SolarCity Leases Solar Power Systems to Homeowners

Many homeowners would like to make their homes more energy efficient and environmentally friendly, but the upgrades to do so—though many end up saving homeowners money in the …

Many homeowners would like to make their homes more energy efficient and environmentally friendly, but the upgrades to do so—though many end up saving homeowners money in the long run—often require incurring a large up-front cost. Purchasing and installing a typical residential solar power system can cost upwards of $30,000 and a return on the investment—in a purely financial sense—won’t happen for several years at the least. Thus, especially in this economic climate, installing solar power and green improvements are out of reach for many homeowners.

Enter SolarLease, a new program from SolarCity, a California-based solar power company. This program allows homeowners to rent solar panels rather than buy them. For a small monthly payment rather than a large one-time expense, homeowners can get solar panels installed on their home. To qualify for the SolarLease program, homeowners must have a credit score of 720 or greater.

“For a home with a monthly electricity bill of $200 we would recommend installing a 16 panel solar system,” according to the SolarCity website. “This system will generate enough electricity to offset what you are currently paying to the utility company from $200 down to $75 per month. Your monthly SolarLease payment would be $100, so you could actually save $25 per month from day one.”

SolarCity handles all the installation of the solar panels, as well as any repairs. They also guarantee a minimum level of power production. “Of course,” according to Fortune, “the house needs to be well-suited for solar, preferably with a large south-facing roof that receives sunlight unblocked by trees or chimneys.” SolarCity employs a solar power system monitor that they call SolarGuard. SolarGuard tracks the performance of every system, and should a homeowner’s system begin to underperform, SolarCity will send a technician out to repair the system for free.

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SolarGuard also comes through for the data-minded homeowner who wants to know exactly how their system is performing. “With SolarGuard, you can also access your personal web page to watch your system’s performance over time and how it is affected by season and weather,” according to SolarCity’s website. “We’ll show you the cumulative environmental and financial benefits of using solar energy.”

When the lease is up, there are four options for homeowners. “You can upgrade to a new system with the latest solar technology. You can also extend your lease, buy the system, or simply have the panels removed for free,” according to SolarCity’s website. Should homeowners decide to sell their home before the end of the lease, they can either transfer the lease to the buyers or buy out the remainder of the lease themselves.

So the SolarLease program provides a lot of rewards for homeowners. But how does SolarCity provide the service?

“For SolarCity, the leasing model works because of the various solar-power subsidies,” according to Fortune. “Because it owns the solar panels it installs—SolarCity has a financing deal with Morgan Stanley (MS, Fortune 500) that, so far, has withstood the current credit crisis—SolarCity pockets the federal solar-power tax credit, any state rebates or tax credits, as well as any ‘renewable energy credits’ which can be resold to utilities.”

In addition, the bailout bill that was recently signed into law sweetened the 2005 Energy Act. Previously, under that act, those who purchased solar panels received a tax credit of 30 percent of the purchase price of the panels up to a maximum of $2,000. But the bailout bill both renewed the act and eliminated the $2,000 cap. “In other words, starting next year, SolarCity will get a $12,000 federal tax credit for every $40,000 solar system it installs,” according to Fortune.

SolarCity, a two-year-old company financed by venture capital, operates in California, Oregon and Arizona; the company installed 1,000 solar power systems last year and expects to install 2,000 this year.

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