Taking startup costs out of home solar

[OKIsItJustMe]

http://eastbay.bizjournals.com/eastbay/stories/2008/06/23/story3.html

Friday, June 20, 2008

Taking startup costs out of home solar

East Bay Business Times - by Mavis Scanlon

Berkeley startup Helio Micro Utility Inc. wants to make it easier for homeowners who use a lot of electricity to move to solar energy by eliminating upfront cash outlays.

The company on June 16 introduced the Helio Green Energy Plan, which allows homeowners to buy solar power on a kilowatt-hour basis from solar panels installed on their own roofs without actually buying the pricey panels. Helio has crafted a solar-power purchase agreement (or PPA) - already commonplace for larger businesses that want to use solar power - for homeowners.

With credit tight and home equity lines of credit being cancelled or withdrawn, homeowners who want to add solar energy systems have fewer options for financing them. Companies that lease or finance solar systems and sell the power back to a homeowner are stepping in the fill the void.

Helio is the latest entrant in a growing market that is responding to the outsize cost of solar power with options to suit different-sized pocketbooks.

...

[dkf]

1. Excellent!

[polichick]

2. I love American ingenuity - YES, WE CAN solve our problems!

[kristopher]

3. Excellent business model.

I think I'm going to suggest it to a friend (electrician) in this area.

[oldhippie]

6. You are familiar with CitizenRE?

Looks like we posted a minute apart. What's your take on CitizenRE? You've seen the articles on RenewableEnergy World?

[kristopher]

8. No, I know nothing about it.

But I'll check your reference and get back to you.

[oldhippie]

9. Here's a couple links, I'm sure you can find more ....

Their basic problem is that they have been signing up lots of customers for years, but can't get financing to build the plant they needed to make the solar panels. The deal looks too good to be true for the consumers, but financial analysts can't figure out how the company will make any money with it's business model (which may be why they can't get financing.)

http://peswiki.com/index.php/Directory:Citizenre_Corporation

http://ktar.com/?nid=6&sid=846769

http://www.renewableenergyworld.com/rea/news/story?id=49709

They keep delaying the annoucement of real financing and plant startup.

[Javaman]

10. Citizenre is a scam...

They were supposed to come out and "evaluate" my home last november. No one showed and repeated messages went unreturned.

Here's some good links about their "business model"...

http://gristmill.grist.org/story/2007/4/22/192151/743

http://www.renewableenergyworld.com/rea/news/reinsider/story?id=47419

http://solarkismet.wordpress.com/2007/02/08/citizenre-consultant-report-leaked-major-issues-revealed/

http://www.danablankenhorn.com/2007/03/the_citizenre_s.html

http://greenvolts.blogspot.com/2007/02/controversy-erupts-over-citizenre.html

[oldhippie]

11. Yeah, but you're not supposed to come right out and say that ......

..... or people will call you "negative."

Funny, can't seem to find any recent info on CitizenRE. But their web site is still up.

[Javaman]

12. their last "update" was in nov of 07. nothing new, just a reshuffling of the deck chairs.

They kept pushing back the "ground breaking" of their facility. I took that as a sign that they were full of it.

I work at an architect company and when that happens it usually means one of two things, either they haven't a clue as to what is really going on or they don't have the money.

No one announces a ground breaking and then puts it off. That costs massive amounts of money.

[oldhippie]

4. Sounds a lot like CitizenRE ............

Someone is going to have to show me numbers as to how their business model makes sense. Until then, I call it a scam.

[OKIsItJustMe]

5. It's essentially the same business model as SunEdison, except SunEdison doesn't sell to individuals

http://www.sunedison.com/

[oldhippie]

7. And that may make some sense ..........

... as businesses are different from individuals in terms of stability, and how they can do their tax accounting. It's a lot harder to make that model fit individuals, who move on the average of every few years. I'd like to know what's really happening with CitizenRE, but no one seems to want to talk about it.

