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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

Journal Article · · Environmental Research Letters
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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, 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.

Research Organization:
National Renewable Energy Lab. (NREL), Golden, CO (United States)
Sponsoring Organization:
USDOE Office of Energy Efficiency and Renewable Energy (EERE)
Grant/Contract Number:
AC36-08GO28308
OSTI ID:
1222436
Alternate ID(s):
OSTI ID: 1220631
Report Number(s):
NREL/JA-6A20-63000
Journal Information:
Environmental Research Letters, Journal Name: Environmental Research Letters Vol. 10 Journal Issue: 2; ISSN 1748-9326
Publisher:
IOP PublishingCopyright Statement
Country of Publication:
United Kingdom
Language:
English
Citation Metrics:
Cited by: 32 works
Citation information provided by
Web of Science

References (7)

Leasing Versus Borrowing: Evaluating Alternative Forms of Consumer Credit journal December 1989
Consumer discount rates implied by purchases of energy-efficient refrigerators journal December 1983
Discount rates in consumers' energy-related decisions: A review of the literature journal December 1985
Evaluating the impact of third-party price reporting and other drivers on residential photovoltaic price estimates journal November 2013
Photovoltaic Degradation Rates-an Analytical Review: Photovoltaic degradation rates journal October 2011
Energy conservation investment journal June 1993
To Lease or to Buy? A Structural Model of a Consumer's Vehicle and Contract Choice Decisions journal August 2007

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Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
residential solar
third-party ownership
lease cost