Solar Leasing and PPAs

By Jim Williams and Curtis Scheib

Things are changing radically in the solar electric industry. Dramatic price decreases in the cost of solar electric panels within the last several years means solar is getting closer to grid parity in many parts of the country. Grid parity is when the costs of installing a solar electric system can compete with the utility electric rates that you pay over the life of the system without rebates or subsidies. Oddly, the other extreme change is the normalization of both the use and financing of residential and small business solar installations.


Solar Leasing

Solar energy is coming to Xcel Energy customers in a whole new way for homeowners looking to save money on their electricity bills. Today, getting a solar power system for the home is just about as easy as purchasing a book on Amazon, and is more affordable than ever before via leasing. Just as leasing a car or truck seemed odd at one time but became status quo, leasing of solar electric systems (PV or photovoltaic) has incredible potential for providing access of going solar to more families.

The ‘leasing’ approach is an ideal way for people who are thinking about, but do not have the money to invest in or don’t want the hassle of planning or financing a solar home solution. With a lease, homeowners can stabilize their electric costs without the up-front costs traditionally associated with installing solar.

In a few easy steps, homeowners can log onto a lease company website, receive a firm quote, often see what the solar panels will look like on their roof using satellite and aerial imagery, can sign a contract using electronic signatures and schedule an installation – all paid for with a no-money-down lease.

By utilizing solar energy, estimates are that most homeowners can save up to 15 percent off their electricity bills from day one and have a new residential solar electric system on their roof. The rate they pay for the energy produced by the solar system starts out lower than they pay Xcel right now and is usually on a 2-5% annual escalation rate. While Utility rates have been averaging over 8% annual increase over the last five-seven years. These systems can function for up to 40 years although the typical lease is 10-20 years with a very reasonable buyout at the end of the lease, giving owners the satisfaction of using clean energy and saving money to boot.

Leasing companies have the ability to help accurately engineer and design a solar system for a home without making a site visit using satellite and aerial photos to size and design the solar system. Finally, a local contractor partnered with the leasing company will then perform the installation and provide service.

“The time is right to bring the simple, pain-free approach to getting a solar solution for your home,” said Eco Depot USA Founder, Keri Brown. Eco Depot has recently partnered with the national solar leasing company Sungevity.


Power Purchase Agreements

With the rise of these new financing tools and the right support from the public and politicians, there is an answer to controlling energy costs for schools, municipalities, non-profits and small businesses: Power Purchase Agreements (PPAs).

Traditionally, implementing solar systems at educational or business facilities presents a laundry list of problems: many organizations don’t have the available resources to make use of capital budgets, can’t gain the financial support for solar systems or can’t run a buying process on existing staffing and budgets in order to purchase and maintain a solar installation. RFP management, architectural design, and proper evaluation of alternative energy systems can be time consuming. The costs and efforts of system maintenance and monitoring further complicate the process.

These contributing factors all cause administrators and facility managers to be initially cautious and slow to move on investments like solar energy. Also, a lot of these entities cannot take advantage of federal tax credits that private investors can, therefore lowering the costs of a PPA.

But we have found that these same administrators are financially creative people who understand the financial benefits of solar. The systems have to be financially sound and save them money.


Enter PPAs

PPAs can help businesspeople or administrators precisely predict what their power costs can be — through fixed cost energy pricing — so they can better gauge spending that might otherwise go to increased electricity costs.

Under the proper utility tariff and utilizing the available tax and rebate incentives, PPA providers can offer a rate of power that’s competitive with existing utility rates. Meanwhile, PPA providers usually partner with local, and experienced contractors for the installation.

New options like PPAs make for a strong start, requiring no or little money down, with energy savings from day one and continuing over the life of the solar electric system.