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Does EV+PV Save More Money?

Thanks to the ever-increasing cost of fuel bills, solar energy is becoming more and more popular as a viable source of power for financially savvy consumers. However, solar energy isn’t exactly a new business; solar cells were invented in the early 19th century when scientist, Alexandre Edmond Becquerel, observed that the presence of sunlight was capable of generating usable electrical energy. Solar cells went on to have many different uses – even being used to power space craft in the 1950s and 1960s. In 1977, the then President, Jimmy Carter, installed solar panels to the White House and started to initiate and promote incentives for other people to create and use solar systems as a source of generating energy. People have long-since recognised that solar energy is looking like the best alternative energy source for our future as its primary source – the sun – is able to generate more than ten thousand times the amount of energy than our planet is capable of providing itself.

These days, as people become more aware of the benefits – both cost and environmental – the installation of solar panels to the home is becoming increasingly common. Indeed, the growth in their popularity has been aided in some way by the current electric vehicle trend. The same theory has applied in the vehicle world; fuel prices have soared over the past few years and people are looking for ways to permanently reduce this cost. However, although electric vehicles are a lot cheaper to power than their diesel and petrol counterparts, they will still add a significant amount to any household electricity bill.

The one thing that holds people back in installing solar panels is the initial cost; although there are plenty of Government incentives to help people afford the installation costs, solar panels are a long term investment. Also, comparison sites now incorporate practically anything in life – from solar panels, to clothing which can help find the cheapest deal. However, although solar panels will save a large amount on peoples’ annual fuel bills, it will take approximately five years to make back the total cost of installation for solar thermal panels and around 15 years for photovoltaic panels. Many people are still reluctant to take the plunge if they cannot be guaranteed an immediate benefit.

Electric vehicles and solar panels working together

This leads us to the real benefit of using solar panels, and the dual benefits of converting to using both electric vehicles and solar energy. Across the pond in Britain, energy powerhouse, British Gas, recently conducted a study using actor, Robert Llewellyn, as a guinea pig – one of the first ever motorists to completely power his electric vehicle through the solar panels installed on his house. The results could be potentially revolutionary for the solar energy world – and could make the prospect of converting both car and house a much more appealing prospect to the average householder.

Robert Llewellyn’s house was installed with solar panels costing $18,200 three months prior to the release of the report. During those three months, Llewellyn drove 2,680 miles and his solar panels generated enough energy to cover around 85% – or 2,290 miles – of that distance. British Gas then revealed that it cost Llewellyn just $8.50 to drive that distance in his solar panel-powered car – a huge saving considering that the same distance would cost $237 in a petrol car, and $58 in an electric car powered by traditional means.

Massive savings

Using Britain as an example since that’s where this experiment is based, their average motorist covers 12,000 miles per year. If Llewellyn travelled the average distance, a year’s motoring would cost him just $92 – saving a fortune of just under $3169 on gas, and a significant amount of electricity costs. However, the real benefit is that, over the course of that year, he would have brought in $1671 in feed-in tariff payments – a significant additional contribution to offsetting the initial installation costs.

British Gas says the average time it takes for the $18,200 system to pay for itself is around 10 years for the average household. However, through adding an electric vehicle to this equation this time could be drastically reduced to around four and a half years. That figure of 12,000 miles per year is also pretty conservative – it’s not uncommon to clock up a mileage of over 20,000 per year and indeed here in America where our cities are much farther apart than in Britain many cover even more ground during a year. In this case, the study indicates that the time could be reduced even further. Suppose you added a second household vehicle to that equation as well; you could find that your solar panels have paid for themselves a lot sooner than you think. Then you can get onto enjoying the real benefits – hugely reduced annual energy costs.

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Anne-Marie Francis is a freelance writer from England who specialises in writing about organic products such as Tempur-Pedic comparison and energy saving issues such as wind and solar power.

Reprinted with permission from SolarLease101.com 

Original Article on Residential Solar 101

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Can Solar Leasing Get Cheaper?

Before solar leasing came along, installing PV on a residential rooftop was expensive. The approach to achieving the allusive breaking point of “grid parity”, or when solar PV is the same cost or cheaper than fossil fuel generation, was to chip away at the expenses with government incentives. Rebates, small grants, and more recently renewable energy credit (REC) markets created new cash flows on top of electricity savings.

