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Summary:

SunPower is signing up residential solar leases at a nice pace in the U.S. while seeing a good demand for its highly efficient solar panels in Japan’s residential market. The company is still posting losses, though it’s doing better than in previous quarters.

SunPower home installation
photo: Courtesy of Solarcity

Solar leases have become a popular way for consumers to use solar electricity without paying for the expensive upfront price. Case in point: demand for SunPower’s residential solar leases is far greater than the money available to finance them, company executives said Thursday.

“Our residential lease business remains strong, with demand outstripping our financial capacity in the first quarter,” said Tom Werner, SunPower’s CEO, during a call with analysts to discuss quarterly earnings.

The Silicon Valley company signed over 2,100 leases during the first quarter, bringing the cumulative total to over 16,200. SunPower launched the lease program in 2011. The lease sign up rate is roughly the same as in 2012, during which it signed up 11,415 of them through its network of dealers, or roughly 2,800 of them per quarter.

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Homeowners who sign leases, which run 20 years, pay a monthly fee for using the solar electricity from the solar panels installed on their rooftops. They don’t own the equipment and aren’t responsible for its maintenance or repairs. SunPower raises money from investors to finance the leases. The investors, which include banks and companies such as Google, put up the money partly to take advantage of a federal tax credit that amounts to 30 percent of the price of all the solar energy system installed using their funds.

Since the lease business is fairly new, it hasn’t been making a big impact on SunPower’s financial performance though. The company’s shares shot up 17 percent after its earnings announcement mainly because it delivered better financial results than expected.

The company generated $635.4 million in revenue for the first quarter, up 29 percent from the $494.1 million for the first quarter in 2012. It narrowed its losses to $54.7 million , or $0.46 per share, from $74.5 million, or $0.67 per share, year over year.

SunPower makes solar panels and develops power plants. It’s building two huge projects in California.  It has installed over 90 percent of the solar panels for the 250MW power plant called California Valley Solar Ranch, which is owned by NRG Solar. It recently started building two projects totaling 579MW that their owner, MidAmerican Solar, called Antelope Valley Solar Projects.

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Internationally, SunPower continues to do well in Japan, a hot market that began offering fat incentives for solar energy generation after the Fukushima nuclear power plant disaster in March 2011. Through mostly Toshiba and a little through Sharp, SunPower’s seeing more demand for its solar panels in Japan than it had anticipated, Werner said. Sales volumes doubled from 2011 to 2012 and could double again in 2013, said Howard Wenger, the company’s head of global sales and development.

Most of the company’s solar panels are going to residential rooftops in Japan. Living space tends to be small (and more efficiently used) in Japan than it’s the case in the United States, so SunPower’s highly efficient solar panels are a good fit, its executives said. Its silicon solar panels can convert about 21 percent of the sunlight into electricity, higher than other silicon solar panels on the market today. Silicon solar panels accounted for 89 percent of the solar panels made in 2012, according to GTM Research.

SunPower has had to cut production and costs in the past two years as the global solar market saw a pricing collapse from an oversupply of solar panels.

SunPower6

The average wholesale prices worldwide fell 50 percent from 2011 to 2012 while demand for them grew only 5 percent during 2012, said NPD SolarBuzz. Dozens of solar panel makers around the world have filed for bankruptcy.

SunPower executives said they have beaten their cost-cutting goals.

“It’s brutal to be exclusively a module manufacturer,” Werner said. “As you look at SunPower, we moved from modules originally to systems a few years ago, and what we sell today is energy in the form of leases or PPA (power purchase agreements).”

  1. Solar leasing is a bad idea and the American public is getting duped again. People need to read those contracts and understand exactly what they’re signing.

    1st by leasing you’re giving away your rebates and tax credit to the company.

    2nd You are not eliminating your bill, you will still have to pay something.

    3rd These leases come with escalation clauses that will cause your payment to go up over the course of the lease.

    4th A lease is debt, and not an asset.

    5th The lease is unbreakable even if you sell your home. That means you’ll have to either pay the entire amount of the lease or have the buyer assume the lease.

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    1. thanks for the insight sly, do you have information if these guys are operating in toronto, canada?

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    2. Hey Sly-

      Leases may not be for everyone, but come on now:

      1) “you’re giving away your rebates and tax credit to the company” – yup, and should be getting a lower overall total lifetime lease cost as a result. You should always compare the total cost of ownership between leasing and purchasing.

      2) even if you purchase a system, you many not be eliminating your whole bill. that depends on the size system you install and your electric usage. it has nothing to do with how you finance it.

      3) SOME leases come with escalation clauses. Some don’t. Again, be sure to compare the total cost of ownership over the lease term against purchasing to know whether you’re getting a good deal or not.

      4) true, but either way you’re going to be out a huge chunk of change for a system with a long lifespan, so either way you need to do your homework beforehand. purchasing is great if you have the free capital on hand, or have access to home equity. leasing can work for many people who aren’t that flush.

      5) again, true, but how does this differ significantly from purchasing and installing a system on your home? is anyone really going to unbolt the system and take it with them? or are they just going to leave it for the new owner? probably the latter. so if the new owner pays a higher purchase price (to account for the “owned” system on the roof) or assumes the lease going forward, what’s the net difference?

      these are all good point, but I feel like many apply regardless of whether you lease or purchase – they’re issues because solar is a long-term investment, and that carries some risk, regardless of how you pay for it.

      but your first point is spot on – “read the contract and understand what you’re signing” and good advice for any contract people sign.

