The Business Model of Leasing PV Solar Panels. Aidan Gilbert March 10 th, 2015

Transcription

1 The Business Model of Leasing PV Solar Panels Aidan Gilbert March 10 th,

2 Background 1 n The Solar Boom Growth in Capacity for U.S. n 2.3 GW in 2010 n 12.1 GW in February 2014 n Grown more than 5x in 4 years Picture Courtesy of DOE 1 2

3 Drivers of the Solar BOOM n Drop in the cost of photovoltaics n Governmental policy n Rising energy prices n Improving economy n EMERGENCE OF LEASING COMPANIES 3

4 The Growth of Leased Systems 1 Picture Courtesy of DOE 4

5 California Dominates U.S. Solar Market 2 n ~ 607,000 homes with PV systems in 2013 Picture Courtesy of SEIA 5

6 Governmental Support for Solar 3 DOE Forrestal Building Rooftop Picture Courtesy of whitehouse.gov 6

7 Federal Tax Drivers n Federal Investment Tax Credit (ITC) PV owner can get 30% tax credit Expires at the end of 2016 n Modified Accelerated Cost Recovery System (MACRS) a.k.a. Depreciation Can depreciate over 5 years instead of full lifetime Only applies to leased systems Picture Courtesy of Climate Policy Initiative 7

8 State Level Drivers n California Solar Initiative (CSI) Gives estimated performance-based incentives Designed to diminish over time 8

9 CSI-backed PV Installations 4 Picture Courtesy of EIA 9

10 California Drivers for PV 5 n Tiered electricity pricing The more energy used, the higher the rate Many never exceed Tier 2 High energy consumers have more incentive to install PV systems Picture Courtesy of Climate Policy Initiative 10

11 Drivers for PV n Net Metering Programs Sell back excess electricity generated Runs the meter backwards Prevents higher tier usage 11

12 Price and Value Converge 5 Picture Courtesy of Climate Policy Initiative 12

13 Still not enough to purchase these systems Upfront cost still too expensive for many Difficult to figure out full tax benefits Installation challenges n Permitting n Interconnection 13

14 Leasing - Homeowner n Solar becomes a service for homeowners Little to no upfront cost Leasing co. handles installation & maintenance Overall bill savings (10-20% typically) No tax benefits for homeowners n Enables many to have PV systems n Not available nationwide 14

15 Leasing Third Party Owner n The leasing company and its investors receive: Tax benefits Rebates Monthly lease payments 15

16 How a Solar Lease Works 5 Picture Courtesy of Climate Policy Initiative 16

17 Target Homeowner n Has a good credit score n High energy consumer n Cannot afford upfront cost to purchase PV n Has no plans to relocate Typically 20 year lease 17

18 Target Investor n Can provides lots of capital n Has high tax liability Tax Equity Investor Limited number invest in renewables Result: n Receives tax credit n High ROI 18

19 Lease vs. Purchase n Service n Short term gains n No upfront cost n Decreases home value n Don t have to think about it VS. n Home Investment n Long term gains n Higher monthly savings n Improves home value n Tax benefits 19

20 Net Present Value of PV Systems 5 Picture Courtesy of Climate Policy Initiative 20

21 Leasing Company Roles n Lead generation n Sales n Financing n Accounting n Installation n Maintenance n Legal 21

22 Leasing Business Models n Fully-integrated e.g. SolarCity and Vivint n Partner model financiers e.g. SunPower n Semi-integrated installers e.g. Sungevity n Semi-integrated financiers e.g. Sunrun and NRG 22

23 How Leasing Companies Fill their Roles 6 Picture Courtesy of Greentechmedia 23

24 High Fixed Costs n From legal, accounting and financing n To be profitable: Aggregate systems into funds Can spread out fixed cost over a wider net Requires quick, large-scale deployment Keeps lease payments low 24

25 Challenges of Leased System n Decreased home value Homebuyers are turned off by leases SolarCity claims 95% of lease transfers occur without any problems n Split Incentives in tenant buildings Tenants get the benefits Property owners get the burden n Fast growth leads to mistakes 25

26 Effect on the Grid n Variations in voltage on distribution feeders Due to variability of generation n V range required by ANSI n Voltage regulators are overworked Leads to shorter lifespans n New electronics are being explored 26

27 Growth of Traditional Loans 6 Companies adding loans to their business model Offer similar service as leased systems Customer owned systems Picture Courtesy of Greentechmedia 27

28 Conclusions n Leasing turns solar into a service, not investment Not without its challenges n Leasing has opened the door for small scale solar systems Aided by government policy, energy prices, etc. n Future of leasing is unclear ITC expiring soon Shift to traditional loans has already begun 28

29 Thank you! n Any questions or comments? Bibliography 1. U.S. Department of Energy 2. Solar Energy Industries Association 3. whitehouse.gov 4. U.S. Energy Information Administration 5. Climate Policy Initiative 6. Greentechmedia.com 29