But this patchwork of incentives, and the process of installing rooftop PV, is convoluted. Land permitting, interconnection, state certifications and qualifications, and weeding through a slew of installers and their different offers make the process a serious headache. Solar leasing not only removed the issue of hefty upfront costs, which could still climb above $20,000 even with incentives, but it also made residential solar simple. Just review the terms of a contract which supplies green electricity to your home and pay less than you would have if you kept paying for dirty electricity. Boom. Done.
But this hasn’t changed the fact that the devil is in the details. Granted, this isn’t to say that the deal isn’t a good one from any number of perspectives. But there are a number of aspects of solar leasing that makes it less the silver bullet technology that it’s sometimes made out to be. For one, as we’ve written about already, the market for leasing companies (talking just about the SolarCity’s and Sungevity’s of the world) tend to move toward consolidating the stream of materials and labor rather than diversifying it.
On top of that, though, there are more straightforward reasons you might be getting jipped. Even though zero money down sounds great, and it is, the reality is the incentive that makes solar leasing possible – the 30% federal tax credit – is conducive to a lot of hidden costs. For one, solar leasing companies sell tax credits to equity investors that benefit from reducing their tax liability by financing large volumes of PV components. Rhone Resch, President and CEO of the Solar Energy Industries Association, argued these tax credits are sold at a loss of 30-50 cents on the dollar when factoring in the transaction costs and markups of selling them in secondary equity markets.
This provides the incentive to markup the costs of the system parts. The larger the system costs, the larger the credit, often to the detriment of installation companies that compete to keep costs low. In the case of larger leasing companies, this process exacerbates the issue residential PV encounters with capturing price drops in global PV manufacturing markets; larger inventories stacked full of components sold prior to price drops equals higher-than-necessary costs to the consumer.

If you’re going solar but haven’t chosen an installer, get a free quote and be sure to ask questions about the source of their system components!

Posted by Stuart Ivy

Original Article on Residential Solar 101

The Relationship Between SREC Prices and Solar Leasing

Several forums, including this one, covering residential solar developments have commented on the volatility of SREC markets in some states. But few have yet to note the potentially tremendous impact on solar leasing, and residential solar adoption in general, in those SREC states experiencing severe fluctuations in pricing. You may have read how the New Jersey and neighboring Pennsylvania SREC markets have declined in SREC prices. After a few years of trading above $600/SREC, New Jersey’s SREC market – which is largely responsible for making the Garden State a national leader in residential solar – plunged to prices between $200-$250 for the second half of 2011. Now, prices have started to drop further, and will continue well below that point for at least the next year or two (assuming no legislative action is taken). There is understandable frustration for the early adopters that expected a 3-5 year payback on their solar investment with an incoming cash flow based on high SREC prices (even though their system is still saving money on electricity bills and earning something for their SRECs). The unanticipated glut in the market has depressed prices as too many SRECs are being generated than the RPS law requires utility companies to buy.

But what does this mean for homeowners that want to go solar, but have yet to put together the finances? The answer to that question is not yet obvious, but the hunch is the volatility in SREC pricing in New Jersey, a state that has installed over 650 MW of solar (second only to California), will drive prospective solar customers away from owning their panels. The obvious alternative is a solar lease, which has an edge in this scenario of not being dependent on SREC revenues whatsoever. The question being posed now to prospective solar adopters is: Do I hedge my bets on volatile SREC markets, or on the predicted rise in electricity costs? Though there are many advantages to owning a system, and SREC prices will not necessarily remain low in all states, solar leasing seems to carry lower risk.

What’s particularly interesting, however is how this development could perpetuate itself in state like New Jersey that are susceptible to volatile SREC pricing. It’s not entirely clear how solar leasing companies like Sungevity and SolarCity monetize their SRECs from the systems they lease to homeowners. The likely scenario is they look for long-term contracts and settle for spot trades when possible. But either way, these large sales will drive down SREC prices, because solar lease companies do not depend on SREC revenues to make their margins, i.e., SRECs are just gravy at the end of the day for them.

Additionally, as solar leasing is tapping into a new income demographic, which is expanding the residential PV market, a greater supply of SRECs is expected to come online from systems that otherwise would not have been built. Even if these SRECs were not sold in the open market, speculative SREC pricing, which looks at potential supply of SRECs, will trend downward in anticipation of a prolonged oversupply. These self-perpetuating factors have yet to take hold on a large scale, but I’ll be curious to see if the markets pan out that way (and feel bad for the early adopters that hedged their bets on high SREC prices!)

The best way to get an up-to-date snapshot of the SREC situation versus leasing is to get a quote today, and check out aggregators like SRECTrade and Flett Exchange.

Original Article on Residential Solar 101

In Focus: Micro Inverters

What factors do you consider when you’re comparing quotes to install a system? Probably a number of things- electricity savings, system size, total cost, to name a few. But what about inverters? Or more specifically, micro inverters? Truth is, some of the most significant technological innovations in residential solar have been in the field of micro inverters and corresponding online monitoring.

Let’s back up for a second. Whether an installer is pitching you a solar lease or a self-purchased system, information about your system’s expected performance over it’s life is crucial. If you lease your system, you’ll want dependable figures on your electricity generation and the money you’ll keep in your pocket because of it. If you purchase your system outright, you probably are making a projection not only on electricity savings, but on SREC earnings as well. Information about system production is crucial in the latter case, too, because you earn SRECs based on how much electricity you generate. Real-time information is paramount for the residential solar adopter.

