For years, the cost of purchasing a solar energy system has kept the dream of escaping the grid or reducing dependence on utility companies just out of reach for many potential customers.
Since March, however, the introduction of a leasing option for Maryland homeowners and commercial businesses has had a dramatic effect on the number of consumers making the switch to solar panels.
“Before leasing came along, we probably did between two and five residential installations a month,” said Teris Pantazes, co-owner of Seven Seas Energy of Annapolis. “Now we’re doing anywhere from four to seven installations a week, depending on the weather.”
Business has also improved for Solar City of Jessup, where Mid-Atlantic Regional Manager Lee Keshishian said residential installations have increased five-fold, thanks to leasing.
“Demand is growing, and it’s holding up well,” Keshishian said. “Close to 50% of the systems we install now are leases. It really changes the game in terms of the industry and allows more people to think about going green.”
Solar City operates its own lease program, while Seven Seas Energy has partnered with the residential solar company Sungevity to offer customers a lease option.
Like most trends, solar panel leasing first began in California, where it was introduced in 2007. Solar energy companies in a number of states have followed suit since, although they have been reluctant to offer leasing in states where a lack of government incentives means only shallow savings for consumers.
In Maryland, the state’s Clean Energy Grant program offers residential rebates of up to $10,000 for qualifying photovoltaic systems and is available until the grant fund is depleted.
On the commercial side, the Maryland Clean Energy Production Tax Credit, set to expire on Dec. 31, 2015, offers up to $2.5 million in total credits during a five-year period.
While a number of individual counties also offer residential tax credits for photovoltaic systems, the Howard County Residential Solar and Geothermal Property Tax Credit program has already closed. However, the county will continue to accept applications until April 1, 2012, from residents who installed photovoltaic systems prior to May 25, 2011. That program offers a maximum incentive of $5,000.
The equivalent program for Anne Arundel County residents, which offers a maximum credit of $2,500, expires on June 1, 2012, but it’s not yet clear whether solar lease customers qualify for the incentive.
“Up to this point it has been held that the program is not applicable to renters,” said Cheryl Mullen of the Anne Arundel County Finance Office. “I have requested a review of that policy and asked for a decision within a month, but the workload may delay that decision.”
According to Jason Brown of the Howard County Department of Finance, the Howard County program has been deemed from inception to include residents who lease solar energy systems.
Benefits of Leasing
Solar City became the first solar company in Maryland to begin offering a lease option, starting in March of this year. The industry standard is a 20-year lease, Keshishian said, although younger companies tend to offer shorter terms, like 10 to 15 years in the case of Seven Seas Energy.
In the long run, customers are realizing that leasing offers a few benefits that ownership doesn’t, Pantazes said.
“The basic homeowner doesn’t have $10,000 to $50,000 to spend on a solar system, and it can take years until a system has paid for itself,” he said. “Leasing gives customers the ability to get solar for no money down and start saving money on electricity bills instantly.”
The savings come in the form of a utility company credit, calculated through net metering — essentially allowing the electricity meter to spin backward whenever the customer uses the current produced by the solar panels.
And unlike a purchased system, a leased system can either be upgraded at the end of the lease or be removed at no cost to the customer.
Those interested in owning the leased system can purchase it at a fair market value at the end of their lease, or can opt for other financing arrangements such as prepaying the lease or choosing a money-down lease to lock in more favorable lease rates, Pantazes said.
Further, the systems carry a performance warranty and are monitored to ensure they meet a set performance standard.
“We’ll write a check for the difference if the system doesn’t perform and fails to produce as much electricity as we say it should,” Keshishian said.
In most cases, Pantazes said, the combined lease fee and new electricity bill have been averaging his customers about 15% less than their original electricity bills.
Solar City initially began offering its lease option in Maryland’s residential sector. As it now prepares to roll out its commercial offerings, company spokesman Jonathan Bass said commercial customers have already had a similar option.
“Most commercial customers [in our other regions] actually choose our Power Purchase Agreement option, which is very similar to a lease but differs in payment structure,” he said.
“I’ve been preaching this for a long time,” Pantazes said. “People will actually make the switch to a greener alternative if they’re given an incentive. Very few people can afford to buy a solar system, but leasing is a different question. Once you put everything down on paper, people can see that it’s a good investment.”