A Long Island residential solar-energy market dominated for more than a decade by the sale of costly rooftop panels is quickly shifting to leased rather than owned systems.
Less than a year after the Long Island Power Authority changed its bylaws in 2012 to allow leased systems to receive the utility's rebate, those systems account for around 40 percent of the market, LIPA said.
"We're seeing more movement in the leased space," said Michael Deering, LIPA vice president of environmental affairs.
LIPA is on track to fund 1,800 to 2,000 home solar systems this year, adding to the total 6,600 systems it has helped finance since it launched solar programs more than a decade ago.
For some local installers who have built their businesses on the sale of rooftop systems, which can cost upward of $50,000, the shift is seen as a threat to a business they helped develop.
Since the beginning of the year, LIPA has been lowering the rebates it pays for systems. Rebates started the year at $1.75 a watt, meaning LIPA would pay $17,500 for a 10-kilowatt system. The cost of a 10-kilowatt system -- the largest the LIPA rebate allows -- is between $38,000 and $45,000, installers say.
But because the pool of money is decreasing, LIPA now pays around $1.10 a watt.
And while at the start of the year purchased systems received a higher rebate than leased systems, they are now about the same, and will remain the same once they reach parity. Leased systems started the year at $1.50 a watt.
In a typical leasing scenario provided by SolarCity, a national solar company, a three-bedroom home with a typical electric bill of $200 a month would lease a 4-kilowatt system with no upfront costs. Once installed, the system could reduce the monthly electric bill to $60 a month. The customer would then make a monthly lease payment of $110 a month, saving $30 a month.
Even some solar dealers who are offering leased programs say LIPA is giving those systems an unfair advantage if the rebate is equal to that of purchased systems.
"I know we can't make leasing go away, but why should purchased systems be on the same level as leased systems?" said Kevin MacLeod, owner of KPS Solar in Bay Shore and chairman of government affairs for the Long Island Solar Energy Industry Association, a local installer group. "Purchases should be allowed to have a higher rebate as an incentive. I really don't even think that leased systems should have any rebate at all."
Leased systems appeal to consumers who can't or don't want to pay for a solar system they can own. Under a no-money down lease, companies pay for the installation and equipment, and service the system for the life of the lease. Customers sign 20-year contracts and get the benefit of cheaper electricity -- generally always lower than their former electric bill.
"By eliminating the upfront cost, it makes solar more accessible to a wider range of customers," said Jonathan Bass, a spokesman for SolarCity, which has a growing presence on Long Island.
Bass says leasing is opening up a vast new market of customers "who want to pay for power the way they pay their utility bills, with no upfront investment. A lot of those customers would not have gone solar if they had not had that option."
Under leased systems, a federal tax credit, as well as the LIPA rebate, go to the leasing company, not the customer. With purchased systems, the customer gets the LIPA rebate, keeps the federal tax credit and usually takes out a loan to pay the difference in the system's cost. Many systems can pay for themselves in seven years or less.
"I think there is room for both" sold and leased systems, Deering said.
MacLeod and other local installers say they want LIPA to maintain two separate pools of funds for residential solar systems -- one for purchased and one for leased -- so that leased systems don't drain the entire pool of money.
Decisions like that may be left with PSEG of New Jersey, which is taking charge of LIPA's renewables budget next year. Deering said how PSEG will administer the program is "still being formulated."