I Can't See How Leasing Doesn't Beat Purchasing, Can You?

[mikegoldnj]

Wow. I've never heard of number like yours. NJ must have some serious rebates going, or much lower panel and labor costs. In California, we're at around 2.50-3.00/watt for a 20 year leased system; you are at just over 60 cents (!) even though your installed purchase price is comparable to California prices.

New Jersey's rebate program ended last fall.

[Franz]

Our system was installed a few months ago, 9.69Kw system (38 Mitsubishi 255 PV-MLU255HC modules, 2 Invertors (1 SB6000 and 1 SB3000) the installed cost of this system was ~47,000 and was installed by a local contractor with whom we have previously done business (with their electrical contracting division). We paid $6,000 up front to Ad-Energy, we have NO further payments to make.... Our break even should be 2.5-3 years.

Wow. I've never heard of number like yours. NJ must have some serious rebates going, or much lower panel and labor costs. In California, we're at around 2.50-3.00/watt for a 20 year leased system; you are at just over 60 cents (!) even though your installed purchase price is comparable to California prices.

[mikegoldnj]

Its still a lease. the numbers and percentages get moved around to show different monthly payments. The end result is the contractor wants 30% and the bank wants its high interest. Lease agreements may work for a small group of people, this small group is typically sole proprietors and corprate filing 1040's that get the real benefits of leasing, as the interest is a write off.

The way solar was suppose to work was to buy a system per watt until the investment could pay itself off in under 5 years or BETTER. If not the ROI is not worth it because when you look at the reports of economic inflation, the rising cost of energy. In order to pay out for the energy you are still paying a locked in return on bank interest. I don't get why people do this. In california alone the rise in electrical utilities spikes 6% on average. In 5 years alone that's 30% more than what your initial return started off from the time of energizing the system. The united states is averaged to to spike 25% in energy cost over the next 10 years.

Leases do not explain to the consumer, The rising costs of energy when you get into an agreement. They just explain CEC AC wghich doesn't really mean anything because that number depriciates annually as the cost of energy goes up annually. Couple that with your interest payments, and you will never be able to buy your lease out on an affordable level. They are put in place so you will continually make payments, the bar is set very low.

What don't you understand about "Prepaid Lease?" There are no continuous payments.

I have a 20 year lease with Ad-Energy. Our system was installed a few months ago, 9.69Kw system (38 Mitsubishi 255 PV-MLU255HC modules, 2 Invertors (1 SB6000 and 1 SB3000) the installed cost of this system was ~47,000 and was installed by a local contractor with whom we have previously done business (with their electrical contracting division). We paid $6,000 up front to Ad-Energy, we have NO further payments to make. They are responsible for all system maintenance and insurance.

Ad-Energy gets the benefits of any federal tax credits and they own and have contracted to sell the SRECs to JCPL. We get all power produced by the system and all benefits of the net-metering. NO FURTHER PAYMENTS FOR THE TERM OF THE LEASE.

Our break even should be 2.5-3 years.

[KRenn]

[QUOTE=vinniethePVtech;34344]

And exactly what do you think the leasing accomplishes? Read that line back to yourself a few times. I kind of shake my head at the people who think that government tax incentives should guarantee them a living [QUOTE/]

The leasing allows a screwed up structure that goes against the price per watt.
You know why tax credits were really designed? To stop a surplus that would inevitably reduce cost any way. Thank your friends at PG&E that lobbied for the tax incentives. Tax incentives were designed to keep things competitive, keep the circulation of money flowing, keep the financial environment balanced. That isn't happening when consumers walk out with a system lower than wholesale pricing without owning the equity to it.
Utilities want the surplus to flow, to keep prices in solar high. When the tax credits expire pv will reduce rapidly because the inventory will be high, and sales will slow.
All this did was start a financial monster that allows the banks to get rich, while the government assumes more debt.
Then inevitably prices will become so low that almost everyone could own solar, small contractors could be working. As long as the tax credits are in play the utility companies and banks win. Our government will assume more debt and the hungry contractor will continue to starve.

Here's the flaw in your argument. The "hungry contractor" wouldn't exist without these tax incentives. The reason why we have too many installers as is, is due to the incentives which were brought about to increase investment in solar. Mission accomplished. Now as these incentives fade away into the distance, we'll still have viable solar installers out there due to the tremendous decrease in the price of solar. The leasing is pretty short-term as well but after all the smoke clears, you'll see a lot of folks go out of business and you'll see a much smaller number of installers who have been time-tested, who have competed and survived and will continue to have fairly steady business, rebates or not.

