Solar lease share set to wane in US

The third-party ownership (TPO) model has transformed the US residential rooftop solar market over the past few years. But the TPO model’s market share has already peaked, and is set to give ground to outright loans.

According to new figures from GTM Research, the TPO model, which often promises no upfront costs and is employed most prominently by SolarCity, will peak this year at 68% of the overall residential market. That compares to just 42% in 2011.

But starting next year, the TPO model’s share will begin falling – sliding to 63% in 2018, GTM predicts.

Taking up the slack will be outright loans for PV systems, as opposed to the leases and power-purchase agreements typical within the TPO model. As solar becomes increasingly mainstream, and more lenders grow comfortable with it, obtaining a loan for a rooftop PV system will become easier and cheaper. 

Many analysts believe that taking out a loan for a PV system, and owning it outright, will represent a better deal for many consumers than the TPO model.

The shift holds important implications for the market at large and for solar companies, industry sources say.

In contrast to slick, well-funded TPO operators like SolarCity, the greater availability of solar loans will benefit smaller local installers, says Tony Clifford, chief executive of Standard Solar.

“Local installers typically rely on their customers to finance their own systems,” said Clifford, speaking at this week’s PV America conference. That means no-upfront-cost options from TPO companies are compelling.

“But as banks and other traditional sources of consumer finance become more familiar with solar, the options available to the homeowner are going to continue to improve,” Clifford says.

“Over the next few years I expect that local banks, credit unions, finance companies and others will all be offering some sort of solar finance products to their customers.”

A handful of TPO players have already branched out by embracing the loans model, and their number is growing. Only last week SunPower announced a $200m loan programme with Admirals Bank for its residential rooftop business, offering homeowners loans of up to $60,000.

Others, like Mosaic, are now offering solar loans without playing in the TPO space at all.

GTM is careful to point out that the overall size of the TPO market is not set to decline any time in the foreseeable future – just its share within the ever-growing US solar market.

Having announced $9.5bn in financing to date, US solar TPO companies will need to raise another $26bn between 2014-18 to meet expected market demand, GTM predicts.