Distributed Generation (DG) Business Models: Third Party Ownership
Monday, November 19th, 2012, 9:30am- 12:30pm ET/ Streamed Panel Discussion: 7:00am - 9:00am PT / 10:00am - 12:00pm ET / 16:00 - 18:00 (Paris-Frankfurt)
Location: 10 Rockefeller Plaza, 16th Floor, New York, NY 10020
Between the California Solar Initiative (CSI) launch in 2007 and 2011, solar installations in the state grew at an average annual rate of 38.2%1. Its incentives spawned a shift toward third party financing, revolutionizing and galvanizing the residential rooftop market. This can be seen in figures reported by GTM Research that show third party ownership of residential PV systems growing from a 13% share in 2009 to 41% in 2011, making it the fastest growing segment in the residential market. This shift toward third party ownership also correlates heavily with an uptick in the number of median income households installing solar, another testament to its growing appeal.
Many, such as Jonathan Bass from SolarCity and Nat Kreamer from Clean Power Finance, respectively tout the versatility of the ownership model as well as the sizeable benefits to both the installer and home-owners. Third party financing provides month to month energy savings to the homeowner while removing the upfront costs and maintenance risks. Meanwhile, third party owners see, as a result of the Investment Tax Credit (ITC), up to “45% of their capital outlay come back as tax benefit in the first year of the loan” and returns ranging from “the high single digits to the mid-teens” according to Kraemer of Clean Power Finance.
This increasingly popular model, however, can be hampered by legislative uncertainty and high soft costs. The third party ownership PPA model is active in the following states: California, Colorado, Michigan, Nevada, New Jersey, New Mexico, Oregon and Virginia according to NREL. Fortunately, there is legislation that supports third party financing through solar leases in many of the remaining states. Still, according to a report by NREL2 “third-party electricity sales face regulatory and legislative challenges pertain[ing] to whether third-party owners are deemed to act as monopoly utilities, competitive service suppliers (competitive suppliers), or both depending on the degree of retail electricity market deregulation.” In terms of soft costs, the complexity of “roof owner/system financier contract legalities” represents one of the biggest market barriers to third party ownership of residential rooftop systems.
Major developers and institutional lenders are still bullish however. Lynn Jurich, president of SunRun said recently that residential solar was “at the tip of the iceberg in terms of growth…as costs continue to drop and more homeowners realize they can go solar without high upfront payments, adoption will scale exponentially”.
In this meeting, experts will weigh in on innovation in the third party financing space, its applications in non-residential sectors, and ways of eliminating uncertainties and barriers to entry.
- How will the plummeting module prices affect the balance between cash-owned and third party owned installations?
- What are the biggest risks associated with third party ownership of PV?
- How effective has third party ownership been in C&I markets?
- What is the optimal size for a third party owned system (residential vs. commercial)?
- How can securitization enhance third party ownership models?
1Calculated using data from Figure 1 of California Solar Initiative Annual Program Assessment, June 2012
2 Katharine Kollins, Bethany Speer, Karlynn Cory, ‘Solar PV Project Financing: Regulatory and Legislative Challenges for Third-Party PPA System Owners’, February 2010
Ram Akella, Centrosolar, President
Madeleine M.L. Tan, Kaye Scholer, LLP, Partner, Structured Finance and Co-Head of Energy Group
Alison Kling, Sustainable CUNY | NYC Solar America City Initiative, Solar Coordinator
Eli Katz, Chadbourne & Parke, LLP, Partner
David Angel, KeyBanc Capital Markets, Managing Director
AGRION requires an annual subscription fee determined by the number of active employees from your company. More information regarding membership can be found here (packages for startups and non-profits are available upon request).