Which brings us back to micro inverters. An inverter is the device that converts direct current into usable alternating current for you, the homeowner and electricity consumer. String inverters (in a series, for the physics wonks out there) were seen as an improvement in lieu of one big central inverter. While string inverters increased visibility into the productivity of panels, an array was still only as efficient as the lowest-producing panel. Think of it as a cross-country team that can only run as fast as its slowest runner. But the advent of online monitoring systems that track production on the web has driven demand for parallel micro inverters, which convert the production of each individual panel from direct current to alternating current. Dysfunctional panels don’t drag down the productivity of the others, and online monitoring can quickly identify the weak link.

Two companies in particular are leading the way in this technology. Enphase and eIQ Energy both have developed parallel micro inverters complemented by sophisticated online monitoring systems. Homeowners with PV on their roofs can identify the productivity of each individual panel from their iPad or smart phone, allowing them to make more precise calculations on expected electricity production and savings. Shading, dirt, leaves, partial cloud cover and sometimes just run-of-the-mill wear and tear can vary for each panel in an array. These two companies offer a product that provides unprecedented real-time information and visibility into your PV array’s performance.

So what can you do with this information as you’re reviewing quotes for a PV system on your roof? Keep in mind that most installers – whether they are small independent companies, larger firms contracted with leasing companies, or the leasing company itself – have to procure all the parts of a system when making the pitch to you. Oftentimes, installers partner with one manufacturer for each part, including inverters, if they think those inverters offer a superior value to the buyer or leasee. Even though micro inverters add costs to the system as opposed to one central inverter, the benefits far outweigh the added expense. Check with your local installers to see what kind of inverters are included in the quotes. And remember, knowledge is power!

Posted by Stuart Ivy

Original Article on Residential Solar 101

Declining Panel Prices and Solar Leasing

The rapid decline in panel prices has been widely reported among bloggers and research institutions in the PV industry, as has the ripple effect this trend has had on driving demand for residential solar. In addition, it seems like every day there are new articles coming out about the growth of the major leasing companies. Whether it’s SolarCity’s anticipated IPO, Sungevity’s aggressive social media campaign, SunPower’s expected future earnings, or research findings on the new income demographics for residential solar, there are countless headlines about solar leasing that have coincidedwith the decline of panel prices.

It almost seems intuitive that these two trends complement one another. (Can you imagine cars being leased in the first half of the 20th century, when the automobile was a very expensive luxury item?) But in reality the two aren’t as closely related as it might seem, and often it’s you, the customer, that is vulnerable to this misconception. There are two ways in which leasing companies can actually fail to capture the benefits of declining panel prices when quoting a system for a prospective customer. Because residential PV projects are smaller in scale over a more dispersed area, residential installers tend to have a harder time managing their inventories. Unless there is a reason to “dump” panels (a term that’s becoming all too familiar in solar markets), installers might sell projects at higher quotes that reflect older panel prices in order to maintain their margins. Whether a solar leasing company outsources installation services or keeps them in-house (e.g., SunPower) it’s worth looking into what panel prices are quoted in a solar lease package. As solar leases gain market share, we’ll keep a keen eye on these numbers, too!

A second reason solar lease companies may not capture declining panel prices in the quotes the offer has to do with the way they finance the system. Because a bulk of the financing comes from selling tax credits to equity investors, and the level of the tax credit is based solely on the system costs, leasing companies have the incentive to quote a high cost to receive a larger credit. Whether or not these artificial margins are made up for through “installer rebates” or other “package incentives”, there is a risk to customers of having a higher than necessary quoted price for the system that gets factored into the leasing terms.

Even though panel prices have come down significantly as leasing options have made little or zero money down a possibility, the two trends are not necessarily complementary, and in some cases, actually work against each other. Even though zero money down and lower electricity bills for 15 years is an attractive offer, purchasing a system outright is becoming more and more feasible as well. If you’re interested in receiving a quote for a lease or an outright purchase (or both), fill out a free quote form today!

Posted by Stuart Ivy

Original Article on Residential Solar 101

Comparing SREC Aggregators

Anyone interested in installing panels, or who already has, has probably heard of solar renewable energy credits, or “SRECs”. An SREC is basically a rebate for PV system owners. But instead of one big payment based on capacity (e.g., $1.00/watt), the rebate is based on solar electricity generation, and thus paid out over time. PV system owners receive an SREC every time they generate 1,000 kWh of electricity from their PV panels, which they can then sell. The dollar amount fluctuates with respect to the annual targets laid out by state legislatures; if more systems come online in a year to generate electricity (and earn SRECs) than the annual targets, the price of the SRECs drops until the targets increase to create a scarcity in the market. It’s a neat mechanism that states are still tweaking, but there is a lingering question many homeowners with panels are left asking themselves: How do I actually sell these things?

