Apr 9, 2013
Leasing can broaden market for rooftop solar panels
If you live in sunny enough climes, installing photovoltaic panels on your roof can cut your electricity bills in a big way. But what if you cannot afford the high upfront costs of installing photovoltaics? Could renting be the way forward? A new study shows that leasehold options are appealing to consumers and can open up the photovoltaic market to a large segment of new customers.
In the US over one fifth of greenhouse-gas emissions are produced by the residential sector. Rooftop photovoltaics have the potential to make a big dent in household emissions, but until recently the high upfront cost meant they were only available to those with cash to spare. Given that household photovoltaics could bring about significant reductions in greenhouse-gas emissions, it makes sense to explore ways of bringing this technology to a wider sector of the population.
With this in mind, Varun Rai and Benjamin Sigrin from the University of Texas at Austin carried out a survey of residents in Texas, where a number of companies are now offering leasehold options for photovoltaic panels. Of the 365 households they surveyed, around one third were leasing their photovoltaic panels. On paper there were no significant demographic differences between the lessees and buyers of photovoltaics: they were all wealthier, older and better educated than the average Texas resident. However, by digging underneath the demographics, Rai and Sigrin found that lessees did differ from buyers in a few important ways.
"Most of the lessees we interviewed would not have installed if it was not for the leasing option," explained Rai. "In general, we find that the leasing model is able to break into consumer segments marked with tight cash flows."
In addition Rai and Sigrin found that leasing helps ameliorate some of the risk associated with adopting a relatively new technology. People are often concerned about the reliability and capability of photovoltaics; leasing companies frequently offer some kind of performance guarantee, which reduces that concern.
But leasing can have disadvantages too. "One additional potential complication with leasing is the potential situation when the leasing company goes out of business," said Sigrin, whose findings are published in Environmental Research Letters (ERL) . "We don't know fully yet what type of financial burden will that add to the leasing customers."
Nonetheless, it appears that leasehold options can help to broaden the market for green technologies with high upfront costs, such as photovoltaics and electric vehicles. Such technologies appeal to a particular segment of the population; generally those who are highly educated, have high incomes and a keen interest in new technology. But a large proportion of those people do not necessarily have ready cash.
"The leasing model appears to be especially effective in early stages of a technology's diffusion, as it unlocks the cash-strapped but information-aware segments of the market," aid Rai. By offering leasehold, companies can rapidly expand their early uptake and provide a wide base, which later adoption can build upon.
Rai's Energy Systems Transformation Research Group is now building on these findings and working on a three-year US-Department-of-Energy-funded project to identify opportunities for improving the efficiency and effectiveness of utility solar programmes in Texas.
- Diffusion of environmentally-friendly energy technologies: buy versus lease differences in residential PV markets, Varun Rai and Benjamin Sigrin 2013 Environ. Res. Lett. 8 014022
About the author
Kate Ravilious is a contributing editor for environmentalresearchweb.