A tale of two solar markets

By Robert McIntosh

It was described as “the Australian way. ” Unlike the US, where financing and debt are usually a part of everyday life, Australian solar customers were less comfortable with the idea of an outside group being involved in ownership of their energy system.

These falling prices will open up the solar market to a whole new group of customers who prefer ownership over leasing, and can now afford a system.

In fact, we’ll likely see more Australian homeowners opt for solar leasing, and more United States customers opt for system ownership (some are already speculating that 2014 could be the peak for US solar leasing).

When more Americans are looking to buy systems outright, companies will be forced to compete more on upfront costs and solar system prices will fall. Capitalism in action.

During a survey of potential Australian solar customers, third-party financing was the least popular option for obtaining solar electricity (though attitudes seem to be slowly changing).

At this point, almost half the cost of solar systems in the US is consumed by unclear margins and finance overhead, compared to about 10 per cent of costs in Australia and Germany.

Solar customers in the US enjoy third-party financing in part because they don’t care about the system itself; they only care about the electricity it produces.

If a customer can already – through a lease – obtain solar electricity for less than their previous utility bill, then financing companies don’t have to drop lease prices even as the price of solar falls.

Though it is impressive that 10 per cent of Australian households now have a solar system, there still may be a considerable number who cannot afford to buy up front and would require some leasing option.

When the Australian government increased its solar incentive program in 2009, it made sense for customers to buy systems up front.

Talking to industry experts, some claimed more than 90 per cent of residential solar systems in Australia are customer owned.

Solar system price reductions become added margins for retailers, rather than savings for customers.

Third-party finance bridged the gap and (arguably) helped save the US solar market; solar became economically appealing to a much wider range of customers.

Beyond this, there are potential headaches associated with owning solar systems that convenience-minded customers could find a turn off.

In the US, 30 per cent or more of customers still opt to buy their solar systems up front.

No-money-down, third-party-owned residential solar leases have removed the significant hurdle of upfront costs, making rooftop solar accessible to more homeowners than ever before.

Meanwhile, financing through a lease can add to the cost of solar – both the overhead costs to arrange the lease and the added cost of interest over time.

To continue to make solar appealing to that consumer group, Australian companies will need to offer leasing opportunities.

This may be a large part of the reason solar systems in the US cost roughly twice as much as Australia and Germany.

Read more here: Business Spectator

    

You may also like...

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>