Published on October 10th, 2014 | by Guest Contributor
SolarCity Announces Home Solar PV Finance Program
Good news on solar financing came for those wanting to convert their electrical energy supply to solar panels, but have been road-blocked by affordability issues. SolarCity has announced it will start offering homeowners a new form of financing for their home solar system called MyPower. This financing method will function like a hybrid between a lease and a power purchase agreement (PPA).
Here’s how it is spelled out:
“Under a lease, the solar system is installed on the customer’s home, but is still owned by a third party. The customer then pays for the loan in regular installments while also paying for the electricity, and ownership of the system shifts to them once it’s paid off. The selling point is that because the third party has a guaranteed income stream over time, the rates for the electricity can be set ahead of time, and set very low. So the combined cost of the loan repayments and the electricity can actually be lower than the standard utility bills of just relying on the grid.
“Meanwhile, under a PPA, the third party maintains ownership of the solar system indefinitely, so the customer can avoid whatever upfront costs might come with taking out the loan. Instead, they just pay for the electricity, again benefiting from the unusually low rates.
SolarCity’s MyPower deal aims to combine the best of both worlds. It’s a loan, but like the PPA, the customer can enter into it with no upfront costs — and instead of paying off the loan in regular installments, they pay it off with monthly bills based on how much power they use. So they can pay off the loan quicker or slower than otherwise, depending. The loan agreement would last over a 30-year period rather than the standard 20-year period for most solar loans.
SolarCity thinks this arrangement could allow customers to pay up to 40 percent less for their electricity than it would cost them to rely on a traditional utility power company. And no matter how fast the customer pays off the loan, the official agreement lasts 30 years; and for the entirety of that time SolarCity handles installation, maintenance and upkeep, taking that logistical hurdle off the customers shoulders.
Affordability for the homeowner is the key concept that will be tested here.
At an interest rate if 4.5 percent, SolarCity will allow MyPower customers to take advantage of the federal government’s 30 percent tax credit for solar power — along with numerous state-level incentives — and use it to further lower the coast of their bill. (Under a standard lease agreement, the benefit of the tax credit goes to the this party owner of the solar system rather than the homeowner.)
SolarCity CEO Lyndon Rive anticipates many customers want to eventually own their system but can’t because of the upfront costs. Leasing right now is about the only way for them to go solar, sans ownership.
SolarCity will initially offer its MyPower arrangement in the states where it’s already doing the best business: Arizona, California, Colorado, Connecticut, Hawaii, Massachusetts, New York and New Jersey. Program expansion will then take place afterward.