[vinniethePVtech]

[QUOTE=KRenn;34336]And exactly what do you think the leasing accomplishes? Read that line back to yourself a few times. I kind of shake my head at the people who think that government tax incentives should guarantee them a living [QUOTE/]

The leasing allows a screwed up structure that goes against the price per watt.
You know why tax credits were really designed? To stop a surplus that would inevitably reduce cost any way. Thank your friends at PG&E that lobbied for the tax incentives. Tax incentives were designed to keep things competitive, keep the circulation of money flowing, keep the financial environment balanced. That isn't happening when consumers walk out with a system lower than wholesale pricing without owning the equity to it.
Utilities want the surplus to flow, to keep prices in solar high. When the tax credits expire pv will reduce rapidly because the inventory will be high, and sales will slow.
All this did was start a financial monster that allows the banks to get rich, while the government assumes more debt.
Then inevitably prices will become so low that almost everyone could own solar, small contractors could be working. As long as the tax credits are in play the utility companies and banks win. Our government will assume more debt and the hungry contractor will continue to starve.

[KRenn]

KRenn,

I agree with you on your list of criteria for choosing a designer/installer. But let's take Run on Sun as an example. They fulfill all your criteria easily, inspiring full confidence in customers. But they can't compete on price with leased systems. I would be absolutely delighted for them to be the sub-contractor installing my leased system, but I don't know if that's a business model they are interested in. Should they, with all their expertise, be reduced to the role of hired hands? Or perhaps in larger applications independent companies like them can compete more equally with leases?

All this hand-wringing aside, I can't see the government support for solar lasting more than another few years. After that, the local installers who are really good and really committed, like Run on Sun, will, I hope, have squeaked by and the johnny-come-lately types will have jumped the ship. Could be good for the industry in the long run. In the meantime, as Vinnie just posted, it's really tough on small businesses--and that's where entrepreneurship starts.

Franz

Well price is also key, but nowadays, with the amount of competition in the solar industry, you can get a competitive price, maybe not the cheapest, but a competitive price, a good quality install, a FAST install with a reputable company.


The issue I see with the solar industry is the people who are coming into the business because of the government money on an installer level but they're not innovating or bringing anything new to the table, they're swallowing up the crumbs on the outskirts and then claiming how unfair the industry is. As incentives keep dropping, these companies will go by the wayside and that is just the reality. Not everyone can, or especially, should be a solar installer. The herd does need to be thinned out, on both a manufacturer and integrator level.

[KRenn]

Tax credits were not designed for profiting. It's design was to stimulate a market by allowing people that on average could not afford solar to buy solar and get a return, while stimulating an equal competition amongst contractors and labor force.

And exactly what do you think the leasing accomplishes? Read that line back to yourself a few times. I kind of shake my head at the people who think that government tax incentives should guarantee them a living and keep them competitive as well. Due to the leasing, the market in many areas has been stimulated beyond what was even previously considered optimistic. People are putting more solar systems up on their roof's than at anytime previously.


The only ones who have a problem with it are the smaller dealers who aren't leasing, are buying equipment piecemeal and demanding that the industry is forced to remain "competitive....ie....higher prices for home-owners, just so they can keep their doors open a few months longer in a futile effort to pull a few more crumbs from the pie.

This isn't creating equal opportunity nore is it fair competition. For those entrepreneurs trying to start a business with no credit facilities will run deficits not profits in this economy. While larger contractors exploit cheap labor, and utilize credit facilities have control of the lease market.
The only companies offering these leases are contractors with multi million dollar bonding and insurance. Not small time start up contractors that have 12,500 bonds and 2 million in insurance coverage.

So its advantageous to the home-owner to have someone that is under-insured working on their rooftop? The insurance requirements are hardly monumental and if someone can't reach those basic minimums, then they simply don't belong, period.

Really it's a serious disadvantage. I could become a sunpower authorized dealer but then I wouldnt be my own self controlled business, I would be controlled by sunpowers financing terms that would allow me to gross smaller margins, and not allow my company to thrive, but rather stay hungry. That's how bad the tax credits screwed things up.

You're free to offer leasing programs if you can accept the terms set forth. For many of these leasing companies, they want their partners to have high levels of insurance so that they're protected in case the contractor screws up. 3-5 million across the board isn't obscene by any definition.

[Franz]

KRenn,

I agree with you on your list of criteria for choosing a designer/installer. But let's take Run on Sun as an example. They fulfill all your criteria easily, inspiring full confidence in customers. But they can't compete on price with leased systems. I would be absolutely delighted for them to be the sub-contractor installing my leased system, but I don't know if that's a business model they are interested in. Should they, with all their expertise, be reduced to the role of hired hands? Or perhaps in larger applications independent companies like them can compete more equally with leases?

