Save money, help the environment with a solar power purchase agreement

We’re going solar!

Our middle-class, suburban family of five, with two children in college, two mortgages and a pile of other consumer debt, is getting a brand new, 7 kilowatt photovoltaic rooftop system worth roughly $31,000 – without us paying a penny out of pocket.

That’s right. We’re paying nothing upfront for the ability to generate up to one-third of the electricity our 1,500-square-foot split-foyer home would use in a typical month.

How’s that possible? With a power purchase agreement.

The panels on my roof are actually owned by a solar leasing company, which will sell me the power that is produced. I’ll be paying 10.5 cents per kilowatt-hour, about 30 percent less than the 15 cents per kilowatt-hour I pay now.

Residential electricity rates haven’t shown any signs of going down, either. Our utility has raised its rates in each of the past four years and is seeking a fifth increase. Our solar provider can raise its rates over the course of our 20-year agreement, but the increase is capped at 2.9 percent per year.

In Maryland, where I live, about half our electricity comes from coal- and natural gas-fired generators. About 40 percent comes from nuclear and the rest is a mix of hydro and other renewables. However, there’s no way to know exactly where the power is coming from when I flip on the light switch or turn on the TV to watch the ballgame.

But as long as my home is using at least as much power as my rooftop panels generate, all the electricity they generate will be going to my house, meaning power that’s being generated with zero emissions or pollutants will displace up to one-third of the mix we get now. We’re also doing our part to help Maryland meet its renewable portfolio standard goal of generating 20 percent of its energy from renewable sources by 2022, with at least 2 percent from solar. Not only am I saving money, I’m helping the environment.

For families like ours without a lot of money in the bank, and everyday expenses that seem to keep it that way, the power purchase agreement is a good deal. For others, it might make sense to pay the cost of the solar power system up front.

Some things to consider when thinking about a solar power purchase agreement:

  • Solar power purchase agreements are not allowed in all states. The Solar Energy Industries Association lists state solar policies to help you determine what is available where you live.
  • Owners of solar power systems can take advantage of a number of tax incentives, as well as renewable energy credits, which can be bought and sold. However, under a power purchase agreement, the solar leasing company benefits from those. That’s part of the trade-off you’re making for getting the panels at no upfront cost.
  • If your state allows net metering, you could get credit for the excess energy your system produces. If your solar panels generate more energy than you use at a given time – say on a sunny day when everyone is playing outside – you can sell that power back to your utility and get a credit on your bill.
  • Residential customers in Maryland are still connected to the grid, so we can’t draw power directly from our solar panels during a network outage. They will simply shut down until the network comes back online. However, with the advent of consumer batteries like the ones Tesla manufactures, some of the power we generate could be stored and used to keep our refrigerator going, for example, for a short time during an outage.
  • Solar leasing companies use the Internet to monitor your power generation and use, so you will need to maintain a broadband connection.
  • Once the 20-year power purchase agreement is complete, you can get a new one or have the panels removed. If you sell the house, you can transfer the agreement to the new owners or buy the panels from the leasing company. Solar panels may even increase your property value.

Power purchase agreements are among the financial tools being used to help not only homeowners like myself but also large businesses pay for clean energy projects. C2ES will be discussing the best ways to finance technology to reduce emissions and be more energy efficient at our next Solutions Forum, Innovative Finance & Clean Energy, at George Washington University on June 25. RSVP here.