08 February 2012
A study on third-party residential photovoltaics ownership in Southern California (US) shows that this rapidly growing new solar market trend can reduce or eliminate upfront costs, reduce technology risk and show cost savings on the first monthly electric bill rather than payback times on the order of a decade. As a result, younger, less affluent and less educated populations are adopting solar technologies.
What has been keeping the broader populace from adopting solar in the first place is not the high cost of ownership alone, so a key finding of this study by scientists from the National Renewable Energy Laboratory (NREL) and the Argonne National Laboratory. In fact, decreasing the purchase price of PV systems did not move the adoption needle. Why? “When customers consider buying PV for their house, there is a huge range of variables that can be frustrating to deal with at best or prohibitively confusing at worst,” says Easan Drury, Energy Analyst at NREL and co-author of the paper “The transformation of southern California’s residential photovoltaics market through third-party ownership” Drury, Easan, et al., Energy Journal 42, 681–690 (2012). “Third-party companies can simplify the process of installing PV by providing financing, monitoring and maintaining system performance, filling out paperwork for permits and incentives, and representing system economics in terms of an intuitive monthly bill savings, all in one clean lease package.”
Says Drury: “One thing that is interesting about the LA PV adoption trends is that it represents a natural experiment where we can measure how customers reacted to decreasing PV prices and the introduction of third-party products.” Eventually, it was the combination of removing adoption barriers and decreasing prices that opened up the PV market to this new, larger demographic. The third-party PV ownership model, where commercial companies own and operate customer-sited PV systems, could push residential PV beyond the early adopters who tend to purchase solar technologies. What’s more, going mainstream brings “several behavioral feedbacks that can significantly increase the rate of technology diffusion,” says Drury. “For example, if your neighbors start putting PV on their roofs, you are much more likely to install PV yourself.”
Third-party PV ownership, however, does have disadvantages. “One drawback for homeowners is that financing costs are typically higher for third-party companies than homeowners, which can reduce the total savings generated by installing PV,” Drury explains. “One drawback for the community is that third-party companies frequently define project costs using a ‘fair market value’ approach or using the total financed system cost, which can inflate project costs, making them eligible for higher incentives per unit capacity than an identical customer-owned system. This can drain incentive budgets more quickly and/or give third-party projects a competitive advantage.”
The question is, are third-party-owned residential PV products rapidly gaining market share at the expense of customer-owned systems? The Southern California PV adoption study shows that third-party owned PV products are enticing a new crop of customers who otherwise would not go solar. So lease options indeed are increasing total PV market demand.
The study is limited to LA and Orange counties. Next, the scientists will evaluate the generality of their findings. Currently, only about 20 states authorize third-party PV ownership. “Several states have recently allowed third-party companies to develop residential products, and I think this trend will continue. Other states, like Florida, Georgia or North Carolina, have legal barriers blocking third-party companies from entering the market that will likely require legislative action to reverse,” Drury concludes.