Leases, loans make solar power more attractive option for home

NEW YORK — A new financing offering stands to make home-based solar power cheaper and more attractive to property owners as it bolsters the adoption of the technology.

The offer, announced by SolarCity, is a loan that allows homeowners to install their own solar systems on their roof for little or no money down while giving them the opportunity to pay less for electricity. Previous plans, while popular, turned off some because the solar company retained ownership of such systems.

“The value proposition is becoming clearer and less complicated for consumers,” said Patrick Jobin, an analyst at Credit Suisse. “Solar is going mainstream.”

SolarCity’s new loan deal and similar deals that involve leases or power- purchase agreements can pay off — if a property owners has the right roof in the right state.

For the deals to work, a roof can’t be shrouded in shade and the consumer has to be paying a relatively high price for power.

And, the state where the homeowner lives also has to allow the homeowner to trade the solar power being generated — but not used — for power the consumer needs at night or when the sun isn’t shining.

For that reason, the national solar companies that offer these deals, such as SolarCity, Sunrun, Sungevity and Vivint Solar, operate only in certain states, concentrated mostly in the Northeast, Southwest and West. For now, solar can’t compete with the power prices and regulations in Southeast and parts of the Midwest.

To help determine if a so- lar system is feasible, the solar company takes a look at a homeowner’s electric bill and the roof, then figures out whether a solar system can offer a break on the electric bill.

The plans work by addressing solar’s big drawback: high upfront cost. A typical system costs $30,000. Before the lease deals and power-purchase deals were rolled out starting in 2007 and 2008, that steep initial hit turned off many consumers.

A lease or loan deal spreads that upfront cost — reduced by a federal tax credit of 30 percent of the system — over 20 or 30 years, making the payments look more like monthly electric bills.

As the panels produce power, consumers buy less from the utility. They come out ahead if their power bill savings are bigger than the monthly loan or lease payment.

Lease and power purchase agreements now account for two-thirds of home solar installations, said Shayle Kann of GTM Research.

The difference between a loan and a lease or purchase agreement is that the homeowner owns the system, and the federal tax credit goes to the homeowner, instead of to the solar company or its financier.

When the value of the federal tax credit — $9,000 for a typical system — is factored in, homeowners can pay substantially less for power over the life of the panels.

SolarCity Chief Executive Officer Lyndon Rive said the company can offer the loans now because it has better access to financing, can better predict panel performance and has decreased installation costs.