Are you more likely to get a solar loan or a solar lease?
Solar leasing has become the dominant way that homeowners go solar, but solar loans seem to be the hot kids on the block.
For many people, solar power has been a "good deal" for years. 20-year savings are typically in the tens of thousands of dollars. However, getting people to make an upfront payment for an electricity system that takes 5 to 15 years to "pay itself off" and starting saving you money isn't particularly easy. Loans have always an option, but banks not used to solar power weren't offering any special deals, and the high interest rates weren't attracting many customers.
Companies like Sunrun, SolarCity, and Sungevity came along and started offering $0 down solar leasing. They took care of the financing, installation, and maintenance and offered homeowners and businesses a simple elevator pitch: "you starting paying less for electricity from Day 1 and save thousands of dollars over time." Solar leasing has since soared to about 70-80% of the US residential solar market.
But things have been changing. Much lower solar costs make purchases easier for more people. Banks are now quite familiar with solar. And people have expressed a desire to own their solar panel systems rather than lease them. Solar leasing's market share has been flattening out in the past couple of years, but there's a lot of discussion now that a shift away from leasing and into loans has begun. Below are a few indications of that.
1. Mosaic, which started out by enabling crowd-investing in solar power plants (for as little as $25), recently announced that it was offering a line of home solar loan products that I was told by a Mosaic rep would "have the lowest monthly payments of any home solar loan product that we know of on the market."
2. I was on a call with Sungevity co-founder and CEO Andrew Birch last week and specifically asked him if he thought such a shift (from leasing to loans) was beginning or on the way, and he flat-out said "yes." It was nice to have the opportunity to ask Birch, as Sungevity offers both leases and loans. Furthermore, its competitive advantage isn't tied to either option and neither is its business model.
3. SunPower*, one of the world's leading solar panel producers and another company that offers both solar leasing and solar loans (in an unbiased way), just announced a partnership with Admirals Bank for $200 million in solar loan funding. "The partnership supports the SunPower® Loan program in the U.S., expanding the financing options available to homeowners interested in owning high-efficiency SunPower solar power systems. Under the program, borrowers may apply for a loan of up to $60,000 to install a SunPower system."
The program offers preferred interest rates and the loans are available in all 50 states. I've seen many announcements over the years about such financing for solar leasing programs, but this is the first I recall seeing for a loan program.
We'll see where things actually go, but I'm happy to say that I think we're headed into another phase of solar power's growth and maturity, a home solar loan era. In a future article, I'll discuss whether you should get a solar loan or a solar lease, but in the meantime, below is an infographic from Mosaic on "The Shift."
*Full Disclosure: I own stock in SunPower.