So this is how the Age of the Solar Lease comes to an end – not with a bang, but with a whimper.
The end came in the fourth quarter of 2016, when only 47% of new residential solar installations were leased or operated under power-purchase agreements (PPAs), according to new research from GTM Research. That’s the first time in six years that the portion of third-party solar had dipped below 50% in the residential sector.
Nicole Litvak, senior solar analyst for GTM, outlined the monumental shift – which received little to no coverage as it was happening – in a blog post today. Though the trend has been noticeable in recent years, 2016 was the inflection point that made the flip complete.
Litvak contends there were two reasons for the shift: SolarCity and California.
First, SolarCity’s acquisition by Tesla has created a new dynamic for the company. Tesla reported that 28% of SolarCity’s fourth-quarter deployments were purchased by the customer, and Litvak speculates the number was even higher in the residential sector.
“Despite SolarCity’s declining market share, the company still accounts for about one-quarter of all residential solar installed,” Litvak wrote. “Any major changes to its strategy will have an impact on the market – and we’re already seeing that impact.”
Second, the decrease in solar leases and PPAs was even starker in California. According to GTM, only 36% of new residential installations. While the state’s small installers have always preferred handling owned systems, the move of some of the national installers like SolarCity, Sunrun and Sungevity to cash deals have accelerated the trend even more quickly.
“California is a shrinking market, but it’s still an extremely influential segment on the national market,” Litvak wrote. “It could be a sign of what’s to come in other major solar states, especially as national installers introduce loans in new markets.”
While there’s no guarantee the flip will continue at its breakneck speed – as Litvak points out, the rise of third-party ownership (TPO) companies like Sunrun, combined with markets that rely heavily on TPOs to grow like Maryland and New Jersey could slow the move – she believes the move to ownership away from leasing and PPAs is inevitable.
“Leasing was a necessary temporary solution that sparked the original growth of residential solar, but the future is cash and loans,” Litvak wrote.
According to the GTM numbers, solar leasing and PPA use peaked in 2014 at 72%.
Update: This article was updated at 4:25 pm EST on 3/06/17 to reflect GTM Research refers to both solar leases and power-purchase agreements (PPAs) under the general heading of “leases”.
This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: email@example.com.