We’ve covered the rise of leasing companies in residential solar, and we expect that trend to continue. But perhaps because SREC prices have dropped in some states, SREC markets have recently been given a bad name. Yet several states are still trading above $200 (and as high as $540 in Massachusetts), and several homeowners would still rather own their systems and sell SRECs rather than lease their panels and fork the SRECs over to the leasing company or installer. But homeowners don’t have the leverage nor the time to go up to a big energy company and ask them to buy 2 SRECs for $250 apiece. Instead, there are brokers/aggregators that trade SRECs on behalf of homeowners. Below is an overview of what to look for when selecting a broker/aggregator to monetize your SRECs.

Transparency. Definitely the most important one. All aggregators find buyers to purchase SRECs. However, some trade on behalf of their customers, while others actually purchase their customer’s SRECs, then re-sell them at a mark-up. The latter approach is typically less transparent for the homeowner, because for the business model to work, the aggregator has to make revenue from buying low and selling high. For example, an aggregator under this model may purchase a number of SRECs from its customers during an oversupply when prices are low, then re-sell them at a later date when prices come back up. The homeowner doesn’t know what the real market value is, nor when the final sale was made.

An aggregator that simply trades SRECs without taking a speculative position usually earns its revenues from a straight commission out of the traded price. This model lends itself to greater transparency, because the aggregator’s interests are more closely tied to the homeowner’s; higher prices for the homeowner means larger revenues for the aggregator.

Volume. Generally speaking, buyers in SREC markets are energy companies that supply electricity to power grids. Most of these companies aren’t going to buy a measly 5 SRECs directly from you, since their quotas climb to several thousand SRECs per year; 5 SRECs in one transaction is a lot of work for a small gain. That’s why you need an aggregator in the first place. Regardless of the model an aggregator chooses, as a rule of thumb, aggregators that offer larger volumes per transaction achieve higher prices. This is partially because of the efficiencies larger volumes achieve, but also because aggregators with large volumes will attract more buyers that places bids to buy, which typically creates an upward pressure on prices.

Aggregators may not have a precise idea of their market share in a particular state, but they’ll have a good idea of how many systems – and therefore SRECs – they have under their services. For example, SRECTrade has over 6 MW in their aggregation, the largest in Massachusetts, according to a senior broker there (name Steven?).

Flexibility. What are the different options offered to sell your SRECs? Some aggregators exclusively trade in spot, or over-the-counter transactions, some broker contracts ranging from 1-5 years, some do a mix of both. Spot trades tend to be more volatile, since buyers adjust their bids based on the supply and demand in the market. Brokered contracts set a fixed price for a period of time for SRECs, but usually this price is lower than the spot market trades. Each homeowner has different appetites for risk that would determine which of these options to choose, and this appetite (like all appetites) can change over time, so why not choose an aggregator that offers several options?

Another consideration for flexibility are the contract terms. Typically, aggregators that do not take a speculative position on SRECs (see above section on transparency) do not lock their customers into contract obligations for their services. Obviously, aggregators that broker forward contracts obligate their customers to stay with them for the duration of the contract. If, for example, you sign up with an aggregator that brokers a contract to sell your SRECs for $100 for three years, but then the spot market jumps to $200 during those three years, you can’t opt out for the higher spot trades (another reason why flexibility in options is preferable).

I hope this provides a nice overview to help differentiate between aggregators. If you are thinking of leasing your system (in which case you likely would not own your SRECs), check out our post on what to look for. Or, if you want to go straight to the pros, fill out a quick evaluation form and we’ll contact installers your area!

Posted by Stuart Ivy

Original Article on Residential Solar 101

Clean Power Finance: Making Moves in Solar Leasing

Only weeks after a revealing study from NREL documenting the expansion of solar leasing into new income demographics in southern California, Clean Power Finance is reaching outside the west-coast bubble of clean energy innovation to offer financing services for residential solar customers in Colorado, Massachusetts and New Jersey. Though several private equity firms and capital investors have rushed to these markets to offer solar lease packages, few of the new kids on the block have the clout of Clean Power Finance to compete with the original leasing companies. It’s a little bit like a small mom-and-pop shop trying to keep up with superstores, only to get saved by a super-superstore (except in this case, everyone starts out with quite a bit of capital).

After partnering with Google to establish a $75m fund along with a few other investors, Clean Power Finance is financing up to “$1 million in residential solar offerings” each day, according to Kirstin Hoefer, VP of marketing. The innovative turn-key solutions for sourcing capital, system parts and solar sales strategies is the main differentiator between them and the likes of SunRun, Sunpower and SolarCity. So kudos to Vivint Solar, an integrator that provides financing options and guarantees maintenance and performance in partnership with selected installers. In its expansion into other states, Clean Power Finance is teaming up with Vivint to penetrate the residential solar market. Some leasing companies look for an advantage by using social media networking, some exercise other aggressive marketing strategies, and some go for the “Made in the USA” pitch. It looks like Clean Power Finance aims to team up with installers and integrators with top-notch customer service guarantees, and then provide their design software tools that make system procurement, financing and sales processes more efficient.

We look forward to learning more about these tools, and seeing how this partnership pans out in these markets!

