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The Business Model of Leasing PV Solar Panels – A. Gilbert
Background 1 n
The Solar Boom
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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
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The Business Model of Leasing PV Solar Panels – A. Gilbert
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
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The Business Model of Leasing PV Solar Panels – A. Gilbert
The Growth of Leased Systems 1
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The Business Model of Leasing PV Solar Panels – A. Gilbert
California Dominates U.S. Solar Market 2
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~ 607,000 homes with PV systems in 2013
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The Business Model of Leasing PV Solar Panels – A. Gilbert
Governmental Support for Solar 3
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DOE Forrestal Building Rooftop
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The Business Model of Leasing PV Solar Panels – A. Gilbert
Federal Tax Drivers n
Federal Investment Tax Credit (ITC)
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PV owner can get 30% tax credit
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Expires at the end of 2016 n
Modified Accelerated Cost Recovery
System (MACRS) a.k.a. Depreciation
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Can depreciate over 5 years instead of full lifetime
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Only applies to leased systems
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The Business Model of Leasing PV Solar Panels – A. Gilbert
State Level Drivers n
California Solar Initiative (CSI)
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Gives estimated performance-based incentives
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Designed to diminish over time
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The Business Model of Leasing PV Solar Panels – A. Gilbert
CSI-backed PV Installations 4
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The Business Model of Leasing PV Solar Panels – A. Gilbert
California Drivers for PV 5 n
Tiered electricity pricing
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The more energy used, the higher the rate
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Many never exceed
Tier 2
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High energy consumers have more incentive to install PV systems
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The Business Model of Leasing PV Solar Panels – A. Gilbert
Drivers for PV n
Net Metering Programs
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Sell back excess electricity generated
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Runs the meter backwards
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Prevents higher tier usage
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The Business Model of Leasing PV Solar Panels – A. Gilbert
Price and Value Converge 5
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The Business Model of Leasing PV Solar Panels – A. Gilbert ENER 553
Still not enough to purchase these systems
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Upfront cost still too expensive for many
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Difficult to figure out full tax benefits
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Installation challenges n
Permitting n
Interconnection
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The Business Model of Leasing PV Solar Panels – A. Gilbert
Leasing - Homeowner
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Solar becomes a service for homeowners
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Little to no upfront cost
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Leasing co. handles installation & maintenance
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Overall bill savings (10-20% typically)
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No tax benefits for homeowners n
Enables many to have PV systems n
Not available nationwide
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The Business Model of Leasing PV Solar Panels – A. Gilbert
Leasing – Third Party Owner n
The leasing company and its investors receive:
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Tax benefits
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Rebates
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Monthly lease payments
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The Business Model of Leasing PV Solar Panels – A. Gilbert
How a Solar Lease Works 5
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The Business Model of Leasing PV Solar Panels – A. Gilbert ENER 553
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
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Typically 20 year lease
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The Business Model of Leasing PV Solar Panels – A. Gilbert
Target Investor n
Can provides lots of capital n
Has high tax liability
¨
Tax Equity Investor
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Limited number invest in renewables
Result: n
Receives tax credit n
High ROI
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The Business Model of Leasing PV Solar Panels – A. Gilbert ENER 553 n
Service n
Short term gains n
No upfront cost n
Decreases home value n
Don’t have to think about it
Lease vs. Purchase
VS. n
Home Investment n
Long term gains n
Higher monthly savings n
Improves home value n
Tax benefits
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The Business Model of Leasing PV Solar Panels – A. Gilbert
Net Present Value of PV Systems 5
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The Business Model of Leasing PV Solar Panels – A. Gilbert
Leasing Company Roles n
Lead generation n
Sales n
Financing n
Accounting n
Installation n
Maintenance n
Legal
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The Business Model of Leasing PV Solar Panels – A. Gilbert
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
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The Business Model of Leasing PV Solar Panels – A. Gilbert
How Leasing Companies Fill their Roles 6
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The Business Model of Leasing PV Solar Panels – A. Gilbert
High Fixed Costs n
From legal, accounting and financing n
To be profitable:
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Aggregate systems into funds
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Can spread out fixed cost over a wider net
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Requires quick, large-scale deployment
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Keeps lease payments low
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The Business Model of Leasing PV Solar Panels – A. Gilbert ENER 553
Challenges of Leased System n
Decreased home value
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Homebuyers are turned off by leases
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SolarCity claims 95% of lease transfers occur without any problems n
Split Incentives in tenant buildings
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Tenants get the benefits
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Property owners get the burden n
Fast growth leads to mistakes
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The Business Model of Leasing PV Solar Panels – A. Gilbert
Effect on the Grid
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Variations in voltage on distribution feeders
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Due to variability of generation n
114-126V range required by ANSI n
Voltage regulators are overworked
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Leads to shorter lifespans n
New electronics are being explored
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The Business Model of Leasing PV Solar Panels – A. Gilbert
Growth of Traditional Loans 6
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•   Companies adding loans to their business model
•   Offer similar service as leased systems
•   Customer owned systems
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The Business Model of Leasing PV Solar Panels – A. Gilbert
Conclusions
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Leasing turns solar into a service, not investment
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Not without its challenges n
Leasing has opened the door for small scale solar systems
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Aided by government policy, energy prices, etc. n
Future of leasing is unclear
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ITC expiring soon
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Shift to traditional loans has already begun
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The Business Model of Leasing PV Solar Panels – A. Gilbert
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
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