SunRun Solar Lease: 5KW Example

Published on June 16, 2009 by Tor a.k.a. "Solar Fred".
Categories: Affordable Solar, Low Up Front Costs, Solar Lease, SunRun.

In my last post, I told you about the basic info in the newSunRun leasing program, available only in Los Angeles and Arizona for now. In this post, I’ll go through the example of an average sized 5KW system.

First I’ll bet you’re asking, “Solar Fred, what’s an average 5KW DC system and what does it mean to me and my house?” It actually may mean nothing for your house. Every house is different and uses a different amount of power.

In this example, it means that a SunRun installer has gone to your example home in Los Angeles and seen 12 months of my LADWP electric bills. So they know an average of what your home uses year round. They’ve checked out your roof and the shading. Then they asked how much of your regular utility bill you’d like to replace with solar power. You’re a big solar advocate and you want to save money too, so you say to make your home 95% solar, 5% coal fired from the LADWP utility.

They run the numbers, and voila, a they recommend a 5KW system with 25 panels and the inverter. And what does this example cost? Let’s see:

• $500 down, upfront gets you the full installation.
• In the first year, your combined solar and utility bill is the same monthly amount as your old one: $80/month. So no savings yet. Where the heck are the savings? They show up over the next 17 years. How?
• Utility rates are rising an average of 5% a year, nationally, and could be higher or lower.
• Meanwhile, SunRun’s rates rise only 2.9% each year for the next 17 years. How much does that save?
• Between year 6 and 7, the system has paid for its initial $500 investment.
• By year 10, you’ve saved $232 for that year alone.
• By the time you add it all up in year 18? You’ve saved a total of $3,935. For financial geeks, your net present value (NPV) is $1,863. Not huge, but savings nevertheless.
• Now, you’re free to end the agreement and have SunRun remove the panels at no cost to you. However…
• It makes more financial sense to buy the system in year 18. SunRun’s quoted residual purchase price is $1/watt ($5000 in this case.). So, why does it make sense to buy the system?
• Because by year 18, electric rates will have gone sky high. Without the panels, it’s estimated that you’ll be paying $2,200 a year for utility electricity. So in two years, you’ll have paid for that $5000 buyout price, plus you’re now only paying only 5% of your power ($152 for the entire year) to LADWP.
• By year 25, your total savings will have added up to $16,570 or $5,785 NPV. Also keep in mind that solar panels usually last longer than 25 years, though at a lower efficiency.
• All maintenance, repairs, and parts are included in these costs, so that saves you time and the price of replacing the inverter.

SolarFred Note#1: The example above may already be out of date. I’ve just learned that LADWP is going from flat rates to tiered rates in July 2009. That will make utility rates more expensive and buying solar have a faster payback. So, I’m not sure that this example takes those rates into account.
SolarFred Note#2: Remember that you will not directly benefit from any Federal, state or local solar subsidies or the value of solar renewable energy credits (SRECS). SunRun says it works a large portion of these numbers into their calculations. That could be a great benefit to people who pay little in income taxes every April 15th.
SolarFred Note#3: Instead of $500 down, you may pay $0 down in some Arizona utilities for systems over 4KW. That would include this 5KW example above. Also, Arizona rates are different from LADWP, so your savings will be different than this LADWP example.

Of course, your system is going to vary by your home’s energy usage and many other factors. This is only an example.

Like any solar leasing or solar PPA program, you’re going to do better financially if you buy the system through a home equity loan. Think about a car lease versus a car loan. Same concept. You’re always better off financially buying, but the payments are going to be higher than the lower lease payment, though long term, you do get a greater return on your investment. So, are you a buyer or a leaser? Overall, the SunRun lease and the SunRun PPA are a good deal if you want:

• Low to no money down.
• Hassle-free maintenance and repairs for 18 years.
• Can’t take full advantage of the 30% tax credit
• Have low home equity or don’t want to dip into your home equity.
• To go solar, save trees, and save some money on your electric bill.

