I wanted to take a moment and relay a well-researched article posted on ThinkProgress, written by Jesse Morris from the reputable Rocky Mountain Institute. He and some of his colleagues have recently delved their resources and research efforts into the concept of renewable energy-backed securities. Why is this worth breaking down for prospective residential PV owners pondering the “buy or sell” question? Because it can offer a solution to the inefficiencies that are often hidden in attractive solar leasing offers. This blog has written about the lure of a zero down payment to ultimately pay less on your electricity bills over 15 years, and contribute to the environment while doing so. But relying on a relatively small number of institutions (equity investors) to finance these PV panels upfront creates a number of issues, namely the perverse incentive of marking up system costs to increase tax equity returns, and the leverage these financing parties have over the transaction that happens before a solar lease is signed.
As I said, we’ve talked about this. But what’s exciting for distributed PV generation (that’s you, homeowners!) is the work folks like RMI are doing to bring a larger pool of investors to the table, which would create more efficient financing schemes and ultimately lower the costs of going solar for homeowners. The short of it works like this: securities are basically a collection of assets that provide steady cash flows, like home mortgages (save the 2008 housing flop we’re still experiencing). The financial institutions that invest in these projects are not looking for quick returns or hidden markups to achieve them. Rather than make good on the investment through tax credits, which must be captured in a relatively short amount of time (less than 5 years, usually), securities like car loans can be repaid over a 10-20 year period. So you can see, solar PV can fit nicely into this scheme, because on any scale, a number of “pooled” facilities can provide a steady, predictable flow of electricity that has monetary value. That’s the kind of leverage and flexibility that homeowners should be excited about, because those whether they lease or buy, the system costs will not reflect the higher costs of capital associated with tax equity investors.
We always encourage the prospective PV system owners out there thinking about putting panels on their roof to ask installers about the costs of capital of their system components when getting a free evaluation, either in leasing offers or outright purchases.