SunRun PPA
The cool tool here is creative solar financing. Solar-electric panels are pretty much a commodity, but still high priced. What's new is an innovative way for a homeowner to afford an expensive solar set up. Nine months ago I covered my studio roof with 5 kilowatts of solar panels financed by a solar company. We are generating about 85% of the electricity we use now. Here's how it works.
You sign up with a company that installs high-quality panels on your property for no money down. Zero dollars! On sunny days the panels make electrons which run your meter backwards. The quantity of panels are sized to cover about 80-90% of your current electric bill, so that you should be expected to pay the utility only 10-20% of what you pay now. In addition to the much smaller payment to your electric grid company you will also now pay the solar company a fee based on the number of watts you send into the grid. This is how they make money to cover the costs of installing the panels and their profit. The rates they will charge you per kilowatt will be less than the utility rates, so your total bill for electricity will be less each month. (Not zero, not half, but less.) Because the solar company makes money by how much electricity your panels produce they have a clear incentive to maintain the panels' performance and keep them clean and the inverters going. After 15-18 years, you can buy-back the panels for a fraction of their costs, but I suspect they will give them to you free since it will be cheaper than removing them from your roof.
You could think of this as a lease-to-own option for solar panels, where the solar company's rents for electricity are cheaper than the utility grid's. Those cheaper rents are made possible in part by government solar subsidizes, which the solar company will claim on your behalf. But this is a business. While you may be generating 90% of your usage, because you are leasing the panels, your total combined bill will not be 90% less. It may only be 10% less per month. But since it costs you nothing or little up front, over 18 years that 10% adds up. In California, one company providing this zero down financing is SolarCity.
While I got a bid from SolarCity, we went with a slightly different deal from SunRun. Rather than zero down, we paid for half of the installation. That investment bought us a better rate for the electricity that we generate. In fact for the next 18 years we pay a fixed rate for electricity. The average California rate is expected to at least double, and we are projected to save $80,000 over 18 years. We could have gone all the way and bought the panels outright and then paid no lease. But we went with SunRun because this path requires either half, or no, down payment, and because SunRun specs out, installs, insures, owns and maintains the solar panels on our roofs. Also, they guarantee a certain level of output performance.
The actual rates that SunRun or SolarCity charge you depends on the particulars of your place -- the solar climate in your town, the pitch and orientation of your roof, potential shade, and local electric rates. Solar engineers use a really cool computerized tool (above) which takes a annualized panoramic to determine your solar potential. From this they can accurately predict your site's solar potential and lay out a design to maximize it by the hour. The image below was taken on the roof of my studio where our panels now lay.
Solar panels these days are low profile (you can't see ours from the street), modular, and require a minimum penetration into the roof. (The picture at the beginning of this review shows the panels being installed on our roof.) Our 28 panels made it through the rainy season with no problems. If there is a problem, the owner -- SunRun -- takes care of it. (There are escrow mechanisms should SunRun go out of business.)
The technical term for this kind of financing is a "solar power purchasing agreement" or a Solar PPA. Solar PPAs were first used for commercial properties -- huge flat roofs converted for collecting electricity. SunRun, SolarCity and a few others have adapted solar PPAs for home residential use. Right now SunRun operates in California, Massachusetts, and Arizona. SolarCity, California and Arizona. SunPower seems to have dealers in many states, though I have not used them. Coverage is being expanded rapidly so it's worth rechecking. Here is a PDF document answering the FAQ on "whether a solar PPA is right for you."
Like a lot of folks, we've wanted solar electricity for a long while but the significant up-front costs of installing it didn't seem to make sense. Zero dollars down makes sense. Half down and a fixed 18-year rate makes sense.
And watching my daily stats on the SunRun website, seeing the meter run backwards, really makes sense.
Favorite (15)
John
I rent and not under their coverage area anyway, but I wish these guys luck, because the product is a pretty good idea and because, well, it seems like the next paragraph in the story should read, "and then the oil companies found out about this, the executives were blackmailed, and the company run out of business."
I'm half-joking, but a company that can make a profit by directing you away from the power companies and saving you money? It sounds like they're not going to make many friends in high places.
Frank Ch. Eigler
Wait a minute, where's the catch? It is well known that small scale solar installations have a unit-energy cost of several times that of the current grid. It seems that this couldn't possibly work, except for taxpayer subsidy of the majority of the cost (and with a near-bankrupt California, good luck with keeping that going).