SunRun Lease (L.A. & Arizona): The Basics

Published on June 15, 2009 by Tor a.k.a. "Solar Fred".
Categories: Affordable Solar, Los Angeles Solar, Solar Lease, SunRun.

We’re still getting through reviewing the various solar leases and solar PPAs in around the U.S. Today, we’re returning to SunRun and their other solar financing program, a Solar Lease.

SunRun is mainly known for its Solar PPAs, but in some states or utility areas, they have a Solar Lease model because of complex utility agreements and/or state laws. Here are the basic need-to-knows.

In the next post, we’ll go over a SunRun solar lease example for an average size 5kw DC system.

• As mentioned, this program is currently only available in the Los Angeles (LADWP) utility and in Arizona. (For other areas in California and Massachusetts, see this post.)
• Standard up front cost is typically $500, but could be less or zip in some utilities in Arizona. So, good news for people worried about high up front costs for solar.
• This is an 18 year lease agreement. Should you move, you can transfer the lease to the new homeowner, buy out the remaining agreement, or buy the system at a predetermined cost.
• You’ll need very good to excellent credit to qualify. SunRun says it takes into consideration more than just your FICO score.
• SunRun does not place any kind of lien on your home, nor does the lease dip into your home equity, but again, they do look at your credit and ability to pay.
• All maintenance of the solar system is included in the lease, including the inverter, which usually conks out at around 12 to 15 years.
• As always with SunRun, they have a list of very experienced installers who will design, install, and maintain your system. That’s really great, considering there are so many new solar companies who have little experience with solar.
• SunRun calculates your first year’s combined Solar lease and utility bill to be equal to what you’re paying now. So, you don’t really save anything in the first year of monthly bills. The real savings come in the next 17 years (or more if you buy the panels.) Why?
• Because for the next 17 years, your SunRun solar lease bill will rise by only 2.9%, whereas the utility portion will probably rise at a higher rate, perhaps 5% or more.
• Historically, utility rates have risen nationally at an average of 5% a year. In the future, could be more or… less. That’s a risk, but with climate change legislation running through Congress and California requiring utilities to buy more renewable energy, it’s a pretty good bet that electric rates will rise by at least 5%, especially in utilities with tiered rates.
• Because the panels are technically owned by SunRun, they collect all of the incentives, including state and utility rebates, Federal tax credits, and renewable energy credits (RECs).
• However, SunRun says it works these incentives into your overall lease price. That can be a really good deal for middle/upper middle income people who may not be able to take full advantage of the Federal Government’s 30% tax credit. (A tax credit is like a gift card for the IRS. For example, you owe $10,000 and get a $9,000 solar tax credit, then you only owe $1,000 on April 15th. Owe less? The credit can be taken over 5 years. Check with your tax expert to confirm.)

In my next post, I’ll lay out an example of the SunRun LADWP lease for Los Angeles and Arizona.

SunRun Solar PPA Example

Published on by Tor a.k.a. "Solar Fred".
Categories: Solar PPA, SunRun.

In my last post about SunRun, we talked about the basic outline of the SunRun solar PPA. In this post, we’re going to go through an example of an average system in Southern California Edison (SCE) utility with tiered rates and net metering. The example would be similar in other SunRun territories, but not Arizona and Los Angeles, which are leases.

In this example:

• The customer’s average monthly electric bill is $153/month.
• This corresponds to $.21/kWh average rate across the rate tiers.
• The solar system’s size is 5 kW DC, or 4.23kW AC.
• This system’s size (5 KW) will offset 87% of the home’s expected electric bill over a year. So you’ll still have to pay the utility 13% of your power needs for the next 18 to 25 years.
• In the example, SunRun projects electric rates in SCE territory to rise an average of 6.5% annually across higher rate tier customers. I think that’s a good estimate. Recently, in April of 2009, energy hungry SCE customers saw a rate increase from 3% to 10%, depending on which rate tier. Historically, electric rates have risen an average of 5% nationally over the last few years, but due to new clean energy requirements and carbon cap and trade legislation in Congress, experts believe utility rates will increase faster than they have in the past, especially for big energy users who are pushed into the high rate tiers. Your state/utility will have different projected increases.
• This 6.5% projection means that the current .21 kWh average rate for this customer will be $.56/kwh by the end of the 18 year contract.

