Homeowners would be well advised to do their homework before leasing solar equipment
New Hampshire, with some of the highest electric rates in the county, would on paper look like a logical market for SolarCity, the nation’s biggest installer of rooftop systems for homeowners looking to cut their electric bills. With 190,000 customers in 16 states (17 if you count New Hampshire), the company targets states with high electricity costs and a favorable regulatory environment for solar.
The Granite State has both, and has seen consistent growth in the use of residential solar over the years, but not through the kind of leasing arrangement that SolarCity will bring to the state for the first time.
While it’s possible to save money by leasing rooftop arrays, homeowners would be well-advised to do a lot of homework before signing the 20-year power purchase agreement that comes with the leasing option, especially given the state’s volatile energy pricing and the uncertain future of its renewable fuels programs.
The market for residential solar in the state has, up to now, been fairly straightforward. Locally owned and operated “mom and pop” operations like Granite State Solar of Boscawen, with 14 employees, would design, sell and install rooftop or ground arrays to homeowners, who would finance the $15,000 to $20,000 project on their own or through a lender, sometimes with help from the installer.
The monthly payments on the solar array replace most if not all of the electric bill, with the purchase price offset by a $3,750 rebate from the state’s renewable energy fund. On top of that, the homeowner, as owner of a renewable energy resource, is eligible for renewable energy credits that can be sold to utilities at rates that generate quarterly checks in the $400 to $500 range.
Homeowners also qualify for a 30-percent federal tax credit for solar systems they’ve purchased.
When SolarCity owns the array, SolarCity gets the rebates, sells the renewable energy credits and enjoys the federal tax advantages that it shares with a “tax-equity partner.”
Buying a better option
Although leasing accounted for 80 percent of the new installations nationally in the past year, the biggest leasing company of all, SolarCity, admits that buying is the better option.
“I totally agree with that,” said Shaun Chapman, senior director of policy and electricity markets for SolarCity. “Unfortunately the pool of people who have $15,000 lying around and can utilize that is limited.”
SolarCity also has a buy-to-own program, but that will not be available in New Hampshire, at least not initially.
The SolarCity leasing pitch of “no money down, and guaranteed savings” is appealing, and is apparently working on a large scale. The company has an A-plus rating from the Better Business bureau, with 163 closed complaints on a customer base of nearly 200,000.
But New Hampshire may prove inhospitable to the leasing model for a variety of reasons. The first is the state’s extremely volatile energy costs.
Under the leasing agreement, SolarCity will guarantee you a rate per kilowatt hour that is lower than the current utility rate and lock it in for 20 years, with annual increases up to 2.9 percent, and will pay you the difference if you don’t achieve the promised savings.
But if utility prices go down, you could actually end up paying more than your neighbor who does not have solar panels on his roof owned by a third party. As unlikely as that may sound, there are many people in New Hampshire, the governor included, who believe prices must go down as a matter of economic necessity, and there are several initiatives under way with that goal.
The state’s regulatory environment for renewables is unpredictable. New Hampshire is one of 43 states with a market for renewable energy certificates, but has the lowest price — $55 per megawatt versus $285 in Massachusetts — and they could go away at any time.
Question of commitment
Even if the certificate program remains in place, there’s no guarantee the state Legislature won’t raid the fund, as the House is attempting to do this year, and leave nothing for solar subsidies.
The state’s participation in the Regional Greenhouse Gas Initiative, which also helps solar programs, comes under fire in virtually every legislative session.
“In New Hampshire, the economics of leasing just don’t add up,” said Erik Shifflett, co-owner of Granite State Solar. “I don’t know how SolarCity is going to make that work. They are not going to be generating as much revenue from their RECs (renewable energy certificates), and if they are not generating it from the RECs, how are they going to pass the savings along to the customer?”
Then there’s always the possibility that the Public Utilities Commission in the state will impose new charges on the owners of solar systems to force them to pay their share of maintaining the distribution system, either through a flat monthly fee or a distribution charge based on volume, which could further reduce savings.
The Legislature is considering those very options now as it mulls the future of the state’s “net metering” program, in which solar owners sell surplus electricity back into the grid.
Chapman says the incentives and subsidies are important, but not essential to long-term customer savings.
“Is there a commitment to these policies in the state Legislature? We hope that there is,” he said. “We hope that they see this technology through to its full maturation. We want some certainty and stability. But our business is focused on how quickly we can bring down the cost, anticipating a day when there is no subsidy, no tax credits, whenever that day may come.”
With so many variables in play, “A Homeowner’s Guide to Solar Financing: Leases, Loans, and PPAs,” published in February by the Clean Energy States Alliance (CESA), ought to be required reading by anyone considering solar as a way of escaping the state’s crushing energy costs.