Get ready — there is a revolution in residential solar going on. From financing models, solar leases, community (group buy) to owners of multi-unit housing complexes potentially becoming independent power producers, there is a changing of the business model guard. Think of it, the world may be a major storage innovation away from disconnecting from the utility grid. Do not kid yourself, there will be utility pushback but there will also be utility participation in the vein of, if you can’t beat ‘em, join ‘em.
Homeowners as well as people who do not own their own roofs or have roofs inappropriate for a PV installation can choose from various ways to buy solar electricity, all of which offer different avenues for participating in residential solar as well as potentially being highly profitable (particularly the solar lease, and residential PPA) for the companies involved in these models. Except for the relatively simple option of buying a PV system, the other business models are relatively new and need to mature.
Buying: An option that may or may not require financing (but probably will). In many cases interest rates offered specifically for solar are higher (sometimes significantly) than other types of loans. Buyers of residential PV systems take advantage of being able to negotiate for the lowest price. In the U.S., the average price of a residential PV installation is $4.00/kWp; with the cost in the arena $3.00/kWp including permitting (the cost can be lower depending on the cost of the hardware and the cost of permitting). With an 8 percent interest rate (as some solar financing companies are offering) for 20 years borrowing $24,000, the total cost of the loan would be $48,000, with $24,000 in interest payments. Low interest financing options are crucial in order to continue momentum in residential PV system sales.
Leasing: An option where the lessee has a monthly payment subject to an escalation fee and has the option to buy the system at the end or before the end of the lease. In some cases the system becomes the property of the lessee at the end of the lease. For the leasing company, the lowest cost of hardware is required and for the lessee, the monthly payments will almost always add up to more than the system would have cost if bought for cash — of course, buying a system up front is not an option for many. The cost of a solar lease may or may not be negotiable. The lessor takes advantage of available incentives, including tax credits.
And the Future of Residential Solar Is…Up for Grabs