Financials:

• To lock in your $.21/kWh bill for 87% of your electric bill for the next 18 years (assuming your power needs remain the same), the customer pays $3752 upfront.
• For a small fee, you can spread this upfront payment over the first year and pay $237 a month plus the $133/month for solar, and $20/month for the left over utility bill.
• Assuming that 6.5% rate increase over the 18 years of the contract, you’ll start to see more and more savings every year. For example:
• After 5 years, you’ll be saving almost $500 a year in electricity costs. Your combined SunRun bill and utility bill will be $155.66/month. Without SunRun, you would have been paying almost $196.66/a month.
• By the end of the 18 year contract, in today’s dollars, you’ll have saved $9,253.
• You can purchase the system at year 18 for $5000 or continue the contract at a rate of 10% less than the utility rate at that time.
• By the 25th year, if you’ve purchased the system, you’ll be paying zero to SunRun and only $89.25/month to the utility. If you only had stayed with the utility, your bill would be $692.83/month.
• All installation costs, and inverter replacement and full maintenance is included. (Expect excellent maintenance from SunRun. They want to make sure your panels are properly maintained and working because their fee is based on how much electricity the panels generate. So, if something goes wrong with your solar system, you’ll probably get a quick visit from the SunRun installer to make sure you’re getting full power out of your solar panels.

SunRun notes that the above sample quote is for a home with good solar potential. Check my previous post about gauging whether your home is right for solar.

In my next post, I’ll talk about the new Los Angeles and Arizona lease model and give an example.

The Sun Run PPA: The Basics (Updated)

Published on by Tor a.k.a. "Solar Fred".
Categories: Affordable Solar, Los Angeles Solar, Solar PPA.

Continuing on our look at residential solar PPAs (power purchase agreements) and solar leases, let’s check out the biggest player in the residential PPA market, SunRun.

First, the basics:

• SunRun is a California PPA company that offers solar PPAs in California and Massachusetts. In Arizona and Los Angeles, SunRun provides a lease model similar to Solar City’s.
• With a SunRun PPA, there is some upfront money involved. It can be as little as $1000, but that’s for a small system.
• For larger systems, you can still do $1,000 down, but the monthly payment will be a little higher than your old non-solar electric bill–initially. Down the road, you’ll be ahead of the game when electric rates rise–and they will.
• You’ll eventually see a payback for the upfront costs in electric savings. This will take a few years, depending on the size of your system. Larger systems will see payback sooner, especially for customers in the higher tiered rate utilities.
• You can break up the upfront payment over the first 12 months of your contract, but there is a small fee.
• SunRun contracts with a select group of experienced installers . These companies are all very well known in the business, so good quality there.
• With the panels installed, SunRun charges you a per kWh charge for the electricity your panels generate. Essentially, they become another utility, except the energy is coming from your solar panels. You will also remain connected to the grid, so no worries at night or on cloudy days.
• You’re locked in for 18 years, though you can transfer the agreement to a new home owner, a new home, or buy out the agreement before then.
• SunRun maintains the solar, including the inverter replacement costs and repairs, and guarantees you that the solar panels will generate the contracted amount of power during the year. If they don’t, SunRun will reimburse you the extra money you paid to the utility if for some reason the system doesn’t generate the predicted amount of power. In other words, if something goes wrong with the system, you’ll still pay that contracted flat solar rate, no matter what.
• Although SunRun predicts how much power your panels will generate over a year, it breaks up your yearly expected usage into a monthly bill, just like your utility. Also like your electric company, you’ll pay a per kWh charge.
• How much is this per kWh charge? That depends on where you live, how many solar panels you need, and how much you put down upfront, as well as how much a particular installer charges you. They always formulate the deal so that it’s the average of the tiered rates that you’re paying now, today. In other words, they try to formulate your combined monthly SunRun solar bill and residual utility bill to be the same as your bill now.
• So where’s the savings? Next year when your normal electric rates start going up. Remember, the SunRun portion of your bill remains the same for 18 years.
• Historically, electric rates have been rising nationally at around 5% a year, but rate increases might be steeper due to Cap and Trade carbon legislation currently going through Congress, so rates might rise more quickly–making solar a great deal, no matter how you finance it.
• At the end of the 18 years, you can buy your panels for a pre set amount at $1 per DC watt or renew your PPA agreement at a rate that is guarantied to be 10% less than your utility rate.
• Since you don’t own the panels, but just pay for the electricity, SunRun receives all of the state rebate and/or utility cash incentives, plus the 30% Federal tax credit and green tag credits (sort of like carbon credits, but for solar.) However, they work in most of the rebates and 30% tax credit into their formula. This is a great feature for those who don’t pay much in taxes and don’t benefit much from tax credits.
• There’s no lien on your property and you don’t dip into home equity. However, SunRun does require you to have good to excellent credit. Their qualifications are not just based on your FICO score, so they can be flexible.
• Solar Fred Note: The Sun Run Lease formula for Arizona and Los Angles is different than the above Solar PPA model for California and Massachusetts. I’ll get to the lease model in a future post.