All this hand-wringing aside, I can't see the government support for solar lasting more than another few years. After that, the local installers who are really good and really committed, like Run on Sun, will, I hope, have squeaked by and the johnny-come-lately types will have jumped the ship. Could be good for the industry in the long run. In the meantime, as Vinnie just posted, it's really tough on small businesses--and that's where entrepreneurship starts.

Franz

[vinniethePVtech]

I don't feel guilty at all. I'm not even sure that the tax credit was intended to go to individuals - more likely, it was intended to ramp up the demand for and installation of renewable energy systems like PV in this country using American workers and hopefully helping to get a fledgling industry off the ground. For my leased system, I opted not to go with one of the big boys like Sungevity but rather a local PV firm. Granted, they are a Sunpower Elite dealer so obviously they offered me a great deal on the Sunpower lease which had just come out this summer. But before that, they didn't whine about not having a lease to compete with the Solarcitys of the world. They developed one of their own. I suspect now that most of their customers will go with the Sunpower lease but at least they didn't sit around complaining about the unfairness of the business.

Tax credits were not designed for profiting. It's design was to stimulate a market by allowing people that on average could not afford solar to buy solar and get a return, while stimulating an equal competition amongst contractors and labor force.
This isn't creating equal opportunity nore is it fair competition. For those entrepreneurs trying to start a business with no credit facilities will run deficits not profits in this economy. While larger contractors exploit cheap labor, and utilize credit facilities have control of the lease market.
The only companies offering these leases are contractors with multi million dollar bonding and insurance. Not small time start up contractors that have 12,500 bonds and 2 million in insurance coverage.
Really it's a serious disadvantage. I could become a sunpower authorized dealer but then I wouldnt be my own self controlled business, I would be controlled by sunpowers financing terms that would allow me to gross smaller margins, and not allow my company to thrive, but rather stay hungry. That's how bad the tax credits screwed things up.

[KRenn]

Well for you all to think you are getting something for almost nothing enjoy it while last. Republicans are shooting down tax credit extensions exactly for this reason.
Only a select few contractors have have access to these leases with an extensive credit line.
It actually puts local contractors out of business and lowers profit margins even for authorized dealers. While if the extension passed it may put 14,000 people to work next year, it will put just as many entrepenueral solar contractors out of business that can't get access to these leases. I'll be glad when these extensions die.

I really have no problem with that. There's way too many "installers" out there as is. You don't have to look at nationwide companies even, every market has competent, decent-sized installers that can offer great value to their customers. My thoughts are that if a certain installer can't compete on price, perhaps its time to look at focusing your business elsewhere. Everyone and their uncle all of a sudden decided that they could install solar and realistically there are some pretty incompetent companies out there, big and small.

There are dealers telling people that installs will take 3 months but them installing them in 6 months or longer. There are those who are cutting corners when working on rooftops, or using blemished equipment, working without insurance...etc. All of the sudden every electrical contractor,plumber, A/C repairman think they can run a solar company, along with all the other assorted washout's from the real estate industry. If you ask me, the industry could use a few less installers.



My thoughts on selecting an installer is as follows


-Very little to no money required up-front. Be aware of anyone that demands 50% right off the bat.

-A variety of financing options

-Installs guaranteed within a certain period of time,backed by some sort of action. Anyone can say "oh yeah, it'll be up in a few months..", the question the customer should ask is, what happens if it isn't "up in a few months?" There should be some sort of financial default on the dealer's fault for underestimating their install date. For example if they say 90 days, something I've seen dealers do as a guarantee is a lump sum payment of $500 if its not up in 120, $1000 if its not up in 150 and $2000 if its not up in 180 with certain restrictions included.

-No sub-contractor's. Too many solar companies that work as sales entities and then turn around and sub-contract their work to someone else, whether for the actual install or the roofing aspect. That puts the customer in a tough bind if they have problems down the road and neither the dealer nor the sub want to take responsibility for it.

-In-house engineering capacity and background.

[Sunking]

it was intended to ramp up the demand for and installation of renewable energy systems like PV in this country using American workers and hopefully helping to get a fledgling industry off the ground.

Good intentions went way wrong. 80% of the money goes to foreign countries mainly China on borrowed money from China. Of the 20% that stays here half of it is short term contract labor to undocumented workers who pay no taxes. The energy generated by home RE systems are not taxed costing us more money in lost revenue. In a nutshell we are financing our own destruction.

[Ian S]

Gang,

I agree about Vinnie's rhetorical strategies. Nice list there, cebury!