Posted by Stuart Ivy

Original Article on Residential Solar 101

Social Networking: Helping the Solar Push

On Monday, I posted an article about residents pushing their local officials to tighten restrictions on solar PV installations in neighborhoods. This attitude is sometimes referred to as NIMBY, or “Not-In-My-Backyard”, and seems to pervade neighborhoods when a socially responsible action is taken, or sometimes required, at the expense of an individual’s pleasantries (e.g., a nice view).

How cynical of me. While it is my contention that the recent retaliation against rooftop solar in New Jersey stems from a few disgruntled property owners that are upset with PSE&G’s PV pole mount program, I have done little to take note of the positive “contagious” forces of residential solar that have led several states (i.e., New Jersey, Pennsylvania, Ohio) well past their original benchmarks to boost solar capacity. Several other columnists and bloggers, such as Sami Grover of Tree Hugger, have written about the influence of peer-to-peer marketing.

As Grover pointed out, whether it provides cover for being the lefty-green activist of the neighborhood, or it simply opens their minds to the benefits of rooftop solar, people tend to buy into an unfamiliar technology when people they trust do the same. What this also seems to imply is that solar, a rapidly growing concept, still has a lot of ground to cover in terms of gaining consumer trust. Perhaps that’s why sharing tangible benefits with neighbors through social media and online monitoring displays has proved to be a very effective tool to ramp-up solar adoption in a particular neighborhood. These personalized media outlets have mimicked tried and tested programs like this one, which encouraged behavioral changes in energy usage simply by comparing one household’s electricity bill to that of their neighbor’s.

It did occur to me as I was reading some of these great articles that similar efforts – granted on a smaller scale and to less success (so far) – document the detractors of residential solar. Just a few outspoken disgruntled opponents of PSE&G’s PV pole mount program have put neighborhood solar on the defensive in town council assemblies, turning several neighbors against the idea of installing solar, rather than supporting it. So, moral of the story: let’s keep sharing solar success stories and push your neighbors and friends to look into leasing or purchasing panels! You could even use peer-to-peer marketing to create a community discount program like Solarize Mass

Posted by Stuart Ivy

Original Article on Residential Solar 101

Why Distributed Solar is a Big Deal

A buzzword often used in promotions for small-scale solar PV development is the term “distributed generation”. It’s a broadly defined term, partially because it’s still more of an idea than a tested alternative to centralized power grids common in most communities. Centralized electricity generation typically serves a large and diverse set of consumers from a few far away and massive (usually fossil fuel-dependent) power plants. Residential solar PV creates several nuances to the typical central grid structure we’re accustomed to, and as such falls under the umbrella concept of distributed generation.

But why is this particularly relevant to residential solar PV owners, and more broadly to all homeowners? These nuances introduced to the grid by distributed solar can generate legitimate savings. It used to be that “distributed generation” was a lefty/progressive term that translated to high costs of electricity for pie-in-the-sky energy technologies. And in some ways, detractors weren’t completely wrong. Centralized power grids historically have had a major advantage over distributed generation in costs due to their massive economies of scale.

However, with declining panel costs, government incentives, streamlined permitting, interconnection and inspection processes, and most recently (and significantly) solar leasing, there is suddenly a paradigm shift across electricity grids around the country. What this translates to for homeowners is a more secure and efficient grid that hedges against the inefficiencies of centralized power production.

First, distributed solar ties the physical electricity generation closer to end user consumption. A portion of power is lost just in transmitting electricity over sometimes several miles from the power generator to consumers. Rooftop solar reduces the amount of electricity required from these distant generators, minimizing the losses in transmission. Given that approximately 20% of electricity consumed in the US is in residential buildings, this is a substantial improvement that generates real savings across the grid. Because most utility companies tier pricing for building type and time of use, different consumption demographics can generate savings unique to their individual users (in this case, homeowners, especially those that own solar!)

Another observation on efficiency- utility companies have to always maintain a “base load” amount of electricity. This is essentially the minimum amount of electricity they have to supply the grid at all times to keep the lights on. The higher that base load is, the higher the rates tend to be for electricity. In a centralized power grid, the main factor that drives up the base load is the variability of demand; simply put, the wider the diversity of electricity consumers in terms of geographic location, consumption levels, timing of consumption, and fluctuations in consumption, the higher the base load will need to be to ensure the grid is meeting its demand, literally second by second. In a centralized grid, this diversity is enormous. Just think of how many different places you use electricity in one day. Distributed generation reduces this variability and, with the help of smart grid technology, can lower the base load requirements on utility companies. Again, the result is savings through efficiencies.