But maybe I'm wrong. Can you run down some numbers about how much money is flowing between all the various parties?
Sgt Ret
What isn't factored here is technology's accelerated advancement. Consider the voltaic efficiency 18 years ago compared to now. Before the mortgage is half over, these panels could be dinosaurs. Is there a guaranteed upgrade?
Also, considering economics, is the company's survival plausible?
(your captcha was unreadable 4/5)
Nickh
And readers thought the litter robot was expensive...
Davey
I was wondering about the future shock aspect, too. We keep seeing promises that solar photovoltaics is on the brink of large efficiency and cost/production breakthroughs. So say state-of-the-art in 10 years is double the watts/square ft. The lessor is now pumping way more electrons into the grid. Do they just get the extra profit, or is there a mechanism for the building owner to share in the bonanza? Does the lessor even have an incentive to upgrade the system?
Also, I've never understood why these companies only size the panels to cover less than the current electric bill. What if you have a large roof and small bill? Why wouldn't the company want to set up to gain the maximum electrons that go back to the grid instead of to your household use? Does this have something to do with how the incentives work?
Strictly from a finance perspective, this appears to be essentially a commodity futures contract with the added complexity of a lessor-owned production facility on lessee-owned property. The building owner is betting that the cost of energy will keep inflating over the long term, so en masse the customers have no financial reason to root for more efficient tech. Despite the questions, I think this is an admirable way to try and jumpstart the solar-electric economy. However, it looks like it remains more of a social investment than a personal-financial one.
William Michael Brown
Cool Tool!
Seems like most of the future-shock commenters are forgetting that the company still mostly owns the installation:
"Because the solar company makes money by how much electricity your panels produce they have a clear incentive to maintain the panels' performance and keep them clean and the inverters going. After 15-18 years, you own the panels and set up free and clear."
OK, so you end up with a used car after 20 years. And a house that's 2 decades older, too. But do you really think they'll have revved solar panel efficiency to some not-possible-to-pass-up new level of efficiency in 9 years? Sure hasn't happened so far.
Steve
I had SunRun on my house in Mountain View, CA. Was a nightmare (the installer RealGoods was fine) SunRun ran my credit many, many times (dinging my score) and placed a undocumented lien on my property.
Kevin Kelly
Steve, when you say you "had SunRun on my house" can you explain? SunRun doesn't make any panels. They don't install. They only finance. And are you sure it was SunRun and not SunPower? Did you have a contract with SunRun? I'd like to hear more details, please.
Alfred Barker
Are you planning to bring the scheme to the UK? I am aware that similar packages exist in Europe.....can you point me to a supplier offering the same package closer to home?.......many thanks....Alfred
Joe D
Something doesn't seem right.
$80,000 savings over 18 years? That's $370 per month.
Are they really spending that much on power?
Lesley
Hi, I'm an employee of SunRun. Kevin, thanks for starting this discussion. There are lots of thoughtful comments and questions on here.
It's true that the economics of solar do work for homeowners right now, and that is because of the tax credit from the federal government and state rebates. SunRun lets more people go solar by lowering the upfront cost (can be as low as $1,000) and also by taking care of all the panel maintenance.
To respond to Steve: we can't find anyone in our customer records who matches your situation, but rest assured that SunRun did not and will not ever place a lien on your property. It sounds like you had a negative experience considering solar, which is unfortunate. We'd be happy to follow up with you to clear up any questions.
Kevin Kelly
@ Joe D: We are not spending that amount right now, but at current inflation and rates of increases in cost, we would be spending that much in 18 years. (This amount is for a household of 7 plus my office/studio which has one employee.)
Carson Matthews
Would love to see SunRun come to Georgia. What happens if you decide to sell your house? I'm not sure I will be in this house for 18 years...do we pick them up and take them with us or do you have to work out an agreement with the new homeowner?
Carson
www.GreentotheScene.com
Kevin Kelly
@Carson: They become an asset, a great kitchen, that helps sell the house. I believe the finance deal can be transferred to the new owner.
r denson
I agree with Carson,
Does anybody know how we could start this process in Ga.?
