Alternative Energy

Published on August 17th, 2010 | by Guest Contributor


Solar Leasing Makes Solar Power Affordable

Anyone I know who is interested in solar power usually has two thing that make them tilt their head, clench their teeth and do the breathe-in hesitation- high up front costs and maintenance. It can cost a lot of money to buy solar panels, and even more to keep them in optimal shape once you install them. But the new Solar Power Purchase Agreement (SPPA) program from the EPA aims to change all that. The idea is simple- whole companies will exist that buy large amounts of solar panels, maintain them, generate the energy, and lease it to homeowners.

Solar companies like Solar City, which provided this Meteor vinyard array, are offering affordable leasing options.

Solar companies like Solar City, which provided this Meteor vinyard array, are offering affordable leasing options.

“A Solar Power Purchase Agreement (SPPA) is a financial arrangement in which a third-party developer owns, operates, and maintains the photovoltaic (PV) system, and a host customer agrees to site the system on its roof or elsewhere on its property and purchases the system’s electric output from the solar services provider for a predetermined period.” – Environmental Protection Agency statement

At this point, a standard agreement will require no down payment(!) and a 10 – 20 year contract that is transferable to the next owner or a new home. Monthly lease payments covers equipment, a certain amount of solar power and often include maintenance from the provider.

While most homeowners will end up with less of a financially good deal over the long-term through the SPPA’s, the lack of a down-payment and option to have maintenance included will surely make this an attractive option for homeowners looking to utilize solar power without needing the technical know-how or one-time big investment.

Where does the money come from to make this possible?

“In order to make the business model work, solar leasing companies must raise significant amounts of capital, normally from tax equity investors or from commercial lenders.  This capital, often referred to as “project finance”, allows the solar leasing company to make the upfront purchase of solar components and to pay for installation. Solar leasing companies collect the federal “Solar Investment Tax Credit”, as well as any applicable state/local incentives associated with the project.” — David Belden

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