Cleantech Market Intelligence
Leasing Drives U.S. Distributed Solar Market
As we described in the recently released report, Renewable Distributed Energy Generation, solar leasing options, including residential solar power purchase agreements (PPAs), are available in a dozen states and have become the leading driver of the U.S. distributed solar PV market. These solar leasing options represented more than half of the residential solar sales in California in 2011. The market share of solar PV leases is expected to exceed 75% for distributed installations in 2012.
Investors have been pouring money into residential solar financing, enabling a growing list of companies like SunEdison, SunRun, SolarCity, SunGevity, and Gen110 to enable customers to generate clean electricity without ever owning the system. Depending on the agreement, the customer enters into a 15 to 20 year contract with the solar service provider and pays a fixed rate that, with incentives, typically comes in just below the cost of retail electricity from the utility.
Since most utility rates are expected to go up over time, these solar PV customers will pay less for electricity than those who continue to only buy utility power. This model has been a game changer in the U.S residential solar PV market because it enables homeowners to install solar for little to no money down. Currently, the best SunRun deal in rainy Oregon enables qualifying residential customers who pay $6,000 up front to receive $6,000 in state and federal tax credits back in $1,500 increments over the following 4 years.
As solar lease providers proliferate in the United States, some companies have expanded overseas. SunEdison, which was purchased by MEMC in 2009, is typically credited with developing the residential solar lease model, and now provides residential, commercial, and utility-scale solar plants throughout the United States, Europe, and Asia Pacific. The company has more than 550 operational sites, with more than 500 megawatts of installed capacity across both solar leases and outright solar sales. The company has raised more than $2.5 billion in financing for solar leases alone. Sungevity recently exported its operations to Europe and Australia, partnering with Zonline and Nickel Energy, respectively. In Australia, the joint venture offers a pay-as-you-go financing model that functions similarly to a solar PPA.
The combination of reduced solar module prices, falling levelized cost of energy via microinverters, and expanded solar financing options may have tipped the scales to smaller, distributed generation that is often less costly than larger, centralized systems.