Selling Solar Photovoltaic Like Cars or Furniture

Implications: The announcement of another high tech business in California getting a photovoltaic system is becoming old news.  What is more significant of this event are different financing instruments for photovoltaic systems making their way into the American market, and mindset.  A medium sized installation company may be the vanguard of a better way of selling PV.

Analysis: The story of a commercial rooftop photovoltaic system going up on a high-tech business is becoming old hat in California.  What is more significant are the business models that are beginning to finance PV systems, especially smaller ones for residential markets.  Besides eBay facilitating discounted installations to a naturally inclined market, leasing is becoming a more acceptable option of financing.

SolarCity is a privately held business that installed 876 kilowatts of photovoltaic capacity for 66 installations in 2007, according to the California Energy Commission.  That makes them nineteenth out of the top 50 installers in the #1 PV market in the US, with an average installed price reported at a little less than $7 per watt DC.

The concept of a homeowner leasing a photovoltaic system instead of shelling out cash is slowly making its way into the American mindset.  On SolarCity's website (www.solarcity.com), an example of leasing is given, where the installation of a 2,400 watt PV system, about 2/3 or so what is needed for an average California residence, is offered for $110 per month and no other costs for 15 years.  That will reduce electricity costs by close to the same amount.  It provides a hedge against future electric price increases and offers a buyout option at the end of the lease.  It's cost effective right now at about 30 cents per kilowatt hour, which many Californian homeowners pay at a marginal rate.

It will be financing that will lead to lower photovoltaic installed costs and make it more ubiquitous, like cars and furniture.  The genius of the German photovoltaic market's growth is not no much the feed in tariff rate, but the development of the financing mechanism.  With the surety of the tariff, a German can walk into a bank and get their system financed and approved, typically with a two page form.  A Californian still has to reckon with a huge pile of paperwork, a bureaucratic maze of different local incentives and jurisdictions, and banks that still run away at the mention of dedicated financing of renewable energy systems.  This is one reason why a German PV system averages over a dollar a watt less than a Californian one, before incentives.  A straightening out of this situation would be a significant cost reducer for photovoltaic systems.

GE is the prime finance agent of this scheme, which is a signature loan, requiring great credit.  It remains to be seen whether other major lenders see this as an opportunity for growth with other lending instruments in the doldrums.