In my next post, I’ll give an example of an average sized 5KW DC (4.23 KW AC System) in Southern California for SunRun’s PPA. So, the above model would apply to most of California and Massachusetts utilities, but not to Arizona and Los Angeles.

photo:flikr/mjmonty

The 5 Most Remarkable Solar Energy Markets in the US

Published on June 14, 2009 by Dave Llorens.
Categories: Solar Trends.

When you subsidize the free market, things sometimes get weird. For example, combine a change in Spain’s (and a few other countries’) solar subsidies, a US-wide absence of corporate tax hunger, and a massive spike in solar module production, and now you’ve got plummeting solar panel prices. I’m talking like… half, compared to a year ago. I remember toward December 2008 my old company had to throw away a couple of giant deals just because we couldn’t get our hands on the modules we needed. Today there is cutthroat pricing from solar panel manufacturers trying to move inventory.

Big commercial solar deals in the US usually rely on tax equity financing. That means if businesses purchase systems themselves, they need to be turning tidy profits to be able to take advantage of the tax credits. Therefore, there aren’t a lot of those deals being sold now. Silicon production has ramped way up in the last few years, as has the number of companies producing solar modules from the silicon, as well as the manufacturing throughput of those companies. All this results in is a lot of supply coupled with diminished global demand, meaning you’ve got lower price. Since the market is subsidized, some common market trends are amplified and expedited.

AND THAT’S JUST INTERNATIONALLY. Break it down by country, then state or province, then to city, and even to neighborhood, and you have markedly different solar energy markets.

Here are the five most remarkable solar markets in the United States:

1) Hawaii

Not the best subsidies for photovoltaics, but Hawaiian power is EXPENSIVE! Think about it, Hawaii has to boat in all the fossil fuels to their island, making the cost per kWh of electricity higher than just about anywhere. Couple that with a lot of sun and you’ve probably got the first market to reach grid parity. A hot market here would have greater changes than other places since most of Hawaiian power is derived from pretty dirty fossil fuels. Hawaii is working hard to change this, and I expect the solar market to take off.

2) Seattle

Here you have pretty crappy subsidies, a population that assumes solar doesn’t make sense because it’s too cloudy and rainy (not true), and pretty cheap power (over 50% of which is already clean hydro power). What you end up with is no one being able to sell solar panels.

