U.S. later this year, the company?s CEO, Tom Werner, told analysts.

Solar leases have largely been financed by banks such as U.S. Bancorp. Overall, 28 funds totaling over $3.1 billion have been set up to finance residential solar leases, GTM said. Non-bank investors?include Google?and utilities that use their own money to finance leases. These investors are counting on a fairly steady return from the fees homeowners pay under their long-term contracts. They also can claim a 30% federal investment tax credit.

The need to raise funds in order expand services and compete effectively has prompted solar companies to look for additional sources of money.?SolarCity is reportedly working?on bundling its solar leases to back the securities it would issue.

The solar financing model has its risks. Solar lease companies are counting on the solar panels and other equipment to work well and generate the amount of electricity promised by manufacturers over a long haul. The turmoil in the solar manufacturing business, where an oversupply issue worldwide has forced dozens of solar panel makers to file for bankruptcy over the past two years, means some manufacturers may not be around to honor their warranties. Solar lease companies often tell consumers that they could reduce their monthly utility bills by going solar, but that doesn?t mean they guarantee lower monthly bills for 15-20 years in writing. Consumers need to read their contracts carefully.

?SOURCE:?http://www.forbes.com/sites/uciliawang/2013/02/11/solar-leases-will-propel-solar-home-growth-to-5-7b/

Source: http://www.worldleasingnews.com/news/solar-leases-will-drive-solar-home-growth-to-5-7b/

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