Leasing the sun

If faced with a $700-a-month electric bill, one might be inclined to cast one’s eyes heavenward. So it wasn’t surprising that Lisa Max took a good hard look at rooftop solar panels as a possible solution to her soaring energy costs. But the estimates “shocked” the San Rafael, Calif., homeowner.

It’s a typical scenario faced by US homeowners who are eyeing solar energy as a way to help the environment and save themselves some cash at the same time. When they crunch the numbers, the financial clouds descend.

Going green, at least until recently, took an awful lot of green – say, between $20,000 and $40,000 for a residential solar unit.

But a number of creative financing solutions have made tapping into solar energy more feasible for environmentally minded homeowners. These options range from neighborhoods using collective bargaining to whittle down the price to a new leasing program that allows people to go solar without any upfront costs.

Factor in this year’s new tax incentive from the federal government, which allows homeowners to take 30 percent of the cost off their taxes (up from a $2,000 cap in previous years), and a global downturn that has driven solar-panel prices down as much as 40 percent, and solar energy starts looking like less of a pipe dream for the middle class.

“When you look at these new finance mechanisms – not that leasing is new, but leasing a solar [energy] system is – what these guys are doing is trying to find a way to get solar to be mainstream,” says Glenn Harris, CEO of SunCentric Inc., a solar-energy consulting firm in Grants Pass, Ore. “It’s a big project, but it’s a worthwhile one. They have a profit motive, but the creativity behind it is pretty cool.”

For Ms. Max, the solution turned out to be leasing a solar unit much the same way one might lease a Prius. “I have a huge electric bill – we have a 55-year-old house with a flat roof, lots of glass, and a pool that requires daily pumping,” she says.

The new unit was installed in July, and, even factoring the monthly cost of the lease, she’s still hoping to cut her energy costs by almost half. “It was a much more economical choice for us,” says Max.

While leasing has gotten a bad rap when it comes to home appliances, this new venture shouldn’t conjure up images of unwary customers who leased their water heater or, even worse, their telephone, for decades, Mr. Harris says.

“When you go to an auto dealer about leasing a car, you don’t think anything about it,” he says. “It’s been an option for a long time. The idea of leasing is just saying to a consumer, ‘We know this thing has a high initial cost. We’ve come up with a balanced financial solution: We’re going to own and operate it, and we’re going to sort of split the benefits of the clean power coming out of it.’ ”

Solar City, one of just two US firms with leasing programs, began offering the option in April 2008. More than 1,600 customers have signed up so far. “We expect it to double about every year,” says CEO Lyndon Rive, whom Harris credits with pioneering both leasing and neighborhood collective programs.

“The homeowner can go solar and save money from Day 1, with no investment needed,” Mr. Rive says, adding that typical savings would be about $30 to $50 a month.

There are a few catches, though. The main one is that, unless you’re a resident of California or Arizona, leasing isn’t available in your state right now. Solar City plans to expand its program to five more states next year, but the candidates haven’t yet been announced.

Another option pursued by homeowners with neighbors also interested in solar energy is collective bargaining. That’s how Paul and Ursula Davidson of San Rafael got their solar unit two years ago.

In fact, credit goes to Max, who created GoSolarMarin, one of the largest of such neighborhood programs, in the fall of 2007. So far, 185 households have signed up, with another 25 under contract but whose units haven’t been installed.

“We did it for both ecological and economical reasons and for the value of the house,” says Dr. Davidson, a retired rheumatologist, explaining why they installed solar technology.

He and his wife have owned their home since 1965. Without any rebates, the cost of their 2.1 kilowatt system would have been $17,000. Thanks to the lower price negotiated by GoSolarMarin, a California state rebate, and $2,000 back from the federal government, the unit cost “about $11,000,” says Davidson.

Their electric bills are now 50 percent lower – about $850 a year, instead of $1,700 – and he and his wife say they are both pleased with the program. “It’s quiet – you’d never know it was there. There’s no downside,” says Davidson.

Still, the recession has slowed the pace of GoSolarMarin, says Max.

And despite its advantages, the idea of collective bargaining in already established neighborhoods “really hasn’t taken hold,” except in Marin County, says Harris.
Since 2006, for example, Solar City has set up about 30 neighborhood solar programs – most recently in Los Angeles in July. They have about 800 households involved in the community pricing program, but twice that number signed up for a solar lease.

Where homeowners can expect to see a real difference in collective pricing is “when new construction takes off again,” says Harris. “It won’t be optional. [The builder] will have negotiated a great price with everybody.”

Other experts agree. “The top 10 home builders are each producing above 20,000 homes – that’s ramping up economies of scale,” says Andrew McCoy, assistant professor in the department of building construction at the College of Architecture and Urban Design at Virginia Tech in Blacksburg, who took a team to the Solar Decathlon this month.

The real change will come when solar technology becomes one of the standard options that developers offer, says Professor McCoy. “When you start getting into that kind of volume, that could really turn the tide.”

“I’m very encouraged by that segment,” says Harris, citing 3,000- and 4,000-home developments in Texas that are planned to be built with solar units included in the next three years. “That’s something that would make solar more adoptable around the US.”

Editor’s note: For more articles about the environment, see the Monitor’s main environment page, which offers information on many environment topics. Also, check out our Bright Green blog archive and our RSS feed.