Robert
Keith
Sounds interesting; but what I haven't seen
addressed yet is the expected lifespan of the
installation. Solar cells do indeed age and
become less efficient, as well as suffer from
delamination and fogging issues in some
environments. Fifteen to eighteen years is
a long time to get them paid off - will they be
worth anything when they're paid off, or will
they just need to be replaced at that point
with another fifteen year 'mortgage'?
Kevin Kelly
My assumption is that they will not be worth much after 18 years, and that the technology will have been substantially improved by then. That's true of most technologies.
Andrew S
Is there any downside to this? Risks?
Do you still come out ahead if you don't use much electricity? We average around 200kWh/month.
Thanks for this great review!
Danelia Larios
How does it works here in Florida? We have so many hurricanes and power outages. If the electricity is stored in the panels, I'm I still going to receive electrictiy if the power is down?
Max
I have a SunRun installer partner going to my house today. From what I've read on the SunRun site, after the end of the 18 year lease, you DO NOT own the panels. You have 3 choices: 1. Let them remove them at no charge (you're back on the grid - 100%). 2. You can buy them from SunRun at a cost that was determined when you initially signed the lease but, I believe with this option you will lose the maintenance service because you own them now not SunRun. 3. You can sign a new lease and enjoy the services you had on the previous 18 year lease. Over a 12 month period (YTD) we averaged 1,334 kWh.
Kevin Kelly
@Max, yes you are technically correct. I amended my statement to be more clear. You can own them at the end of 18 years by buying them back at a very reduced price. I think our 5kw system with inverters were slated to cost us $1,000 to buy-back. My guess is that after 18 years, the cost of removing these panels will far exceed their worth so they will probably just give them to you. (No one will buy them, new panels will make them obsolete and dumping them will be expensive, not to mention the labor of removing and patching your roof.)
Max
Update: I just signed a lease with one of SunRun's preferred installers using the PPA offered through SunRun. The way things are calculated, I should produce enough power to avoid the PG&E's upper pricing tiers. I went with the low up front payment and my electric bill plus the SunRun monthly payment will be almost exactly what I've averaged over the last 19 month period. As long as my usage stays pretty consistent, I'll only be paying for the first two tiers which are much less that the upper tiers.
Tom
Congrats Max!
I have been studying quotes from two different vendors, each of whom offer both a direct purchase plan, the SunRun Total Solar (prepay) plan and the SunRun PowerPlan (pay as you go) plan.
I have created the most mind-boggling spreadsheet to compare potential rate hikes, SunRun payments (vs. loan payments), etc.!
Right now, I am leaning toward either a direct purchase or the SunRun Total Solar (prepay) plan.
The reason: assuming a 5.5% inflation in electric power rates, during the period between year # 8 and year # 18, I will save $3,000-$4,000 a year, whereas with the SunRun PowerPlan (pay as you go) plan, I will only save $1,000-$2,000 a year. Call me greedy!
PS: To add to the running usage database on this thread, our household averaged 700-900 kWh over the last few years, but in the last 12 months our usage has bumped up to 1200 kWh! (My theory is that it's due to a new heated bathroom radiant floor plus the teenager starting to do her own laundry -- but with half-full loads.)
Tom Fasold
Does anyone have any info about getting work in this feild installing the pannels??? Contractor in Visalia Calif.
Stephen in San Jose
We have SolarCity zero cost lease. We are saving about $600 per year over
our previous PG&E bill. Very satisfied, Solar City monitors and has been
out 1ce for a problem. Some complain about subsidy for solar, but using the
atmosphere as a sewer for fossil fuel byproducts has a cost as well. Not
that long ago we used or rivers and lakes as sewers of human and industrial
waste....at least until these bodies of water began dying. Then we decided
decent clean water was worth something. Air is the same way...IMHO. Not
to mention the cost(s) of the Military to protect our sources of fossil fuels.
Renewables just make sense
Liz Merry
I did an analysis of a SunRun PPA for a neighbor who bought in to a 5kW SunRun financed, REC Solar installed system here in Davis. She pre-paid $15,000 to SunRun, which I don't understand much because the point of a PPA is no downpayment, but with that financing she got a fixed $.13/kWh rate for the PV power for 15 years. A good deal overall.
SunRun works because people don't have $30-$45k in cash, but they often have $10-$15k. And if they are in Tier 3 or above the fixed sunrun cost of power is going to save them a lot of money over the years.