3) Palm Desert

LA is a great solar market. The Palm Desert market is ridiculously great. Here you have a lot of homeowners who have been there a long time, and thus still have home equity. They also have magnificently large power bills and air conditioning. Add to that SCE’s tiered rate structure (the more you use, the more it costs), and selling solar energy is like shooting fish in a barrel. The only negative (which is greatly outweighed by the positives), is that heat negatively affects the voltage of crystalline silicon products. As a result, I bet you’ll see some of the first residential thin-film installs going up around places like this (even though it doesn’t make sense for everyone – thin film takes more space and a lot of people in Palm Desert are already maxing out their roof real estate).

4) New Orleans

New Orleans has the best residential subsidy in the nation. 50% Refundable state tax credit coupled the 30% Federal tax credit, means your systems are 80% off. The thing that makes this an interesting market is that the subsidy is only a year old, which means solar never made sense before. So you have a very small number of people who can install, and their experience is new. Politics are moving very quickly as well, and the new tax credits will probably soon be transferrable, allowing for both commercial installations as well as third party ownership options (like Solar PPA’s or Solar Leases).

5) Denver area

A recent pilot of California’s AB811 style municipal financing in Boulder was hugely successful, but small. The rebate from the utility there, Xcel Energy, dropped a dollar a watt, and Colorado energy is relatively inexpensive. So while the subsidy is making solar energy for homes is possible, it’s just not a slam dunk. Colorado also has lots of sun and a nice, cool, climate – ideal for solar power. As a result of the recent success of the subsidy that came online, I think, around late 05 early 06, lots of people jumped into the market with lots of success. Lately, with the pilot in Boulder complete, Xcel dropping their rebate, and a lot of the low-hanging fruit of customer base already absorbed, many installers are desperately clutching to low price as a solution for generating business to get themselves out of this economic downturn. I expect a consolidation in this market and for some to shake out, but that it will remain a robust solar market in the long run. One block off the Grid is kicking off a solar energy group purchase program for solar energy in Denver in a few weeks.

States with Renewable Portfolio Standards

Published on June 13, 2009 by Tor a.k.a. "Solar Fred".
Categories: Affordable Solar, solar incentives, tax credits.

Solar curious people: If you haven’t done so yet, please read this post on my sister blog site and pass it on. And now on with my regular blog….

For those who follow this blog, they know I love to point them to DSIRE.org, a non-profit database of all of the solar incentives in each state. Another hint that will indicate if solar is an affordable option in your state is by the State’s Renewable Portfolio Standard.

Video: Great Solar PV Explanation

Published on June 9, 2009 by Tor a.k.a. "Solar Fred".
Categories: Solar Components.

This is a great intro to solar basics. It explains how solar works and all of the components in a few minutes. Graphics are very clear.

Notice the “thin film” roofing tiles that look like regular tiles. Solar doesn’t have to be panels (but it’s less expensive that way). A picture is worth a thousand words and moving pictures are worth at least 10,000 words, give or take. Enjoy.

Solar Fred is now on Twitter

Published on June 8, 2009 by Tor a.k.a. "Solar Fred".
Categories: Why Solar Fred.

SolarFredNews: I’m officially a Tweeter. I shall tweet about solar and how to afford it at http://twitter.com/SolarFred.

Please follow me, tweet me, @me, #me, and tender your solar insights there. In return, I shall tweet my solar insights to you in 140 characters or less. I’d go longer, but them’s the twitter rules.

If I can’t put solar insights into 140 words, at the very least, I’ll alert you about new Solar Fred insights being posted here at the old blog, which is so 2004, I know. But it works.

SunRun is Now in Los Angeles

Published on June 5, 2009 by Tor a.k.a. "Solar Fred".
Categories: Affordable Solar, Buying Solar, Solar Lease, Solar PPA.

SunRun has done what no other Solar Lease or Solar PPA company has done before. They have made an agreement with my home town utility, the Los Angeles Department of Water and Power (LADWP), and according to SunRun, they have already sold their first low money down solar lease in the city.

I’ll get more into the details of the SunRun lease and PPA models in the next few posts. This post is a shout out to the LADWP to say thank you! …and also, please make more deals with other third party solar finance people.

