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