Sun for rent

State hopes affordable leases will make panels an electricity option for more homeowners

By Beth Daley
Globe Staff / May 24, 2009
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It's an old energy problem with a new solution: After decades of facing prohibitively high costs to install solar panels, Massachusetts residents will be able to lease the panels for a tiny fraction of their upfront cost.

Instead of paying $25,000 or more to buy solar panels, homeowners will have to shell out only about $1,000 to install the energy collecting devices on roofs. The companies involved in the leases say most homeowners will be able to recoup the initial cost within seven years through electricity savings - and then save money on future bills by locking in the rate they pay for the electricity generated by the leased panels.

The long-term leases - similar to how residents might contract for cable TV service - are now being offered through a private company, which will take advantage of federal and state subsidies to help lower costs.

"It's great from a green perspective but also from a straight economic argument," said Eric Friedman, a Newton homeowner and state environmental employee who just signed up to lease solar panels.

Governor Deval Patrick is hoping "solar as a service" will help the state reach an ambitious goal of getting 250 megawatts of solar power by 2017. Today, the state has 9.7 megawatts.

Unlike the sprawling Southwest and other sunny places, which can host giant solar parks to generate electricity, the crowded Bay State wants to build up its solar network on the rooftops of urban triple-deckers, big box stores, and suburban subdivisions.

Commercial buildings across the country have been able to finance solar panel lease deals in re cent years, but homeowners were often left out. The costs associated with financing such small projects just didn't make sense to banks.

But the available subsidies - and the high price of electricity here - make it possible for private companies to offer the lower-price option of leasing while still turning a profit.

A company called SunRun Inc., which has done similar business in California and Arizona, is the first company to enter the Massachusetts solar lease market for homes. It owns the solar panels and partners with local solar installers - in Massachusetts, Alteris Renewables and groSolar.

Here's how the program works: A homeowner calls one of the companies to assess the potential for solar at the home and install panels. A one-time, upfront fee of about $1,000 is charged, and the homeowner also is given an 18-year locked-in rate for energy the panels generate. That rate will be comparable to, or less than, what utilities charge, according to the companies involved. If the homeowner uses more energy than the panels produce, they then pay the utility its rate for the electricity.

A typical home getting about 62 percent of its electricity from solar might pay around $77 a month for the solar electricity - and maybe $46 more for electricity from the utility for a total of around $133, according to Alteris Renewables. If they were getting all their electricity from the utility, it might be $151, Alteris estimates.

"We did a lot of market research, and not surprisingly we learned the upfront cost [for solar panels] is too high for people," said Lynn Jurich, cofounder and president of SunRun.

Homeowners who sign up for the leasing program do not have to worry about upkeep of the solar panels: If a panel breaks, it is replaced at no extra charge. They are also freed of other details, such as tying the panels in to the electric grid or applying for the rebates and subsidies. The company - not the homeowner - gets the state and federal subsidies because it owns the panels.

The state subsidy program that helps make Massachusetts attractive territory for such lease arrangements is called Commonwealth Solar. It is offering $68 million in rebates over four years to residents, owners of commercial buildings, and communities. It gives back an average of 40 percent of the cost of solar panels to the purchaser.

Add to that a new federal tax break of up to 30 percent of the cost of the project - the previous federal incentive maxed out at $2,000 - and the price of solar comes down enough to be competitive with traditional utilities in Massachusetts.

The Bay State is not expected to have such generous rebates for long. Already, 716 Commonwealth Solar rebates have been awarded, amounting to more than $25.5 million, according to state officials. Of that, 587 are homes, 113 are commercial or industrial buildings, and 16 are public entities.

But the state hopes the flood of money now - along with other efforts to bring installers and solar manufacturers to the Bay State - will cement the industry in Massachusetts enough to drive competition and lower prices so such generous rebates are not as necessary in the future.

Without the subsidies, SunRun wouldn't be in Massachusetts, because solar is still more expensive than electricity from fossil fuels.

"The goal is to get enough competition to bring down that cost," said Ian Bowles, state secretary of energy and environmental affairs. He said other measures are helping, such as making it easier for homeowners to sell renewable energy they generate back into the grid, allowing utilities to own solar installations, and requiring long-term purchasing contracts with utilities to purchase renewable energy.

The state is also examining making solar a requirement for utilities and other electricity suppliers in the future.

Michael Durand, a spokesman for NStar, a large Massachusetts utility, said the company was supportive of any effort to help reach Patrick's solar goal. "Having a variety of options will be helpful in meeting that goal," he said.

For homeowners, there are some caveats. One, you need sun. The best place to put solar panels is on south-facing roofs that get direct sunlight. And rebates, final costs, and savings can vary based on energy use, how much sunlight you get, and competing electric rates.

One downside might be that panels' cost may come down in the future. Homeowners who move can transfer their solar agreement to the new homeowner, buy out the contract, or purchase the panels.

Still, state officials and solar advocates say the $1,000 or so investment makes sense even in a recession.

"Solar has a guaranteed return," said Adam Browning executive director of the San Francisco based Vote Solar Initiative, a nonprofit that works with states to improve policies to grow solar. "You tell me where else you can get this rate of return in this economic environment."

For Friedman, who is renovating his home as green as he can, his decision to have Alteris install solar panels made sense. Even with all the rebates and other incentives he is eligible for, it would have cost him around $11,500 to buy the panels. His $1,000 investment is expected to be paid back through lower electricity bills within four years.

Beth Daley can be reached at