With more than 5 MW of distributed solar PV being installed per day in the United States, third-party-owned (TPO) systems have catalyzed growth in residential and commercial market segments. Until now, the wind industry has missed out on the immense opportunity offered by customized power purchase agreements and lease options for its customers. As with TPO solar, wind leases enable customers to start saving money on their electric bills immediately, with little-to-no money down. The system owner, meanwhile, takes advantage of the federal investment tax credit (ITC), depreciation, and other state incentives.
Based in Brooklyn, New York, United Wind is a developer of small wind projects and is currently offering lease options for 10 kW and 50 kW wind turbines. The company has focused its efforts in New York, where the New York State Energy and Research Development Authority (NYSERDA) wind incentive can mean up to $40,000 in credits on a 10 kW system, on top of the 30% ITC. Other companies are also trying to provide financing options for their customers, either directly or through third-party sources, but uptake has been slow.
Slow Off the Mark
According to Navigant Research’s report, Global Distributed Generation Deployment Forecast, 225 MW of small and medium wind (<500 kW) are expected to be installed cumulatively in the United States between 2014 and 2023. Overall, the small and medium wind market in the United States has been far surpassed by the solar PV market due to rapidly declining costs that small wind has not been able to match. With state incentives, in regions with strong wind resources, small and medium wind can be more cost-effective than solar PV, but the industry has been on its heels for the past few years. As key state incentives have expired, a number of companies have gone under.
At the same time, distributed solar PV companies secured hundreds of millions of dollars in investment, established national sales operations, and significantly reduced customer acquisition costs. The wind lease option is intended to tip the scales back in favor of small wind in key market segments, such as agriculture, manufacturing, municipalities, universities, schools, and hospitals, in places where wind is abundant.
As with solar PV, wind leases will range from 15 to 20 years on average and include guaranteed performance (in kilowatt-hours generated) warranties that include maintenance and insurance – all wrapped into a single payment. This puts a premium on site assessment, since customers that don’t see cost savings are a risk to default on their payments.
The small and medium wind market needs to prove it can succeed in markets without lucrative state incentives. The lease model is a great opportunity to move in that direction, but will require significant investment.
Tags: Distributed energy, Finance & Investing, Renewable Energy, Smart Energy Program, Wind Power
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