SOLAR TODAY - September/October 2010

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lease will be more expensive than the utility grid electricity, should there be a sharp decline in utility electricity rates. According to an informal poll on the direction of future electricity rates, most customers assume fixed-rate solar is a better long-term option and gladly accept the associated risks over buying utility grid power.

Regulation of
Third-Party Ownership

As mentioned, in several states, utilities
and regulators have questioned whether PPA
providers fall within the definition of a public
utility. Most states continue to heavily regu-
late electric utilities in exchange for the local
monopoly the utilities enjoy. Some of those
utilities look unfavorably at new entities, such
as PPA providers, that offer customers a source
of electricity other than monopoly service. The
utilities argue that PPA providers are selling
imagine a lease of solar equipment as a direct
sale of electricity, making it harder to envi-
sion a lease provider (a lessor) as a utility. The
utility commission in Florida has found that
leases were permissible even though PPAs
weren’t, for example. (See “A Tale of Two
Commissions,” page 46.)

electricity and, therefore, should be regulated as public utilities. PPA providers look to the same laws and argue that they are not serving the general public and are therefore not utilities. The arguments are complex and turn on arcane interpretations of public utility statutes often written almost a century ago.

The states that have addressed the third-party argument are primarily the same states that have implemented policies to support a vibrant solar market, including solid net-metering rules and interconnection procedures and establishment of well-funded solar incentive programs. Obviously, these states are where regulation of third-party providers is ripe for decision.

In the 17 states shown on the map on page 45, leases have been discussed in rulemakings and are generally allowed. While some parties have argued that third-party ownership via a lease should be prohibited/regulated for the same reasons that apply to PPAs, it is hard to

Other No-Money-Down Options

Data from California indicate 14 percent of residential solar generation is under third-party ownership, while more than 60 percent of non-residential solar capacity is third-party-owned. While that’s an impressive showing, it is worth asking why third-party ownership isn’t used more.

Quite simply, there are other no-money-down options available that make direct ownership an attractive option for significant numbers of people. Many homeowners can still get loans and use the 30 percent tax credit, making this option as economical as a lease or PPA. At present, businesses can use the Treasury grant program to realize much of the tax benefits that third-party ownership brings. Module manufacturers are beginning to offer financing to help customers install arrays with no up-front cost. Property Assessed Clean Energy (PACE) financing, a recent major innovation, is poised to assist property owners in greening their electricity by financing solar arrays through their property taxes. Unfortunately, PACE programs have been imperiled by concerns at Fannie Mae and Freddie Mac that, in the event of homeowner insolvency, PACE loans would be paid first, making mortgages more risky.

Determining whether you should buy your own solar system or use third-party ownership requires a sharp pencil. Rules in your state may hinder third-party ownership, but where it is allowed, it is worth considering. Work with an installer to figure out how much it would cost you over time if you owed a system outright, including tax benefits and maintenance. Then ask your installer about third-party ownership options or inquire from a third-party provider directly for a quote.