Grist Magazine, September 13, 2012
Pollution is not the only thing wrong with the U.S. power system. It is also governed by inconsistent rules and opaque, unaccountable organizations. The average citizen has little understanding of how it works, who is in charge, or how it might change for the better. The financial benefits of electricity, like power generation itself, tend to be centralized, concentrating in the hands of shareholders and executives.
The biggest barrier to spreading renewable energy is its high up-front costs. Some of that is helped by state and federal financial incentives, but those are expected to decline sharply in coming years. However, there is a positive countervailing trend: innovations in the financing and ownership of solar projects that are opening distributed solar PV to a wider and wider market. Here are three financial models that are helping to drive this solar expansion.
The conventional route to rooftop solar is to buy some panels and enjoy the payback … in five to 10 years. This restricts solar PV to those willing and able to a) cobble together enough cash or get a home equity loan in crappy economic times, b) stay in the home long enough to earn positive returns, and c) take on the responsibility of operating and maintaining a small power plant. That’s a comparatively small segment of the public.
With a lease, you don’t own the panels on your roof; they are owned, operated, and maintained by a solar leasing company like Sunrun, SolarCity, or Sungevity. The solar company effectively becomes a utility. You pay them a monthly fee for the electricity the panels produce. At the end of the lease period (typically 15-25 years), depending on the details, you can re-up the lease, buy the panels, or have them removed.
The biggest states for solar leasing are California and New Jersey, but leases are also available in Arizona, Colorado, Massachusetts, Oregon, Pennsylvania, and Texas. Here’s a Solar Lease 101 that can compare products and generate a free quote.
The growing popularity of leasing (along with falling panel prices) is one reason that U.S. solar installations more than doubled in the second quarter of this year, bringing the total capacity to 5.7 gigawatts.
Between 70 and 80 percent of people in the U.S. aren’t in a building suitable for rooftop solar. However, many of those people would like to be able to invest in distributed solar, not only for the financial returns but for civic or environmental reasons. “Community solar” refers to the many ways that groups of individuals can pitch in together to buy or lease solar.
A good place to start learning is this Department of Energy-funded guide to community solar. It divides projects into three kinds:
• Utility-Sponsored Model: A utility owns or operates a project that is open to voluntary ratepayer participation.
• Special Purpose Entity (SPE) Model: Individuals join in a business enterprise to develop a community shared solar project.
• Nonprofit Model: A charitable nonprofit corporation administers a community shared solar project on behalf of donors or members.
See also this report from the Institute for Local Self-Reliance (ILSR), which “examines nine community solar projects, the policies that made them possible, and the (substantial) barriers that remain.” Here are the three policy solutions ILSR’s John Farrell recommends to unlock community solar:
1. Community net metering — to allow project owners to share the project’s electricity output. Right now, most state policies require utilities to allow net metering, but only for a solar or wind project on your own property. [Here’s what net-metering is, for those not yet in the know.]
2. Simplified securities law — to make community-based projects easier. Right now, there’s little difference between setting up a mutual fund and setting up a community solar project, and both take a lot of lawyers. (Learn more in this report.)
3. Smarter federal tax incentives — to allow community-based institutions to host community-based projects. Nonprofits, cooperatives, cities, and counties are logical entities to build projects, but they can’t (easily) use federal tax incentives for solar and wind power. This raises the stakes for problem No. 2.
Expanding and simplifying community solar will enable anyone who supports renewable energy to invest in it — kind of like carbon offsets, only with tangible results and and financial returns!
In closing … [applause, applause]
The thread that runs through all of these innovations in finance and ownership is energy democracy. They open up the social and economic benefits of solar power to a much broader (less rich, less elite) audience. That, not some grand federal bill, is likely the first step on the road to real political change.