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Title: Exploring the market for third-party-owned residential photovoltaic systems: insights from lease and power-purchase agreement contract structures and costs in California

We report that over the past several years, third-party-ownership (TPO) structures for residential photovoltaic (PV) systems have become the predominant ownership model in the US residential market. Under a TPO contract, the PV system host typically makes payments to the third-party owner of the system. Anecdotal evidence suggests that the total TPO contract payments made by the customer can differ significantly from payments in which the system host directly purchases the system. Furthermore, payments can vary depending on TPO contract structure. To date, a paucity of data on TPO contracts has precluded studies evaluating trends in TPO contract cost. This study relies on a sample of 1113 contracts for residential PV systems installed in 2010–2012 under the California Solar Initiative to evaluate how the timing of payments under a TPO contract impacts the ultimate cost of the system to the customer. Furthermore, we evaluate how the total cost of TPO systems to customers has changed through time, and the degree to which contract costs have tracked trends in the installed costs of a PV system. We find that the structure of the contract and the timing of the payments have financial implications for the customer: (1) power-purchase contracts, on average,more » cost more than leases, (2) no-money-down contracts are more costly than prepaid contracts, assuming a customer's discount rate is lower than 17% and (3) contracts that include escalator clauses cost more, for both power-purchase agreements and leases, at most plausible discount rates. Additionally, all contract costs exhibit a wide range, and do not parallel trends in installed costs over time.« less
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  1. National Renewable Energy Lab. (NREL), Golden, CO (United States)
Publication Date:
Report Number(s):
Journal ID: ISSN 1748-9326
Grant/Contract Number:
Published Article
Journal Name:
Environmental Research Letters
Additional Journal Information:
Journal Volume: 10; Journal Issue: 2; Related Information: Environmental Research Letters; Journal ID: ISSN 1748-9326
IOP Publishing
Research Org:
National Renewable Energy Lab. (NREL), Golden, CO (United States)
Sponsoring Org:
USDOE Office of Energy Efficiency and Renewable Energy (EERE)
Country of Publication:
United States
29 ENERGY PLANNING, POLICY, AND ECONOMY; residential solar; third-party ownership; lease cost
OSTI Identifier:
Alternate Identifier(s):
OSTI ID: 1220631