But this is a shame, because Vinnie's last post actually makes some trenchant critiques of the current situation. For a couple of reasons, I feel kind of guilty about the decision I've made to go with a lease. First, it capitalizes (literally) on a federal tax credit intended to go to individuals but which is being co-opted by banks. (I realize that the credit is, in a way, going to me, since it is subsidizing the low lease payment, but this is not what the lawmakers intended, I think.) Second, it is part of a new financial strategy that is threatening the livelihood of small solar designer/installers. I don't like that, though this is the way the market works. Adapt or go extinct.

I really liked Jim Jenal, the president of Run on Sun, the local designer/installer with the great blog. He came to my house for a site visit with his chief installer, another principal of the company, both of them NABCEP certified installers. I have absolute confidence in the system they would have installed. But it would be almost exactly the same size as the one I'm going to lease and would have cost me almost exactly twice the price after all rebates and credits, plus I would be on the hook for monitoring, maintenance, and insurance. If my situation is typical, then Vinnie is right that these tax credits may put thousands of independent small solar firms out business. Including ones founded, like Run on Sun, by lawyers who decided to go straight and move into solar design. That is a terrible shame, isn't it? Or am I too soft-hearted?

Franz

I don't feel guilty at all. I'm not even sure that the tax credit was intended to go to individuals - more likely, it was intended to ramp up the demand for and installation of renewable energy systems like PV in this country using American workers and hopefully helping to get a fledgling industry off the ground. For my leased system, I opted not to go with one of the big boys like Sungevity but rather a local PV firm. Granted, they are a Sunpower Elite dealer so obviously they offered me a great deal on the Sunpower lease which had just come out this summer. But before that, they didn't whine about not having a lease to compete with the Solarcitys of the world. They developed one of their own. I suspect now that most of their customers will go with the Sunpower lease but at least they didn't sit around complaining about the unfairness of the business.

[Franz]

Gang,

I agree about Vinnie's rhetorical strategies. Nice list there, cebury!

But this is a shame, because Vinnie's last post actually makes some trenchant critiques of the current situation. For a couple of reasons, I feel kind of guilty about the decision I've made to go with a lease. First, it capitalizes (literally) on a federal tax credit intended to go to individuals but which is being co-opted by banks. (I realize that the credit is, in a way, going to me, since it is subsidizing the low lease payment, but this is not what the lawmakers intended, I think.) Second, it is part of a new financial strategy that is threatening the livelihood of small solar designer/installers. I don't like that, though this is the way the market works. Adapt or go extinct.

I really liked Jim Jenal, the president of Run on Sun, the local designer/installer with the great blog. He came to my house for a site visit with his chief installer, another principal of the company, both of them NABCEP certified installers. I have absolute confidence in the system they would have installed. But it would be almost exactly the same size as the one I'm going to lease and would have cost me almost exactly twice the price after all rebates and credits, plus I would be on the hook for monitoring, maintenance, and insurance. If my situation is typical, then Vinnie is right that these tax credits may put thousands of independent small solar firms out business. Including ones founded, like Run on Sun, by lawyers who decided to go straight and move into solar design. That is a terrible shame, isn't it? Or am I too soft-hearted?

Franz

[cebury]

Well for you all to think you are getting something for almost nothing enjoy it while last. Republicans are shooting down tax credit extensions exactly for this reason.
Only a select few contractors have have access to these leases with an extensive credit line.
It actually puts local contractors out of business and lowers profit margins even for authorized dealers. While if the extension passed it may put 14,000 people to work next year, it will put just as many entrepenueral solar contractors out of business that can't get access to these leases. I'll be glad when these extensions die.

Classic Vinnie-ness (Franz quote) right there. Post with several or more of the following: arrogance, call people foolish, speak as if you're an expert, include numbers and % in your claim. If you're trapped in "logical corner" or your argument becomes weak: never admit you're wrong, capitalize on any (irrelevant) weak spot in a detractors post, avoid the main topic at hand, and shift focus to a related topic that is either obviously true or that buys you support from a polarizing topic. This could be quite a case study in (forum) debate skills or A.P. Behavior.

[vinniethePVtech]

Well for you all to think you are getting something for almost nothing enjoy it while last. Republicans are shooting down tax credit extensions exactly for this reason.
Only a select few contractors have have access to these leases with an extensive credit line.
It actually puts local contractors out of business and lowers profit margins even for authorized dealers. While if the extension passed it may put 14,000 people to work next year, it will put just as many entrepenueral solar contractors out of business that can't get access to these leases. I'll be glad when these extensions die.