[tinrobot]

13. Helio Mu is another company doing this...

http://www.heliomu.com/

Generally a good idea, but in the long run it will be more expensive than buying the panels yourself.

[OKIsItJustMe]

14. They've got to turn a profit somewhere...

(That's why they're in business.)

However, think of the people who (for example) will keep buying incandescent bulbs because they're cheaper than CFL's (even though the CFL is cheaper in the long run.) It's that startup cost that gets them.

[tinrobot]

16. Yeah, but you could probably do the same thing with a loan.

With a loan, at least you would own the panels after a certain point in time. If you borrowed $20K to buy $35k (after rebate) worth of panels here in CA, it would take 10 years at around $200/month worth of home equity loan to pay off.

That's slightly higher than the cost of my current utility bill, which is essentially what these companies charge for installing the panels, but without ownership. Factor in the tax deduction for the equity loan and a little for selling back extra power, and the panels are probably cheaper to buy outright than to rent from one of these companies.

In some ways, these companies remind me of the rent-to-own appliance stores. They offer cheap payments, but the ultimate cost is a lot more.

Still, if something like this is what it takes to get more solar on more roofs, I'm all for it.

[kristopher]

17. It isn't a rent to own model.

The rent-to-own model depends on what amounts to high-rate financing, right? There is no other profit center available except selling off the used goods and possible tax benefits.

In the model I'm seeing, there are other profits to be exploited (1.differential between financing available to homeowner and probable preferred financing available because of renewable credits and guaranteed cash flow and 2. the much higher value of the homeowner produced electricity when it is managed to maximize value). That allows for competitive pressure to channel some of those added benefits into the pocket of the homeowner.

Is it possible to find a person trying to rip you off with energy-saving businesses? Sure it is, but that doesn't mean that profits are impossible unless you do. There are lots of niches where honest people can make a honest living.

[tinrobot]

18. Perhaps it isn't...

But I've actually had some financial estimates with some of these companies and, over 5-10 years, the numbers still favor purchasing with an equity loan rather than renting.

These companies offer a cheaper startup, but it's more more expensive in the long run.

[kristopher]

19. "These companies" is the problem I have with what you're saying

That kind of statement is simply prejudicial without being informative. We (including you, I think) have no idea what their business plan was based on, so I think perhaps you're being unfair.

I don't have a base of experience with actual contractors myself, and I'm speaking from the theoretical point of view. I'm just not sure how many people are aggregators as I described where they sell the power instead of being sellers of just a home system that is based on a state's incentives to individuals. I suspect most of the people you are referring to are not knowledgeable enough to get into the area of marketing the electricity itself. I can also see where a lot of people who don't know much getting into it from the angle of selling overpriced systems.

[kristopher]

15. Off of CitizenRE and back to the OP

I can't speak to the facts on CitizenRE because I didn't find much more than speculation on either side of the issue.

However, there is a place for someone in between the utility and the homeowner. The fact is that in most cases, the amount of money a homeowner might get for selling their excess production back into the grid isn't necessarily the best deal going.

It is often a set amount predetermined under rules that treat such home generated electricity differently than normal commercial sources of electric production. To be treated as a normal source of production most utilities require that the producer be of a certain size, say at least capable of generating 1Mw. If I have this minimum capacity of production then I can potentially sell it to the utility on several different markets; the renewal time on these contracts might be years, months, weeks, days or even hourly. The shorter the term, usually the higher the price of the electricity ultimately bought/sold.
So if I can form a company that 'bundles' the production of those homeowner financed solar panels to achieve the minimum size to negotiate with the utility I can then sell the electricity into the most profitable market possible and get more for the electricity than would be possible for each individual homeowner acting alone. The homeowner avoids the high initial investment by providing me with a minimum guaranteed cash flow that I can use to get preferred rates to finance the entire project's construction costs.

Anyway, that is what I saw in the initial OP.