What is Third-Party Solar Financing?
Third-party solar financing in the US is expected to grow to $5.7 billion by 2016, up from $1.3 billion in 2012. This is promising since the industry only came about a decade ago. Third-party financing allows consumers to more rapidly gain energy independence by lowering the cost of installation and maintenance of residential and commercial solar panel systems.
Residential third-party solar financing makes up more than 50% of the new solar capacity in the states of Arizona, California, Colorado, and Massachusetts, with several other states gaining traction. Funding for a total of 28 residential solar projects has reached $3.1 billion. U.S. Bancorp has been the largest of eight major investors, with over $1.35 billion invested in the market.
SunPower, SolarCity, Sunrun, and Clean Power Finance were the largest suppliers of residential solar leases in 2012. The services of each company varies, which creates a healthy competitive market that provides consumers with a myriad of options. According to the Solar Energy Industries Association (SEIA), there are two main financing models that are being offered. Generally, consumers can either:
a) sign a lease and pay for the use of the solar system.
b) sign a power purchase agreement (PPA) to pay a specific rate for the electricity that is generated each month.
In the first option, consumers are able to sign a contract with a solar installer, receive the installation, and pay off the system over a period of years. Some contracts require down payments, while others do not. This option is similar to purchasing a vehicle on a lease.
The PPA option allows the installer to build a solar system on a property at no up-front cost and they are not required to pay for the system. Instead, the consumer’s electricity bill is offset by the system, and the consumer pays the installer a set rate for electricity that is used. This rate is generally lower than the utility’s electricity supply rate. Once the contract has expired, the consumer has the options of cancelling, renewing the contract, or purchasing the system.
Residential solar financing is currently available in 14 states, with leasing being the most available option in most states. Contact major third-party suppliers to see what options are available in your area.