Options for financing solar projects include leases and third party ownership with power purchase agreements (PPAs). Under a lease, a customer pays for the system over a specific period of time with low upfront costs. However, leases are not an available option to all customers, due to financial constraints. With a PPA, a third party owns the solar system and the customer contracts to buy the electricity from the third party, usually at a rate lower than retail electricity rates. Some states allow solar leases, but do not authorize solar PPAs because of regulatory restrictions on third-party sales of electricity.
Approximately 60 percent of new rooftop solar installations nationwide are completed through third-party ownership. Third-party ownership allows residential customers who are unable to afford the upfront costs of solar PV systems or who have unsuitable credit to still enjoy the benefits of solar-generated electricity. Financiers offer no-money-down systems to customers while recovering costs through federal tax credits, renewable energy certificates, and savings from avoided electricity consumption. The customer usually pays a sub-retail rate for electricity, and is even able to purchase the system once the third-party contract expires.
States can look to Georgia for an example of state enabling legislation for allowing third-party sales of electricity. In May 2015, Georgia legalized third-party sales of electricity through the Solar Power Free-Market Financing Act, which has resulted in significant growth potential for many in-state companies.
States could allow third-party electricity sales in order to expand consumer choice and decrease overall solar system costs through increased competition. Third-party sales of electricity would enable more customers to transition to solar. A state could follow Georgia’s example to attract more solar providers to the state and capitalize on its solar potential. Allowing third-party electricity sales would make solar PV accessible to more consumers and expand in-state solar industries.