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Will NRG Energy be the next ten ton gorilla in solar leases?

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NRG Energy, one of the most aggressive power companies to invest in solar projects, is considering getting into offering leases for solar panel roof systems for home owners and businesses. NRG Energy’s CEO David Crane tells Bloomberg that it is something that they’re “looking at in a very serious way,” and NRG Solar’s CEO Tom Doyle told me last month that the company has been inreasingly talking about financing options for solar roofs and in particular exploring the lease structure.

NRG Energy already builds solar panel projects for commercial and industrial building owners. Doyle told me that the company has been “heartened” by the amount of Fortune 300 companies that have wanted to install solar panels on their rooftops. Distributed solar panel systems have been gaining momentum, said Doyle, adding that they’ve been delivering higher growth than utility solar systems. In an interesting twist, that puts NRG Energy in grwoing competition directly with utilities, notes Bloomberg.

The emergence of the solar lease, or other financing options for solar, has helped unlock huge growth in solar panel rooftop installations in recent years. Essentially a third party, like SolarCity or Sungevity, raises a few hundred million dollar fund from a bank or a big company like Google (s GOOG), and uses that money to provide the up front capital for a home roof top system, which can cost tens of thousands of dollars to install. The homeowner doesn’t have to pay that upfront cost, but pays the solar leasing company a monthly bill that is usually lower than its former utility bill. Over time the bank or “the Google” gets paid back with a return that can be around ten to twelve percent.

As I reported last month, three quarters of the solar panels installed on home roofs in 2012 in California were financed and owned by these solar service companies, and not the home owner. These “third-party owned” solar systems collectively generated $938 million in revenues last year.

It’s one of the more lucrative businesses in the solar market these days. So why wouldn’t NRG Energy want to be in it. SolarCity (s SCTY), a former startup that has helped pioneer the business, went public in December 2012 at $9.25, saw its stock soar 40 percent on its debut day, and has now more than doubled to $18.57 Monday morning. Other companies that offer solar financing options include Sunrun, and Clean Power Finance.

The emergence of NRG Energy in the solar leasing business could be a real threat to the companies already operating in it. NRG Energy earned $1.59 billion last year, which was a decline from the previous year, but which is clearly far larger than the fairly new companies like Clean Power Finance and Sungevity.

4 Responses to “Will NRG Energy be the next ten ton gorilla in solar leases?”

  1. douglasshort

    Hi Katie – I don’t think they will be. Eventually distribution utilities and their regulators will get their acts together. When they do, utilities will own the systems, put them in rate base (leveraging their relatively low cost of capital) and pay the hosts a “rent” through lower rates for the electricity generated by the panels. The utilities will have to manage the price they charge the hosts such that they are the best option. The other 98.5% of NRG’s generation will be valued at dimes on the dollar. See

  2. Ron Winton

    Let’s hope that more solar leasing companies do not enter the arena. I predict that solar leases and PPAs will be remembered as the great solar Fleecing of America. Once today’s much low pricing for purchasing a solar system hits the mainstream, there will be a lot of angry consumers who won’t be happy with the idea that they will probably wind up paying up to 3 times more in lease payments than what they would have paid if they purchased their systems instead. Today you can purchase a name brand, grid tie solar system for only $1.66 a watt before all of the lucrative incentives so a solar lease makes abolutely no sense for a consumer that can take advantage of the 30% federal tax credit worth thousands of dollars. In some states the cash rebate alone is greater than the cost of the system, yet people are still signing up for leases. Go figure ? For the leasing companies and their wealthy wall street investors, it’s all about the hype. “Ladies and gentlemen, step right up and go solar for zero money down. Sure you’ll up to triple what you should be paying in lease payments and you won’t even own the system and we’ll take all of your financial incentives and never mind that today you can get a $0 down solar loan instead of a lease….. so what ! Just sign on the dotted line.

    • And guess who is the “bank” behind Solar City – wait for it… Goldman Sachs. The fleecing is well underway. It is all “Big Solar” now, the consolidation continues as the oligarchy is created and then the profits salted away to Wall Street.

      What was once a good thing, has now become just another thing, maybe some good stil can come, but your Utility Rates will increase with more Distributed Generation, it is happening in So Cal right now. If ____ go off grid for most of the day, who pays for the upkeep of the grid anyways? Yep, ratepayers. So go ahead and go off grid, but you will still end up paying the Utility in some way as they will have to socialize O&M costs.

  3. Earth receives more energy from the sun in one hour than the world uses in one year. If we use enough of the solar energy we can greatly reduce consumption of non-renewable resources, and the generation of CO2 that results from that.