After coming off another record year in 2014, growing by 34% over 2013, the U.S. solar industry is showing no signs of slowing down. As of the first quarter (Q1) of 2015, more than 51% of all new electric generating capacity in the United States came from solar power alone, with the residential and utility PV market segments each adding more capacity than the natural gas industry brought online in Q1.
This from the latest Market Insight report from the Solar Energy Industries Association (SEIA) and GTM Research, which expects another record year for solar power and continued growth over the next couple of years. For the average business or homeowner who still thinks solar is out of reach, these figures might have little meaning, but they should because solar energy is more affordable than ever before and is proving a wise investment option.
According to a 2014 report from North Carolina State University’s public service and research administration, NC Clean Energy Technology Center, a fully financed, typically sized solar PV system is a better investment today than the stock market and, in many cities, costs less than energy from a local utility.
“Of the single-family homeowners in America’s 50 largest cities, we estimate that 9.1 million already live in a city where solar costs less than their current utility rates if they bought a PV system outright and nearly 21 million (93% of all estimated single-family homeowners in those cities) do if low-cost financing is available,” wrote Autumn Proudlove and Jim Kennerly in the report, entitled Going Solar in America.
What’s more is that solar energy is growing despite below-average temperatures as experienced in the Northeast earlier this year. The Going Solar report even found that customers with a 5-kW system in Chicago or Boston, cities known for cold winters, could offset more power than in Phoenix, a location with some of the best solar resource in the U.S.
“There is a clear information gap,” said Proudlove, “Despite solar’s dramatic cost declines, there’s still a widespread mentality that solar is only a viable option for the wealthy. We hope that our work will help people realize that solar is often a financially attractive option for the average American homeowner today, providing a long-term, relatively low-risk investment.”
Falling prices and changing financial models
Since the implementation of the Solar Investment Tax Credit (ITC) in 2006, a federal 30% tax credit for solar systems, the cost to install solar has dropped by more than 73%. Depending on location, panel prices vary but SEIA puts the residential system costs at $3.48 per watt as of late last year, which is a 3.3% decrease from the previous quarter and a substantial drop in price from a decade ago.
“When the declining cost of solar is coupled with the rising cost of grid electricity, the financial case for solar can be quite persuasive, particularly for locales with higher than average electricity rates,” explained Proudlove and Kennerly in their report.
Although third-party ownership still remains the dominant model for financing solar installations in the U.S., at least for residential and commercial systems, times are changing. PV systems continue to get cheaper and it is now easier than ever to access low-cost financing.
Third-party financing primarily occurs through two models: power purchase agreements (PPAs) and solar leases. In the PPA model, a developer builds a solar energy system on a customer’s property at no cost, but the system helps offset the electric utility bill. The developer then sells the power generated to the customer at a fixed rate, typically at a price that’s lower than the local utility. In the lease model, rather than paying for the power produced, the customer signs a contract with a developer and pays for the solar system over a period of years or decades.
Because the number of banks and leasing companies has increased in direct relation to the growth of the solar market, however, direct ownership and unique financing models are gaining momentum.
A survey conducted by Mosaic, a solar finance pioneer, found that two times more respondents would prefer to own a residential rooftop system rather than lease it, assuming savings and performance are similar.
Mosaic offers solar loans and a unique financial model that includes a peer-to-peer network designed to connect individuals seeking funding with others who provide the loans.
“In the past, we funded many commercial projects with thousands of retail investors and we launched a home solar loan last year that’s growing fast. Solar installers around the country use our software to provide financing to homeowners,” said Billy Parish, CEO of Mosaic. “There is a massive shift happening where homeowners in the U.S. prefer solar ownership to leases.”
Dividend Solar is another online company connecting individuals interested in going solar but they’ve added installers to the list, offering system monitoring, product warranties, and performance and maintenance guarantees.
“We connect creditworthy homeowners, customer-centric installers, and financial investors, creating partnerships and aligning interests to enable all members of the solar value-chain to benefit,” this according to their website. “With our zero-down loan, homeowners realize the maximum economic benefits of full solar ownership.”
Sharing a piece of the solar community
These are great options for people who can mount solar panels on their roofs. However, estimates indicate that over half of all homeowners and businesses can’t install solar panels on their rooftops even if they wanted to. Whether it’s because of rental or roofing restrictions, or less than ideal credit ratings, a variety of barriers to solar power still exist.
Community shared solar programs, also known as roofless solar or solar gardens, are providing a solution that’s gaining wide acceptance. A compromise between a stand-alone residential system and a large utility-scale project, electric utility customers subscribe or buy a portion of a specific, offsite solar system, which currently caps at 2 MW (although there are now instances where multiple 2-MW projects are being built adjacent to each other).
“Community shared solar satisfies the consumer’s desire to purchase cleaner forms of energy, while allowing the utility company to maintain a grid-tied solar array,” shared Tim Braun, spokesperson for the Clean Energy Collective (CEC), a power-generation solutions provider. CEC’s 1.8-MW system in Carbondale, Colorado, the state where community solar got its start, may be the largest stand-alone system currently in the U.S.
“Participants either buy individual panels or subscribe to power generated in the shared arrays and then receive a credit for the electricity generated directly on their utility bills,” said Braun.
Either way, members actually own (not lease) a part of local clean energy and are credited for a portion of the power produced. A myriad of financing options are also available, depending on the system developer, location, and individual program.
“A low-interest loan is available for panel purchases through CEC’s financial partners, for example, and through the SolarPerks program in Massachusetts, customers can switch to solar with no money down, so no financing is required,” said Braun.
Like the many financial options available today for investing in a solar system, the ultimate goal of this shared energy source is to make solar power more accessible to a broader array of potential customers. Going solar is easier, cheaper, and smarter than ever before.
“Community shared solar is inciting widespread penetration of distributed solar by tackling the primary barriers to entry—accessibility and affordability,” said Braun.
For information on solar-related incentives and policies in a specific state or region, visit DSIRE’s website at www.dsireusa.org. DSIRE is operated by the N.C. Clean Energy Technology Center.