Why is solar power still a pay up-front system?


Renting Solar Energy
Solar panels no longer have to be the homeowner's responsibility.
Solar panels no longer have to be the homeowner's responsibility.
Robert Nickelsberg/Getty Images

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Instead of putting up $30,000 or more to buy solar panels, why not just rent them? A few companies are offering to install and maintain solar panels in exchange for a monthly fee. The idea is based on the purchase power agreements used by businesses. In this type of agreement, the company owns and maintains the solar panels and sells the electricity back to the homeowner. At the end of the rental period, homeowners can extend their lease, buy the system, or have it removed. The arrangement protects homeowners from rising fuel prices because their monthly cost is locked-in for several years. Because the rental company owns the panels, it gets to take advantage of government rebates and tax breaks instead of the homeowner.

How exactly the rental agreement works depends on the company involved. SolarCity, which serves residents of California, Oregon and Arizona, charges $1,000 to $3,000 (depending on the size of the system) to install the solar panels, and then charges the homeowner a monthly fee. For example, if a homeowner has a monthly electricity bill of $250, he or she might pay SolarCity $125 a month to rent the solar panels, but the homeowner's electricity costs would drop to $100. All in all, he or she would be saving $25 a month by renting solar panels [source: SolarCity].

­Sun Run, a San Francisco-based company, has a couple of different plans. With the Total Solar plan, homeowners pay a big up-front cost, but they don't have any monthly electric bills. The company's Power Plan charges customers $2,000 to $8,000 up front, but then they have to pay a monthly power bill.

Citizenre, which is based in Delaware, eliminates the opening investment entirely. The only fee it charges is a $500 security deposit. For the duration of the contract, which can be 1, 5 or 25 years, customers just pay a fee per kilowatt-hour of energy they use.

Other companies are also in the business of renting solar energy. These include freEner-g in Minnesota, CT Solar Lease in Connecticut and Recurrent Energy in California.

­Meanwhile, a few companies are developing new technologies that should bring the price of solar panel ownership down for consumers. Companies such as Akeena Solar are streamlining systems to make them easier to install. SUNRGI, which is based in the Silicon Valley, has developed much smaller solar panel technology that it says can produce as much electricity as regular-sized panels.

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