Northeast Sustainable Energy Association (NESEA) Building Energy Fall Issue featured an article entitled "Residential Solar: Own or Lease?" Click
Home owners and communities should reap solar’s economic benefits
Third party ownership has introduced solar to a new audience. However, we need to do more to maximize the benefits of our growing clean energy sector within our local communities. We need to support ownership in residential solar because it offers two excellent benefits.
First, greater access to ownership will increase the number of people who install solar on their roofs. Despite the attractive hook of a no-money-down option, many homeowners are unwilling to allow a third-party to own equipment installed on their home. Financial options that don’t require homeowners to forfeit ownership will serve a substantial number of homeowners who remain on the sidelines right now.
Second, ownership of solar resources confers substantial economic benefits. With third- party owned projects, those economic benefits accrue to out-of-state companies. Research by the National Renewable Energy Laboratory indicates that locally-owned renewable energy projects generate 1.5 to 3.4 times the economic impact of third-party owned projects Because of its favorable regulatory environment, Massachusetts is illustrative of what communities stand to gain—or lose.
Local ownership means local gains
As Massachusetts Governor Deval Patrick recently stated “Our businesses and residents spend $20 billion annually on energy costs—and $18 billion of that leaves the Commonwealth. That is nearly $8,000 that each and every Massachusetts household sends to other states and countries to meet our energy needs.” Solar represents a strategic opportunity for Massachusetts or any state to keep its energy spending local.
Policymakers in the Commonwealth and in Washington have worked to create incentives that make solar installations financially attractive, including rebates, tax credits, and Solar Renewable Energy Certificates (SRECS). To understand the magnitude of the economic value at stake, consider a typical residential PV system here in Massachusetts. With current prices and rebates, the total value of the tax credits generated by the system is $10,900.
7 kw system installed for $5/wattTotal system cost: $35,000
State Tax Credit
Federal Tax Credit
Total Value Tax Credits
All tax credits are captured by the owner of the PV system. In the case of a third-party owned project, those dollars accrue to out-of-state entities. When a homeowner owns the system, those dollars are delivered to our Massachusetts residents.
In the first several months of 2012, according to the Massachusetts Clean Energy Center, 81% of solar installed on residential rooftops in Massachusetts took up the third-party ownership model—in 2008 only 2 percent did. And about 90 percent of all leased systems are owned by out-of-state companies. If the next 100MW of residential solar is installed with the same rate of third-party ownership, the Commonwealth will forfeit over $100 million in federal and state tax credits to out-of-state entities. The full economic impact of that forfeiture in terms of job creation and economic multipliers makes the case for local ownership even more urgent.
Locally-owned solar offers a unique opportunity for us to meet our energy needs and enrich our communities. So while each third-party owned project moves Massachusetts closer to meeting Governor Patrick’s goal of 400MW, it also represents a lost opportunity to capture economic value for the state.
Solar panels are not a car
Whether it’s their home or their car, some people are inclined to rent or lease, while others prefer to own. The same applies to solar. With the right information and support, homeowners can quickly come around to the fact that by leasing their solar panels, they lose access to valuable incentives such as SRECs and tax credits. Moreover, at the right site, solar is a great investment opportunity. Jim Picardi of Shelburne Falls, MA, did extensive research on solar. “I considered leasing my panels at first,” he says, “but the more research I did, I realized there were more advantages to owning.” Matt Russo of South Deerfield, MA, leased his car, but not his solar panels: “I know there are companies that would put a system on my roof for a lot less if I leased. I leased my last car. But this isn’t a car. This is attached to my house and it’s going to last more than a car, more than three to five years.”
There are more homeowners out there like Matt and Jim. In order to keep the conversation around solar positive, we must deliver products and services that support local ownership of renewable energy resources. Greater access to local ownership will broaden solar appeal, grow the industry and enrich our communities.