Do you want to power your home with a rooftop solar system, but don’t want to spend the upfront cash for a system, or don’t want the responsibility of maintaining the system? Then here’s some good news: you may soon have the option of using a solar equipment lease to power your home! The Florida Public Service Commission (PSC) just approved a petition by Sunrun, a major solar company, that gives the company a green light to start offering its residential solar lease here in Florida.
What is (or is not) a solar equipment lease?
A solar lease is not a retail sale of power from a solar provider to the homeowner. Instead, the customer leases the solar system equipment and makes payments for the use of the system over a period of years. Solar leases can be structured so customers: pay no up-front costs; are provided maintenance for the system; and have the option to purchase the system at the end of the lease term. Similar leasing structures are commonly used in many other industries, including automobiles and office equipment.
In Florida, the solar lease can’t be structured as a sale of power, nor be construed as selling power to a customer. A sale of power to a retail customer is the exclusive purview of the incumbent electric utility. The prohibition is found in state statute that defines a utility as supplying electricity to and for the public. The Florida Supreme Court held in 1988 that the “public” includes supplying electricity to even one retail customer. Care is required in drafting a Florida solar equipment lease as payments based on the output of the system or performance guarantees are surely to be construed as a retail sale of power.
Why is a solar equipment lease just coming to the Florida market now?
Prior to this year, Florida had a burdensome tangible personal property tax – assessed on non-real estate business property. The tax was applied to a number of items – including leased rooftop solar systems – which priced leased systems out of customers’ reach. Florida voters changed all that in 2016 – when they overwhelmingly passed Amendment 4. The approval of Amendment 4 by voters, and the passage of SB 80 by the Legislature last year, significantly reduced tangible personal property taxes – including on leased residential solar equipment. With the tax burden lifted, the solar lease is a now an economically viable solar product in the Sunshine State.
Kudos to Sunrun for being the first solar company out of the gate to seek the regulatory green light for a state-wide solar leasing program. Sunrun, in late 2017, filed a declaratory statement petition asking the PSC to approve the structure of a proposed solar lease to be offered in Florida – specifically to find that it does not constitute a retail sale of power. The Commission first considered Sunrun’s petition at its March 1st Agenda Conference – and Sunrun got a cool reception. The Commission defied its staff recommendation and refused to approve the proposed lease structure without first reviewing of the actual lease. Sunrun subsequently filed its proposed Florida lease on March 19th.
During the recent April 20th Agenda Conference, the commissioners were gracious to Sunrun and thanked them for filing the lease for the PSC’s review. At the end of a short question and answer session, the PSC unanimously approved Item 5, Sunrun’s petition.
PSC Chairman Art Graham stated in a press release that “[r]esidential equipment leasing makes solar more attractive for some customers, and today’s decision confirms that. In its declaratory statement, the PSC found today that:
• Sunrun’s residential solar equipment lease does not constitute a sale of electricity;
• Offering its solar equipment lease to customers in Florida will not cause Sunrun to be a public utility under Florida law; and
• The residential solar equipment lease will not subject Sunrun or its customer-lessees to Commission regulation.
Sun continues to shine on the Sunshine State
Florida continues to add to its to its installed solar capacity. The Sunshine State finally broke into SEIA’s top-ten ranking for solar development – coming in at # 10 for 2017. While that ranking is driven primarily by utility-scale projects, rooftop solar continues to play an important role in supporting solar development, economic growth, jobs, and a cleaner future for our kids. Since the passage of Amendment 4, and the defeat of Amendment 1 in 2016, interest in rooftop solar has spiked. There are now about 20 active solar co-ops in Florida where homeowners pool their buying power to guarantee the lowest bids from solar providers. Solar permits for new rooftop systems in 2017 surged 110% over the previous year.
And now, a major solar company can offer another option in financing rooftop solar power – the solar equipment lease. Get ready, Sunrun expects to start accepting orders in select markets in the coming months.