Last spring, the company broke ground on its first-ever PPA-based solar community at Pacific Station in Encinitas. Through a development agreement with San Diego-based John DeWald & Associates, Open Energy Corp. is financing $480,000 for the installation of 1.2 kW rooftop systems on each of the 47 condominium/townhomes at the mixed-use complex. In exchange, homeowners agree to buy back the solar electricity produced by the system from Open Energy Corp., at a rate lower than the rates of regular utilities. The project is scheduled for completion in 2009.
It’s a win-win for all parties, says John McCusker, a representative for Open Energy Corp. The builder receives the tax breaks associated with using renewable energy, along with a faster rate of sale. Solar-equipped homes are selling four times faster in California than regular homes, he says. The solar-electric systems also allow the builder to meet Leadership in Energy and Environmental Design-certification requirements.
But the benefits for the homeowner go beyond no up-front costs. Other pluses include the added resale value for the home, the possibility of selling the house faster, a lower electric bill each month, and the satisfaction of using eco-friendly renewable energy.
Other companies are developing PPA programs as well. Berkeley’s Helio Micro Utility entered the residential solar PPA market last summer, and Tioga Energy of San Mateo also launched a PPA finance program. As more institutional investors back solar integrators, PPAs are expected to flourish in the residential market.
“What we’re starting to see is that innovative financial solutions from companies like ours will offer grid parity—the point at which electricity produced by PV is equal to or cheaper than grid energy—with some additional cost-savings benefit,” says Nat Kreamer, president of SunRun. The company recently received $12 million in venture capital to help expand and fund its residential PPA program.
After a market survey, SolarCity of Foster City, California, verified what most industry professionals already knew: The up-front payment is the largest deterrent to residential solar adoption. In response, the company teamed up with investment bank Morgan Stanley to pioneer a leasing program that makes solar electricity more affordable and accessible for homeowners.
“Our goal was to design a program that made it possible for families to pay less for clean power than dirty power, so they don’t have to choose between helping the environment and saving money,” says SolarCity CEO Lyndon Rive.
Their solar lease is typically structured as a 15-year agreement with a fixed monthly lease payment for the life of the contract and a guarantee of system production. The lease payment and guaranteed production are largely based on the individual system’s size, but other siting factors—including tilt, orientation, and shading—are taken into account. The more optimal the conditions, the higher the guaranteed power production, and the lower the lease payment.
Any production above the guarantee is applied against usage and may earn utility credits. However, such credits are rare, since SolarCity slightly undersizes most systems and primarily targets the most expensive peak utility rates. This keeps the lease payment down and maximizes the savings for the customer. Homeowners can opt to lease a larger system to offset up to 100% of their electricity usage.