A second consideration related to the “soft” costs of electricity – namely costs of land permitting, interconnection and inspection – is part of the paradigm shift as well. A significant portion, sometimes up to 30% of upfront costs of residential PV system, are accrued simply from a patchwork of fees charged for these necessary regulations over connecting a power generator to the grid. However, programs like this one are targeting these costs to streamline the processes. Again, suddenly the burden of complexity is shifting toward centralized power. I couldn’t find a thorough study on soft costs of massive power plants, but at least try to imagine the legal and administrative costs of laying transmission lines across multiple jurisdictions and properties, not to mention the infrastructure requirements of building substations and transmission lines. Localizing these processes provides a simpler solution to reducing the soft costs of generating power.

So if you’re considering going solar, think about all the benefits you can contribute to beyond your own electricity savings…you’re helping the entire grid!

Posted by Stuart Ivy

Original Article on Residential Solar 101

PACE Still Alive

Communities and homeowners have more reason to be optimistic about solar financing. In the summer of 2010, the Federal Housing Financial Authority (FHFA), which is the regulatory arm of mortgage giants Fannie Mae and Freddie Mac, unilaterally wiped out PACE financing programs that were just gaining fruition in communities (sometimes state-wide) across the country. With the recent boom in solar leasing, the not-so-distant demise of property-assessed-clean-energy financing (PACE) programs has faded quietly. But it looks as though PACE might not be completely phased out just yet…

To back up a bit, since we haven’t posted (or had reason to post) about PACE financing in a while, a brief review. PACE financing is a program similar to solar leasing in a number of ways.

Before leases became a viable option, homeowners could pay no money upfront in areas where PACE financing was available. Like leases, PACE relies on electricity savings as the key ingredient to the scheme, but also leverages government funding as part of the equation. But while solar leases leverage private equity investments with the support of a generous 30% federal tax credit, PACE programs operate in a more concentrated locus to finance the systems.

Under PACE, residential PV systems are usually financed through a revolving loan or bond-issuance program. Once a PV system is installed, the homeowner pays back the loan that financed the system through a supplemental charge on their property taxes. The payments are usually spread out over at least 10 years, and adjust based on anticipated electricity savings so the increase in taxes never outpaces the savings captured by the homeowner (sound familiar?)

Much to the chagrin of solar advocates, PACE programs were halted almost overnight when FHFA ordered Fannie and Freddie not to underwrite mortgages for homes that had opted into the innovative program. The reasoning, however, short-sighted, was that in the event of a foreclosure, the property tax assessment owed to the PACE program could have senior lien over the mortgage. Though this logic is flawed because the value of homes would only increase with the addition of a PV system, Fannie and Freddie followed suit and effectively ended PACE programs.

Or so we thought.

A court order from a California federal district judge last August ruled that FHFA must conduct a public notice and comment period for 60 days (until March 26th) to weigh in on PACE programs. We’ll definitely keep our eyes on this, though the National Resources Defense Council – a leading advocate for this financing tool – has been keeping a beat on the day-to-day developments. What I’m interested to see is how, if PACE can make a real comeback, these programs will size up to solar leasing. Though the process is a little less direct in terms of government subsidies, solar leases are just as dependent on government financing as PACE programs are, just at different levels that produce different tools. They both leverage electricity savings as a means to make the tool viable. But solar leasing has an advantage in scalability, because it in fact requires large investors that can pour millions upon millions of dollars to take advantage of the large tax credit in the first place, and because, obviously, this funding is not limited to a geographic area (unless you wanted to define the United States as a geographic limitation).

Yet don’t count out PACE programs as being inferior or unscalable. Several states had PACE programs in the works or already coming to fruition when FHFA stomped on them. PACE also has two advantages over other more directly government-funded renewable energy programs that are particularly useful given the current climate over solar energy. First, these programs are designed to have a direct payback that is easily measurable over time. While rebates and other subsidies drive demand and generate electricity savings (not to mention saved environmental and social costs), those benefits are hard to capture, and more importantly, to quantify over a set period of time. PACE programs have a predictable, measurable payback for the public’s investment. Second, PACE programs are less likely to become muddled in disputes over “choosing winners and losers”, as we’ve grown accustomed to after Solyndra and Evergreen Solar. Most states in which PACE financing would even be possible already have a list of qualified installers for other incentive programs, and because the incentive goes straight to the homeowner (not a solar company), the community that seeds the funding has greater security in their collective investment.

Posted by Stuart Ivy

Informative?

Original Article on Residential Solar 101

Solar Leases Are Here to Stay

A very informative and thorough study from the National Renewable Energy Laboratory (NREL) called The Transformation of Southern California’s Residential Photovoltaics Market through Third-Party Ownership” has rightfully received wide readership for its insight into the trends of residential PV markets moving towards third-party ownership models – particularly, as the study’s evidence demonstrates, in southern California. A key finding of the study is that third-party ownership models, namely solar leases, are increasing their overall residential PV market share in SoCal, but not to the detriment of the more traditional customer-owned model. In the latter model, the homeowner finances a system out-of-pocket, usually with the assistance of government rebates and tax credits. The study found that rather than stealing customers away from installers that offer customer-owned installations, solar leasing is in fact expanding PV installations to an entirely new demographic.

