In a new study recently published by Green Tech Media, it was reported that 72% of all residential solar installed in 2014 was the result of what the solar industry calls the third party ownership. Third party ownership includes lease models as well as power purchasing agreements (PPAs). The solar industry has seen incredible growth in 15 out of the last 16 quarters, and this growth is largely attributed to this third party ownership option.
It’s helpful to understand that these two forms of financing, leases and PPAs, are often confused, but they are not the same thing. In a solar lease, a homeowner is leasing the solar equipment on their home and making monthly payments for the use of that solar system. In a PPA, the homeowner is purchasing the power generated by the solar equipment installed on their roof, but is not making any sort of payment for the equipment itself, only the electricity being generated.
Regardless of the differences between these financial models, it is impressive to note the huge impact that third party ownership is having on the solar market nationally. This type of financing has proven to be an attractive and accessible way for many homeowners in America to go solar. It has allowed a large majority of solar customers to have solar on their homes and to benefit from low cost, clean energy, without needing to shoulder the burden of the cost of the equipment and installation. A residential solar system can cost tens of thousands of dollars, a price tag that remains out of reach for many homeowners without affordable financing options.
As the cost of solar equipment and installation continues to drop, however, the study reports that third party ownership will begin to phase out over the next five years, with customer ownership taking the lead in residential installations by 2020. Financing will still be involved, but the research predicts that solar installations will be funded through loans as opposed to third party ownership deals such as leasing or PPAs.
This data shows that having multiple choices about how to go solar plays a big role in the widespread adoption of solar technologies across the country. Different communities and families have different financial needs and preferences, so having a variety of financing choices will increase their ability to go solar, whether through a direct purchase, loan, lease, or PPA. More choices equals more solar.
As more solar is installed, the volume of installations helps lower the cost further, thus leading to the increase in customer owner systems that is expected in the next few years.
The widespread success of third party ownership success is especially interesting today, given the fights over PPAs that are currently taking place in several states. Earlier this year, Georgia’s state legislature unanimously passed a bill allowing PPAs, meaning that the Peach State joins nearly 40 others in supporting PPAs. On the other hand, North Carolina, Kentucky, Oklahoma, and Florida currently prohibit them, despite the fact that PPAs are a proven business model that has successfully helped to open up solar markets across the country.
SACE is a founding member in a grassroots movement currently taking place in Florida to legalize PPAs and bring this choice to the people of the Sunshine State. The effort is called Floridians for Solar Choice – you can learn more about it at www.flsolarchoice.org