Times Article Looks At Solar Policy Challenges

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Aug 6, 2014

Hal Bernton interviewed Jeremy and Pam for the Sept. 7th segment in his Seattle Times series dealing with responses to climate change.  There is a discussion of solar energy systems that are leased to utility customers by a third party such as SolarCity. Companies that lease solar like to point out that the expansion of the solar market has been propelled by third party-owned projects, and that is true to an extent.  It is also true that for a few years there weren’t many sources for financing solar, so leasing was one of the only ways to reduce the upfront cost.  Now that excellent financing is available the need for third party leasing has ebbed. Here is a little more about Solar Leasing and Washington state incentives…

  • When our customers purchase a solar electric system they get 30% of that investment back from Uncle Sam.  When you lease, that tax credit goes to tax equity partners like Goldman Sachs.
  • When a solar system is purchased, it adds value to the property where it is installed; it is guaranteed income for the property owner.  When that system is leased, it adds value to the lessor’s portfolio, and guaranteed income for them.  The system may also be a liability if the 20-year lease must be paid off because a purchaser of the property doesn’t want to assume it.
  • A solar system purchaser will receive a production incentive from the state that is distributed in the state.  A leased solar system will funnel these state funds to out-of-state investors.
  • That said, there are people who don’t own their property (including many businesses) who could benefit from solar, and there are people who can’t use the federal tax credit (some self-employed, some retired, etc.)

Because of that last point, we continue to keep the door open to the possibility of solar that is owned by a third party, but the current state program fund is insufficient to support the addition of leased projects without  causing a reduced incentive for those who are already in the program. The accompanying Sankey charts show how the financial values flow in a system purchase versus a system lease.  As you can see, there is a clear advantage with ownership, but there is still a place for leasing; the challenge is to find additional incentives that will support third party ownership. (Key to abbreviations: NEM=net metering; TPO=third party owned; ITC=investment tax credit).

About The Author - Jeremy Smithson

Started Puget Sound Solar in 2001 with 30 years of construction contracting experience, and a desire to turn Seattle on to solar energy. Achieving NABCEP certification in 2004, Jeremy believes that our customers often follow a path similar to the one he took, starting out with solar daydreaming, then progressing to education on the subject, and eventually leading to action. In addition to leading the company he also does some teaching and speaking engagements about various aspects of solar energy, and experiments relentlessly with various solar, energy efficiency, and electric vehicle projects.

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