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Solar power purchase agreements, aka let someone else deal with the paperwork for you

The views expressed are those of the author and are not necessarily those of Scientific American.

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Editor’s Note: Scientific American‘s George Musser will be chronicling his experiences installing solar panels and taking other steps to save energy in 60-Second Solar. Read his introduction here and see all posts here.

At the rate things are going, the sun is going to become a red giant and engulf the inner planets before we ever get our solar panels. It took us months to navigate the government and utility bureaucracies, we’re now waiting for the installers to work through their backlog, and we’re worried about the installation glitches that other solar bloggers have reported. What I wouldn’t have given for a power purchase agreement (PPA), whereby an outside company navigates the bureaucracy and installs the panels for you, in return for collecting a share of the public subsidies.

Today, for example, Borrego Solar announced today a new program of PPAs for companies and government agencies in California, Massachusetts, and my own state of New Jersey. Such agreements typically are three-way deals among someone with a roof, someone with the panels, and someone with the cash. Borrego’s innovation, says CEO Mike Hall, is to prearrange $30 million of financing, enough for about 20 megawatts of panels. Because the investor has in effect signed off in advance, the three-way deal becomes a two-way deal, so setting up a PPA should be even simpler than before.

Retail stores, school districts, and other institutions that go this route are making a tradeoff. They give up the subsidies, but they don’t need to float the cost of the system, they don’t need to hire extra people to manage it, they typically get a discount of about 1 cent per kW-hr on their electric bills, and their electricity rate is protected against future price increases.

So why can’t I get a PPA, too? In some states, homeowners can. Sun Run offers them in California, Arizona, Massachusetts. But not in N.J. I’ve just discovered a new company, AD Energy, that offers a leasing arrangement similar to what SolarCity provides out West. That would have helped somewhat, and I wish they’d been around in February when I started this whole process. I console myself that at least it’s easier to buy a kidney here.

Hall says one reason for the neglect is N.J.’s complicated system of subsidies, which relies heavily on tradable certificates of fluctuating value. Small projects lack the economies of scale that would make the uncertainties and transactions costs worth bearing. “There’s too much risk in the system,” says Borrego’s man on the ground in N.J., Alex Sarly. Consequently, Borrego won’t even touch projects smaller than 200 kW. Sarly says the state would be better off with a more straightforward, predictable subsidy such as a feed-in tariff.

To salve my wounded pride, Hall told me that PPAs don’t make as much financial sense for homeowners as they do for bigger electricity customers, anyway. Folks with good enough credit to qualify for a PPA might as well just refinance their mortgages and pay for the solar panels themselves or, as I’ve done, rely on a utility-financed loan program. I appreciate the sentiment, but I still think someone has got to do for solar installation what Apple did for the cellphone: make it so simple that even an astrophysicist could do it.

Update (August 3rd): One person remarked in the comments field that solar power seems to be less about science than about collecting subsidies. There’s some truth in that; I hadn’t expected my attention to be consumed by paperwork rather than technology. But as I discussed in an earlier post, these subsidies are rooted in science: they promote an important emerging technology and price in the external benefits that renewable energy sources provide. Moreover, the energy industry is shot-through with subsidies; the solar subsidies are just more visible.

Borrego Solar project at the University of California, San Diego


Rights & Permissions

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  1. 1. Soccerdad 10:38 am 08/3/2009

    The science behind solar energy seems not to be focused on collecting the sun’s rays but rather in collecting the taxpayer’s dollars. Sustainable? Not hardly.

    Link to this
  2. 2. charrisgw 12:54 pm 08/3/2009

    I like this business model. Good thinking.

    Link to this
  3. 3. agenthucky 3:37 pm 08/3/2009

    This isn’t science, it is economics. Because someone is trying to middleman the effort makes the science of photovoltaics illegit? I smell bias…

    Link to this
  4. 4. daybreak95 3:48 pm 08/3/2009

    Hey Soccerdad,
    How much tax subsidies do you think go to big oil?

    Link to this
  5. 5. ozarkerbob 9:35 am 08/4/2009

    Gee, I didn’t have any problems with the installation of my 5.4 kW system other than a few months delay because of backordered panels. Once they arrived my installer came worked with me to set it up. A couple of days later the power company came and "blessed the system", and I haven’t had an electric bill since.

    Link to this
  6. 6. Erica David 5:27 pm 04/1/2010

    Another company that offers a home solar lease in CA is I’m leasing panels from them and highly recommend it–they’re installing my panels for free (you read that right) and then I pay monthly what I used to pay my utility for electricity.

    Link to this
  7. 7. Erica David 10:59 pm 04/1/2010

    Another company that offers a home solar lease in CA is I’m leasing panels from them and highly recommend it–they’re installing my panels for free (you read that right) and then I pay monthly what I used to pay my utility for electricity.

    Link to this

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