Forget Leasing Rooftop Solar — Get A Loan

body-0-1376425473419Solar companies are expanding a new business model of loaning money to rooftop solar customers directly so they can buy the panels outright. Up to now, most of the business has been about the solar lease, where a customer leases the panels from a third party solar company like Solar City.

The savings with the lease deal aren’t nearly as good as if building owners bought the panels outright. But the advantage with leasing is that you don’t have to plop down $15,000 or so up front.

But the solar leasing margins are disappearing fast, particularly as utilities work hard to strangle the industry through fixed monthly fees that cut the narrow savings amount for customers significantly. That’s why the new movement to loan customers money is so important, as Utility Dive reports:

The third party ownership (TPO) financing structure that revolutionized the business has peaked. From 2010-11, it changed residential solar by bringing billions in institutional money into the sector to drive out the high-upfront-cost adoption barrier.

“Loans and direct ownership are playing a bigger role in the market. That is the big story of 2015,” explained GTM Research Sr. Solar Analyst Nicole Litvak, author of U.S. Residential Solar Financing 2015-2020. “The market reached 72% third party ownership in 2014 and we think that is the peak.”

Most of the top TPO financier-installers, led by SolarCity, have introduced a loan product, Litvak said.

Though loans have not yet reached 20% of SolarCity’s 2015 sales, they are increasing, according to the sector leader’s Q2 earnings report. SolarCity expects 25% to 30% of its total 2015 installations to be through loans, according to Litvak.

Since SolarCity sells a third of U.S. residential solar, “that alone is a big part of the market,” Litvak said.

It’s encouraging to see the industry innovate like this. The leasing model is less than ideal, and it’s even caused difficulty for some homeowners trying to sell by complicating the transaction. Ultimately, the loan model, if the financing terms are good, should ensure that solar continues its rapid growth while giving building owners a bigger share of the savings.


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