The most straight-forward distinguishing factor between the new demographic and the customer-owned one, not surprisingly, is household income. The solar lease industry has grabbed a large share of homeowners with a household annual income between $100k-$150k. Obviously given current PV prices, as the study demonstrated, $150k/year is a stark cutoff for those that can reasonably afford the upfront costs of going solar, which, with incentives, runs over $15,000. However, this finding prompts a few other questions: 1) what about the $150k/year mark, aside from current PV pricing, separates those below so starkly from those above?; 2) can the technology of lease financing expand to other demographics in the future?; and 3) what other technological advancements could expand the residential PV market into other (possibly unforeseen) demographics?

The rest of this post will address the first question. Obviously current residential PV prices are the main determinant in what income level is generally sufficient to finance a system out-of-pocket. But what are other relevant factors? For starters, several homeowners that own their system finance the upfront costs by taking a private loan or putting together a home-equity arrangement. The lower a household’s income, presumably the less equity one could expect the home to have for such options. Second, in addition to the federal income tax credit (30%), some states add another tax credit either in lieu of or addition to the federal credit. Although tax credits usually carry forward a few years, households with lower incomes cannot take advantage of these incentives to the same extent that larger equity investors that finance leasing programs can. By achieving large economies of scale with huge tax appetites, solar leasing packages put these same credits to more efficient use than a household under $150k/year could.

Another consideration comes to mind related to the nuts and bolts of solar leases: electricity rates. As rates ($/kWh) are generally the same for a household bringing in $125/year versus one pulling in $200k/year, it’s reasonable to expect that electricity savings have a larger appeal to the first home, since the bills eat up a greater proportion of their income. An argument against this claim might note that a house with a higher income has a larger electricity bill corresponding to increased consumption levels (holding the rate constant). However, an equally valid counterpoint can be made that houses with lower incomes have less efficient appliances and leakier physical household structures. These are obviously general claims that merit further research in their own right, but the point stands that each dollar saved on electricity bills has a greater benefit to a household making less money. Leases have an obvious hedge here by locking in prices that, if the last 20 years are any indication, would keep climbing higher.

Posted by Stuart Ivy

Informative?

Original Article on Residential Solar 101

Comparing Solar Leases

While 2011 may mark the first year solar leasing became a widely accepted option to finance and install residential solar systems, 2012 is shaping to be a year of growth – and differentiation – in the niche industry of providing solar leases. Though the basic structure of a solar lease is similar across the board, a number of considerations can greatly affect the customer’s experience and overall benefits. At first, only a few companies – SunRun, SolarCity, Sunpower, and Sungevity – offered leasing options. Now more solar installers and integrators are attracting capital investors that provide the package deals, making it more important for potential rooftop solar customers to know what to look for when reviewing leasing offers.

The factor that draws the greatest distinction amongst leasing companies is the selection of installers and system manufacturers. It’s easy to get excited at the prospect of paying little or no money down for a solar PV system that will ultimately save money on electricity bills. But it’s just as easy to overlook the system’s performance and maintenance guarantees over the life of the lease. You’ll want to make sure that if your leasing company outsources the installation or parts procurement to another company, they offer a guarantee to maintain and fix the system in the event of a breakdown. Keep an eye out for companies like Sunpower, which underwrites their leases on its (in-house) equipment. Generally speaking, leasing companies that outsource installation and parts procurement can still offer dependable services. Take for example SunRun, which rigorously vets installer partners in each region of operation. Nevertheless, it’s worth looking into not only the terms of the agreement, but the reputation of their partners that may be on the hook for any maintenance.

Another consideration for the prospective lessee is the flexibility of the terms offered. A general principle is the less money you spend upfront and the shorter the lease term, the lower the monthly savings will be. Leasing companies vary in how flexible the terms are, but you should be aware of how altering the amount paid upfront and the length of the lease can change the return on your investment through electricity savings. Furthermore, companies offer a variety of escalators in monthly payments (obviously that are projected to be below the rising electricity costs over time). Take a look at this review of leasing options from Sunpower, offered by David Brands at Clary Solar, which factors in an annual escalator with offer comparisons.

A second consideration to the length of the lease period relates to performance-based incentives. Some states have renewable portfolio standards that create SREC markets, which effectively reward owners of generating facilities for their solar electricity. Over time, the prices for an SREC, which represents 1,000 kWh of generation, is scheduled to decline. Typically the leasing agreements hand ownership of SRECs over to the leasing company or installer, but presumably the homeowner retains ownership of SRECs once the lease expires (if they agree to own the system). Consider how future cash flows from SRECs affect your anticipated ROI, and inform your ideal term length for the lease.

Hopefully this gives you an overview of key factors to look for when comparing leasing companies. Check out John Schumpeter’s Solar Lease Mystery Shopper for a more inside look at some of the major leasing companies!

Informative?