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    3. You are somewhat correct Sly on your insight, however I’d like to point out the other side of the argument as to how leases are beneficial on 5 of your points:

      1st by leasing you aren’t having to come up with $25,000 to $45,000 out of pocket to buy the system in order to utilize the rebate and tax credit. You aren’t giving away your rebate because the installing contractor in almost all cases in taking the rebate amount for you off of the price and then it goes back to them in order to keep you from having to wait what typically takes 3 to 5 months to get back. Many people who purchase solar don’t have the tax appetite to use the 30% credit.

      2nd, you are correct that you are paying something but picture it as paying less for using the same electricity. For example, you have a bill that averages $200 for electricity usage. Now with a lease you can produce the same amount of electricity that you use (in some cases a little more) for say $150 per month. That’s a $600 savings in the first year alone. That savings will increase as we see that energy costs continually rise each year.

      3rd, even though there may be an escalation clause the escalation amount is less than the rising costs of electricity. Electrical energy costs typically goes up 5 to 6%. The escalation clause is only 3%. Your savings still outpaces what you would pay without solar, even if you are leasing.

      4th, you are correct that a lease is a debt. In this case it is truly an asset because you are saving money over what you would be paying without solar. The cost that you pay for you electricity is debt that you will pay until you die. If you can at least save money on that commodity that you have to have, then you are at least managing your money better.

      5th, the buyer doesn’t have to assume the payment. Lease contracts actually outline that the home seller can buy the system and then turn around and sell it to the homeowner. Really what the seller is doing is adding the value of the system onto the sale price of the home. And, you can’t use the argument, “What if the new homeowner doesn’t want it,” because there isn’t anyone out there who wouldn’t want a home that is more energy efficient that will lower their costs for living in it.

      Hope some of the points shed some light on your objections to leasing

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  2. Solar leasing will be remembered as the great “Fleecing” of America. The leasing companies will take the 30% federal tax credit, which will be worth thousands of dollars. They will also take any other applicable financial incentives including any cash rebate from the utility company. In return you’ll save 10% to maybe 20% on your electric bill after factoring their expensive and in many cases “escalating” lease payment.

    And worst of all, after making up to 20 years’ worth of leasing payments you won’t even own the system, it will still belong to the leasing company. If you want to own it, you’ll have to buy it from the leasing company at fair market value, that’s the law.

    Instead of a solar lease or PPA, why not get an FHA $0 down solar loan, it’s easier to qualify for than a lease (only a 650 credit score and no equity in your home is needed), you’ll get to keep the 30% federal tax credit and the cash rebate and best of all, you’ll own your solar system for a much better return on your investment.

    And good luck selling your home with a lease attached to it. What homebuyer will want to assume your “escalating” lease payments on high priced, used equipment, using older technology, when they can buy a brand new solar system using the latest technology for tens of thousands less.

    Today you can easily purchase a complete, name brand, grid tie solar system for only $1.66 per watt before incentives. Add in $1.00 a watt for installation or install it yourself and save thousands.

    With a lease you’ll pay up to triple this cost in lease payments and you won’t even own your solar system. An even better option than a lease, PPA or even a $0 down solar loan are the new PACE Property Assessed Clean Energy financing programs that are cropping up all over the place that allows you to finance your solar system and add your payments to your property tax bill.

    If all this isn’t enough, take Sly’s advice and read the details of your lease contract. Did you know that one of the largest solar leasing company’s in the country states in their contract that if you are more than 10 days late on your lease payment that they have the legal right to remove the solar system, charge you for the removal and then sue you for the balance of the payments that you owe on your lease as well as other fees and penalties. Don’t believe it ? Then read your solar lease contract under the heading of “Default” Don’t get “fleeced” by the solar leasing companies.

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  3. Ken, spoken like a well trained solar lease salesman. Just about everyone of your statements are misleading.

    1. You no longer have to come up with a large sum of money to utilize the rebate and tax credit. There are now $0 down loans available that do not require any equity in your home that allow you to keep your 30% federal tax credit and the cash rebate. In addition the $25,000 to $45,000 that you threw out there is totally exaggerated, and is reflective of the much higher pricing that is charged by the leasing and PPA companies, not fair market pricing. Today, name brand grid tie solar systems can be purchased for $3.00 to $3.15 a watt before incentives which is nearly half what you quoted.

    2. Again, your numbers are exaggerated. Visit the leasing company’s websites and they only claim a savings of 10 to 15%. Not the 30% savings that you’re claiming.

    3. How do you know that the escalation clause will be less than the typical rate increases in the future. Several lease companies have recently been named in a class action lawsuit for making such claims. The reality is that if your utility company is ever mandated to lower their rates, with a solar lease payment escalator, you could end up paying more for your electricity than if you never signed a solar lease contract to begin with.

    4. “In this case it is truly an asset product” A leased product is never an asset. You do not own it, nor can you sell it. A lease is only a debt liability. You are only renting it. It is only an asset to the leasing company. “If you can at least save money on that commodity that you have to have, then you are at least managing your money better.” You can save far more money by owning instead of leasing” Ask any accountant to analyze the return on both leasing and owning and he or she will always find that the return on investment is far greater with ownershiip.

    5. “the home seller can buy the system and then turn around and sell it to the homeowner.” Why would a home seller want to buy a solar system from the leasing company at their inflated prices when they can buy a brand new solar system for thousands of dollars less ? “because there isn’t anyone out there who wouldn’t want a home that is more energy efficient that will lower their costs for living in it.” False, most people would prefer to have an energy efficient home while paying a much lower price for a brand new system than pay the much higher price of the remaining lease payments. If you have any doubts just visit Google and type in the search term “solar lease home sale” and you can read about all of the different real estate brokers who are have difficulty selling homes with leases attached to them.

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