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Southern California Sees a Surge in Third-Party Solar Leasing
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January 25, 2012

Southern California Sees a Surge in Third-Party Solar Leasing

By Cheryl Kaften
TMCnet Contributor

There are about 13 million Americans who could be tempted to take advantage of rooftop solar arrays –if they were offered a third-party lease, rather than a purchase agreement – according to the results of a recent study by the Golden, Colorado-based National Renewable Energy Laboratory (NREL).

In contrast to buyers, this discrete demographic group of younger, less affluent, and less-educated customers would be attracted to the lower upfront costs and immediate savings they could enjoy by leasing.

The new third-party-lease business model – seeing a surge in Southern California – enables homeowners to put as little as $3,000 down and derive instant gratification from a lower electricity bill (albeit, by just a few dollars). The real benefits are realized over the next two decades, when their $40 or $50 monthly lease payment stays constant, while, presumably, the cost of electricity soars. Third-party companies are touting potential customer savings of $10,000 to $15,000 over the term of a 20-year lease.

But there is one hitch: Apparently, what the researchers classified as “less affluent” is subject to interpretation – and not as similar to the profile of an “Occupy Wall Streeter” as it is to the picture of the average “One Percenter.”

Indeed, if what is true in southern California proves valid nationwide, the millions of folks who would fork over money for a lease live in households that earn between $100,000 and $150,000. In comparison, those who purchase solar energy platforms live in households with an income of $150,000 or more.

“What is so interesting about the southern California data is that the strong decrease in PV prices – from lower retail costs and stronger federal incentives–didn’t pick up a new demographic. But the new business model – leasing – did pick up a new customer demographic,” said NREL’s Easan Drury, the lead author of the report.

Repackaging the value of photovoltaics as a simple savings on the monthly bill is an attractive pitch, he said. “If someone comes up to you and says you can make money next month and forever, that totally changes how people see the value of solar.”

 Among Drury’s other findings:

  • Third-party leasing usually eliminates the need for home-equity-style financing – and, thus, the need for significant equity in the home. Without the hurdle of financing, more people can adopt solar, Drury said. 
  • Along with the lower income threshold, Drury found a surge in solar leasing in neighborhoods with younger families.
  • In the Los Angeles and Orange county markets, customer-owned PV was five times more prevalent than third-party owned in 2009. In 2010, the ratio had dropped to 2 to 1. And for the first quarter of 2011, the ratio was almost even.

The NREL study, “The Transformation of Southern California’s Residential Photovoltaics Market through Third-Party Ownership,” is available in the current edition of the journal Energy Policy.

NREL is the Department of Energy’s primary national laboratory for renewable energy and energy efficiency research and development. NREL is operated for DOE by The Alliance for Sustainable Energy, LLC. – a limited liability company that is equally owned and governed by Battelle and MRIGlobal.

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Cheryl Kaften is an accomplished communicator who has written for consumer and corporate audiences. She has worked extensively for MasterCard (News - Alert) Worldwide, Philip Morris USA (Altria), and KPMG, and has consulted for Estee Lauder and the Philadelphia Inquirer Newspapers. To read more of her articles, please visit her columnist page.

Edited by Jennifer Russell

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