Original Article on Residential Solar 101

The Role of Energy Storage in Distributed Solar Generation

A major selling point for residential solar generation is the advantages it brings of distributed generation. More precise load delivery, fewer losses in transmission and fewer costs in grid infrastructure and maintenance are just a few of the efficiencies provided by distributed electricity networks. However, many of these grid benefits, particularly when considering solar power generation, stand to improve dramatically at the prospect of energy storage technology.

Solar is convenient in that it tends to increase electricity production as demand peaks during the middle of the day and in the summer months. Yet these are general trends. While excess generation can plug into the grid for nearby electricity consumers like your neighbors to use, there are still inefficiencies when dealing with a largely centralized grid structure that generates massive amounts of electricity from a couple distant (and usually dirty) sources and plugs into the grid. Smart grid meters that communicate back to the grid operator help with efficiently offsetting extra generation when green electrons flow into the grid from rooftop solar. But improvements in energy storage capacity could be the technological innovation that more fully realizes the advantages of distributed generation. A couple companies are already leading the way.

One of these leaders, Eos Energy Storage, in the new cutting edge industry has refined the zinc-air battery technology. The company, based in Easton, Pennsylvania, claims that at a significantly lower manufacturing cost, the zinc-air design can store up to three times the energy of more conventional lithium-ion batteries. A key differentiator in the technology is its use of oxygen as part of the battery’s process of generating current. Read more about the company and its projects here.

A different technology using sodium-ions instead of zinc is also on the rise. Aquion Energy, a Pittsburgh-based company, is developing an efficient battery that they expect to be grid-ready in 2012. These batteries can be manufactured to have a range of capacity between 10 kWh and 100 kWh that can operate for a couple hours. Both of these innovations have the advantage of being cheaper than previous battery technologies, and store energy more efficiently. They have the added benefit of having fewer or no hazardous chemicals, which makes them more viable for residential solar usage, where electricity suppliers are often homeowners with families and property to protect.

These are just two of the several technologies in energy storage that could revolutionize distributed solar generation. Aside from the number-crunching efficiencies that are straight-forward (if not complex in calculation) that can be gained from increasing our ability to store electricity for later use, imagine the psychological effects of knowing you could store your excess generation from panels on your roof. Increasing storage capacity brings people closer to being able to supply more or all of their energy needs, generating significant savings on their utility bills. Thought it’s years past since anybody has even considered a world without battery technology, imagine all the things that run on batteries today: cell phones, remote controls, cars, calculators, etc. Think of how the ability to store energy in those devices made their every day use possible. The same revolutionary changes can occur in residential electricity consumption and production!

Posted by Stuart Ivy

Original Article on Residential Solar 101

Residential Solar Report: Costs Down, Installations Up

As we near the end of a tumultuous year for solar PV, the latest reportfrom GTM/SEIA indicates there is more momentum that ever for residential solar. A number of factors – the growth in solar leases, the glut in global panel production, and the complex web of economic incentives – have already made this the strongest year in US history for solar PV installations. Much of the buzz around solar has focused on Solyndra and government loan guarantees, or Solar World and Chinese panel dumping. Despite the likely expiration of the highly successful federal 1603 Treasury grant, which has leveraged over $22 billion in private capital, there is much to be excited about looking forward for residential solar.

After two quarters of declining growth, residential installations grew by 21% heading into the final quarter of 2011. Even though this figure lags behind the overall market growth (38%), it is still an indication that the drop in costs of going solar has driven installations among homeowners. The average cost of residential installations has dropped from $6.41/watt to $6.24/watt in the course of less than one year, though residential systems in stronger markets like California and New Jersey dropped to or even below $5/watt.

In these markets, the supply chain is maturing at a faster rate than other areas in the country. Panel and inverter prices have declined as foreign and domestic competition ramps up. Part of this increase in productivity and economic efficiencies is attributed to the anticipated expiration of the 1603 grant, which has driven a lot of large utility scale development that would otherwise not secure financing without the 30% cash grant. As the market continues in its current consolidation phase where smaller manufacturers, distributors, and installers cannot keep up with declining prices, it remains to be seen how some of the larger market players will begin to have a direct effect on the residential market. Though prices didn’t decline, nor installations rise, as drastically as the broader market, residential solar has noticeably benefited from the aforementioned market developments.

Lastly, as this blog has highlighted already, communities and the federal government are teaming up to target the last bottleneck in the process of installing panels: soft costs. To date municipalities and state regulatory bodies have had separate, often redundant and convoluted processes to receive land permits, utility grid connection, and system inspections. Depending on who administers these processes and when, fees for completing these certifications can add up to hundreds, or even thousands of dollars. The Department of Energy, solar advocates and local communities are now leveraging their funding and local resources to streamline these processes and save residential solar customers money.

As the year winds down, there are a number of positive takeaways based on the first 3 quarters. As we look forward to 2012, questions linger regarding the 1603 expiration, the panel dumping case, growth in solar leasing, fluctuations in state SREC markets, and much more.

Original Article on Residential Solar 101