US: 2014 to be peak year for solar leasing model, says GTM Research


A report by GTM Research suggests that 2014 could represent the apex of third-party ownership (TPO) for the U.S.’s residential solar industry, peaking at 68% share of the market this year before falling off over the coming years.

The report, titled U.S. Residential Solar Financing: 2014-2018, suggests that the country’s currently buoyant solar lease market will drive residential installations to their highest point yet this year, having already outpaced the overall market by a value of 60% to 41% year-on-year.

However, TPO’s grip on the sector will loosen from 2015 onwards as direct ownership options snaffle a larger share of the market thanks to an increasingly diverse suite of solar loan programs, crowdfunding options and other financing mechanisms, such as property assessed clean energy (PACE). This slow transition will see direct ownership claim 37% of the residential solar market by 2018, says GTM.

"Solar loans are becoming widely available, with many more options to choose from than in the past, and declining system costs are making direct ownership affordable for more homeowners," said Nicole Litvak, the report’s lead author and GTM Research analyst. "As a result, the share of TPO solar has already begun to come down in leading state markets, including Arizona and Massachusetts."

New lease of life

The benefits of TPO solar systems – chiefly rooted in the fact there are no upfront costs for the homeowner – may soon be outweighed by the positives offered by direct ownership, particularly as solar loan options become more widespread. A recent Bloomberg report also highlighted a growing problem some homeowners are facing when trying to sell a property fitted with a leased solar installation, with some would-be buyers deterred by the terms of the contract and unwilling to take it on.

However, with solar leasing leader SolarCity's recent purchase of solar cell producer Silevo making headlines, it would appear that the industry is aware of this impending trend shift and is making concessions to adapt in time. This move to vertical integration by SolarCity follows previous efforts by Sunrun and NRG to widen their own service offering, with both moving into installation and the solar loan market.

"The residential solar financing market remains just as complex as ever," added Litvak. "The recent trend has clearly been toward vertical integration – the SolarCity model – but we expect companies such as Clean Power Finance to retain their pure focus on financing and service for smaller installers."

More widely, GTM Research reports that the overall residential solar PV market in the U.S. is set to enjoy sustained and substantial growth over the coming years, topping 1 GW nationwide before the end of the year. Companies that operate in the TPO sector, therefore, will be required to raise an estimated $26 billion between now and 2018 if they hope to continue to meet demand. Thus far, project funding for the TPO market stands at around $9.5 billion.

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