Conventional Rooftop Solar Model
Conventionally, people who wanted solar panels had to cough up tens of thousands of dollars to get them on their rooftops. Most people do not have that kind of cash. So this traditional business model didn’t really work well.
Solar Leasing Model
Then came the solar leasing business model into picture. Solar leasing firms help customers to benefit from rooftop solar systems without the burdens associated with financing, installing, permitting and operating the panels themselves.
Let’s see how a solar leasing business model works.This model usually comprises of four parties.
- A credit-worthy homeowner who isn’t able to pay the upfront costs of a rooftop solar system. Leasing companies generally target customers with high electricity consumption rates so that the margin of savings that can be brought about is high.
- The electric utility that interconnects rooftop solar to the grid.
- A solar leasing company that offers financing, installing and operating the system.
- Investors to finance the system. Solar leasing companies usually partner with a third party (commonly banking enterprises) to fund the projects.
How Does the Leasing Model Work?
Under the solar leasing business model, usually the leasing company installs and maintains the system on the customer’s roof. The homeowner agrees to buy power from the leasing company at a pre-determined rate for a period of around 20-25 years. The rates may come with periodic escalators or maybe fixed in nature. The homeowner requires the right kind of roof and needs to be in a favourable locality. The leasing company would agree to install a system only if these prerequisites are met. At the end of the lease period, the home owner may purchase the system, renew the lease agreement or get the panels removed.
What are the Benefits from the Leasing Model?
Solar leasing companies say that with the leasing models, homeowners can save 10-15% on their electricity bills per year during the leasing period. However, homeowners should keep in mind that their savings are dependent on the price of grid electricity. If the price of grid electricity rises over time, then their savings from leasing agreements.