SolarCity (Nasdaq:SCTY) has found a new way to expand – by partnering directly with companies that providing financing for solar systems and access to their customer base.
In this first deal, SolarCity is partnering with American Honda. Honda is providing $65 million in financing for solar systems at dealerships and for Honda and Acura customers. The program will finance about 3,000 solar systems for homeowners and 20 for dealerships.
In exchange, Honda will get a return on its investment and another green program to tout.
Dealers will get preferential terms to lease or buy systems from SolarCity, and customers will get a sweetener on top of the the usual program – a solar system on their home or business with no upfront cost. They’ll get an extra $400 discount on their solar electric bills.
What’s important about this agreement is it may open the door for SolarCity to vastly extend its reach beyond the few banks, like Credit Suisse, which have loaned hundreds of millions of dollars, but don’t bring them new customers. By partnering with corporations they get access to unlimited potential corporate customers.
Through this deal with Honda, SolarCity will potentially gain access to tens of millions of new customers as Honda reaches out to current and previous vehicle owners.
The offer will be available to Honda’s customers in 14 states – where SolarCity currently operates.
They also plan to develop a program that integrates solar charging for Honda’s electric vehicles.
Honda says it will expand the program if it catches on, noting that it has the potential to cut more carbon emissions than through the sales of electric cars.
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Solar leasing or solar fleecing ? You decide. The solar leasing companies want your roof so that they can take your 30% federal tax credit worth thousands of dollars. They will also take any and all other financial incentives such as cash rebates and REC credits. In exchange you’ll only get a 10 to 15% reduction in your electric bill after you factor in the lease payments and you’ll be stuck with 20 years’ worth of lease payments on forever ageing solar equipment that you can’t sell because it won’t belong to you. In fact after making 20 years’ worth of lease payments, if you want to keep the system, you’ll have to buy it from the leasing company at fair market value. And good luck ever selling your home with a lease attached to it. What home buyer will want to assume your lease payment on used equipment when they can buy a brand new, state of the art system for as little as 1/3 the cost of your lease payments. Today you can buy a complete, name brand, grid tie solar system for only $1.66 a watt. And that’s before any incentives. Instead of a solar lease why not get an FHA $0 down solar loan so you can keep the 30% federal tax credit and all the other financial incentives for a much better return on your investment. Oh, and that discount that the leasing company is offering you, who do you think is paying for that in the end? Right, how generous of you.
While I agree with most of what you say, there are a couple errors. The initial 10-15% return is compounded by avoiding the future price increases in electricity everyone agrees will come. So the AVOIDED cost (i.e. return) rises as the years go by. The challenge is determining a correct percentage increase, which is an unknown. History tells us 6.7% in So Cal – but will it continue? Electricity prices are composed of three areas: 1-2% in grid expansion to account for growing population; 2-2.25% attributed to fossil fuel (gas prices); and another 2% in “green expansion” as mandated by the clean energy act. Another key is the escalator offered by the lease. I prefer a flat rate lease if you can get it. This widens the “corridor” between what you’re paying and where prices ultimately go. If you can’t afford, or can’t qualify for a purchase, the lease still saves you money over what you’re paying the electric company.
Which takes us to the purchase. Your figure of $1.66 a watt is way off. Panels COST about $0.90 to $1.00/watt. If you go micro inverter, their cost is about $0.68/watt. NOW you have to pay for BOS (Balance of system) which includes racking and the other assembly, which is about $1.00/watt. NOW you have to get it installed. And installation NEEDS to be tied to the grid with a licensed C-10 or C-46 electrician which is NOT cheap, and well worth paying for. Expect $2.00/watt or more as a fair price for installation and grid tie. So you’re at $4.68 a watt MINIMUM to purchase a system.
My advice is this, if you can afford/qualify for a purchase – PURCHASE it. With the 30% tax credit available until 2016, you can offset three year’s worth of tax appetite if you have that available. HOWEVER, going solar – regardless of whether leasing or purchasing is a less expensive proposition than staying with your utility company and their certain future price increases. “Investing” in your utility is dead money! You’re paying your electric bill anyway – probably have for years – and what do you have to show for it? NOTHING? Since you’re paying anyway – invest in solar and own the system outright at the end of your loan. Translation? Relatively FREE electricity for the rest of your life!! For more information go to http://www.eamericansolar.com.
Interesting and insightful comments, Ron and Mark. The reason solar leasing is doing so well as a business model is that people don’t want to spend $25k or so up front to buy their own system. So, although it makes more financial sense to do that, at least solar leasing gets solar on peoples’ roofs who wouldn’t otherwise have it. They’d have to pay an electric bill anyway.