For years I’ve been snoring at the news of the so-called looming solar revolution. But now SolarCity are on the cusp of changing the way North Americans consume solar power for good. As of approximately March 1, 2015, they will begin offering loans to homeowners allowing them to build solar power systems. This promises to be a coup that would firmly encourage middle class consumers to take action over something they have flirted idealistically with but dithered in vain over since Jimmy Carter’s Presidency in 1976.
Currently rooftop solar deals involve a lease or an agreement to buy power from a local power carrier over a period of time, although the company retains ownership of the panels. Now a SolarCity loan will ultimately allow customers to own their systems, shop around for carriers to deal with as both buyer and seller, the consequence of which would be air-conditioning and heating, etc., that would cost far less than it does now.
SolarCity are way ahead of the financial game. This is because their loans will be offered at 4.5 percent over 30 years. Yet customers won’t need to pay a fixed amount every month, according to Yahoo News. They will only need to pay for the amount of actual power the panels produce. As panels are bound to produce lots more during certain given months, depending, naturally, on where you live and variations in climate, some customers are bound to be able to pay their loans off faster. Naturally then, because solar power is cheaper than power from the electric utility’s grid, each customer’s monthly electricity cost will fall even further.
If the panels produce less, the customer pays less to SolarCity, and, at least in theory, would not have to pay the loan off in full. They will be dependent upon the vicissitudes of nature rather than the mercy of their bank manager. This may sound naïve on SolarCity’s part, but the green corporation, which is based in San Mateo, California, is confident that it can predict the output of the panels over 30 years well enough to ensure their loans loan will be repaid.
These kinds of third-party-type financing schemes have traditionally tended to pop up a red flag to consumer protection agencies and municipal government watchdogs making it difficult for companies like Solar City to operate. As per usual, the legal language on the contracts seems to be willfully confusing and some states already have laws in place that will not allow third-party ownership of solar panels. However, as SolarCity‘s CEO, Lyndon Rive, told Yahoo News in an interview, most customers insist they’d much rather own, yet sign up for a lease, because it has been the only way to purchase a system without very high upfront costs. And the company has better access to financing, because its designers and engineers have already put together the paperwork predicting the performance of panels well. And as SolarCity’s experts travel the country and meet with concerned watchdog groups, the objective is to convince them that the production risk of the system is removed from the customer’s plate and placed in the lap of SolarCity itself.
An equally important factor is the federal tax credit for solar, much encouraged by the Obama administration. With a solar lease, a credit of 30 percent of the cost of the system goes to the solar company or its financiers. For the consumer with an outstanding loan, however, the credit goes to the customer instead to help pay it down.
These no-money-down leases have helped SolarCity become the largest U.S. supplier of rooftop power from coast to coast, according to Bloomberg News. It will begin offering 30-year loans in eight states including New York and New Jersey that are repaid through borrowers’ power bills.