Third party solar finance companies, such as the ones I’ve listed in another post, help to make solar affordable because they lower the upfront costs for both home owners and especially for businesses and government entities. I’m quite frankly perplexed as to why the LADWP has been blocking very experienced, qualified NABCEP solar installers from implementing their various financing programs. Many cities allow these companies to do the same solar installations, and the LADWP should as well. L.A. could have so many huge solar installations on schools and other businesses right now. Furthermore, we are losing good solar jobs in our struggling Los Angeles economy–not to mention the environmental loss. I hope this new agreement is a sign that the LADWP is beginning to remove any obstacles that other cities don’t have.

In the mean time, the SunRun Solar Lease is open for business in Los Angeles! I’ll be getting into more details over the next few posts, but overall, I think it’s a great, affordable, low money down program.

What's the Diff? Solar Lease vs. Solar PPA

Published on by Tor a.k.a. "Solar Fred".
Categories: Affordable Solar, Buying Solar, Los Angeles Solar, Solar Lease, Solar PPA.

Dear Solar Fred,

What’s the difference between a Solar Lease and Solar PPA?

Confused in Cali

Dear Cali,

You’re right to to be confused because they’re similar…yet very different. I outlined each option and others in my Cash Poor Series of posts, so you can see an outline of each program there.

Here are the basics:

• PPA stands for “Power Purchase Agreement.”
• PPA gives you a low ($1000 or more) up front cost.
• You’re locked in for 15 to 18 years to this agreement, which is transferable to a new owner or home.
• They charge you a set electrical rate that is sometimes flat, and sometimes calculated to rise over the term of your agreement. So instead of paying for coal fired electricity rates, you’re paying for PPA rates generated through your solar panels.
• The PPA company takes care of the maintenance and any needed repairs and monitors your system.
• You don’t get any tax benefits or State rebates or Renewable Energy Credits (RECs).
• You usually have some kind of option to buy later or at the end of the agreement for a set price per watt. Sometimes this is negotiable (and you should at least try since used solar panels aren’t worth much.)
• You need to have an excellent credit rating to qualify.
• You’re always tied to the grid, so any residual electricity needs that your solar panels don’t produce is covered by your utility.

Now for a Lease:

• There is usually no down payment, so 0 down.
• You’re locked into 15 years or more years, which is transferable to a new owner or home.
• Unlike a PPA, you do NOT pay for any power that your solar panels generate.
• Instead, you pay a lease payment plus any extra power you need buy from your electric company. So, solar panel power is technically free, but you have a set lease payment that rises 3 to 4% a year. That’s typically less than the 5% rate increases by your electric company. Some programs, like the CT Solar Lease program, is a flat rate, so no yearly increases.
• Like a PPA, they may take care of maintenance and repairs and monitor your system, but that’s not always the case.
• Similarly, you don’t get tax benefits or rebates or Renewable Energy Credits (RECs).
• Like PPA’s, you have an option to buy later or at the end of your term for a set residual price. You should try to negotiate the Fair Market Value (FMV) at the end of the lease, as used panels ain’t worth much more than the cost of taking them off your roof.
• You need to have a good to excellent credit rating also, depending on the program.
• Also like a PPA, you’re always tied to the grid, so any residual electricity needs are covered by your utility.

So, bottom line:

• PPA, you pay for power generated by solar panels with some money down and flat or yearly increases on your PPA electric rate. You also benefit from tiered rates.
• Lease, you have no money down (typically) and pay a flat leasing fee that rises every year by a certain percent, plus left over utility bill. You also benefit from tiered rates.

While both these options are good for low cost financing, in the long term, you’re better off financially using a home equity loan or an energy efficiency mortgage to buy your panels. There are also a growing number of cities that will finance your solar through a tax assessment, known as PACE Financing (Property Assessed Clean Energy.)

Either way, you have nothing to lose by getting a quote from these various companies and comparing the financial pros and cons. Some companies can give you both options, so you can compare solar leasing/solar ppa with purchasing.