Going Solar? Here Are Ways To Pay

Going Solar? Here Are Ways To Pay

Rochelle ParkRosann Pellegrino, who began leasing solar panels for her Rochelle Park home in April, didn't want to face upfront costs.

BY JENNIFER V. HUGHES

David Beyer and Rosann Pellegrino wanted to “go solar” — install photovoltaic, or PV, solar panels on the roofs of their homes to generate electricity, saving them money and helping the environment by reducing their reliance on fossil fuels.

But they chose different ways to get there.

Beyer, a Hackensack resident, purchased his PV system outright, financing it through a home equity loan. Pellegrino, a Rochelle Park resident, chose a lease, in which a company owns the PV system on her roof, and she pays a fee that ends up lower than what she paid for electricity.

“For me, a lease didn’t make sense,” said Beyer, whose system was installed three years ago. It cost about $24,000, and he pays it off monthly through the home equity loan, which is rolled into his mortgage. “I tend to look at things long term. Even though I’m in my late 60s, I plan on being around for a while.”

Beyer said that for at least six months a year, he pays nothing for electricity, and he often gets credit toward the next month because he’s producing more than he uses.

Pellegrino wanted savings, but she didn’t want to deal with the hassle or upfront costs.

“I liked the simplicity of a lease,” she said. Her system has been up and running since April, and her lease payment is about $85 a month compared with about $200 she previously spent for electricity. The lease runs for 20 years. PV systems generally have a useful life of 30 to 40 years.

“My neighbor had them first, and I was skeptical, but he was raving about it,” she said. “Now I’m really happy.”

Another method of going solar, called a power purchase agreement, is structured similarly, but instead of a lease payment, the homeowner agrees to buy power from the system at a set price per kilowatt hour.

According to the New Jersey Board of Public Utilities, as of August, of 34,122 residential solar projects statewide, about 67 percent are owned by a TPO, or third-party owner. Residents are owners in about 12 percent of the projects, and the owner is unknown in about 20 percent of the projects.

Livingston-based Geoscape Solar offers both PV system sales and leases/PPAs. President and co-founder Jeff Chavkin said different approaches appeal to different homeowners.

“A lease usually makes sense for people who don’t have the credit or borrowing power to get a loan,” Chavkin said.

SolarCity, one of the nation’s largest companies that offers leases, has about 4,500 residential customers in New Jersey. Lee Keshishian, vice president of East Coast operations, said leases appeal to customers who are looking for price certainty. The company’s leases and PPA-style agreements come with 20-year guarantees of what a customer’s monthly price will be. He estimated that most customers in New Jersey will save 10 to 20 percent off their current electricity bill if they go solar with a lease or PPA.

Keshishian said leases are popular options for customers who don’t have disposable income to put down, who don’t want to take out a loan or who want a one-stop shopping experience.

Either buying or leasing offers incentives for going solar, but where those incentives end up depends on how the project is structured.

Two incentives

One incentive is a 30 percent federal income tax credit — a sweetener that is due to expire by the end of 2016. A bill to extend that tax credit until the end of 2017 and then replace it with a new renewable energy tax credit was introduced in the U.S. Senate with 30 Democratic co-sponsors, but passage in the GOP-controlled Congress appears unlikely.

Luke Uzupis, co-founder of Amped On Solar, based in Florence, said he advises customers to act as if the incentive will expire.

“It’s probably better to assume that it will,” he said. “Losing it will change the math, and if people wait too long, it’s a good chance they’ll miss out.”

A second incentive is New Jersey-specific. SRECs, or solar renewable energy certificates, are awarded for every 1,000 kilowatt hours of electricity generated, traded in a commodity marketplace and earned for 15 years. The value of SRECs has dropped since their peak in 2011, when they were worth about $600, said Ted Repetti, the manager of the Solar Loan Program at Public Service Electric and Gas, which helps finance resident-owned PV projects. SRECs are now worth about $220.

If the homeowner pays for the system outright or through any type of financing, he or she gets the tax credit and SREC. If it’s a solar lease or PPA, then the lease or PPA company receives the benefit.

The PSE&G Solar Loan Program began in 2008 and has financed about 900 residential PV projects statewide. Working with a solar panel installation company, the Solar Loan program will structure a deal where a large percentage of the project’s cost is financed and repaid to PSE&G through the SRECs earned, Repetti said.

The PV system must be sized appropriately to the home’s needs, Repetti said, meaning a consumer can’t install something that will purposefully produce vastly more energy than he or she uses. But most PV systems frequently produce more energy than the homeowner needs. In those cases, the excess feeds back into the grid, and the homeowner gets credit for it.

PSE&G guarantees a certain “floor” for SREC prices that will cover the cost of the loan, but if prices rise, the customer gets to pay down additional loan amounts, Repetti said. The loan is structured for 10 years, and like any financing, there are income and credit qualifications.

PSE&G estimated that it has the capacity to finance an additional 850 residential projects before this round of funding expires at the end of 2016.

Figuring the costs

Uzupis, of Amped On Solar, said most of his work is with customers who want to own their PV system. Customers should figure that 50 percent of the cost will be covered by a PSE&G Solar Loan, 30 percent will come from the federal tax credit, and the homeowner will come up with the remaining 20 percent, either in cash or a home equity loan, he said.

“That 20 percent may be as little as $4,500 or up to $6,500 for a larger system,” he said.

A year ago, Arnavaz Taraporevala purchased a home in Wayne that had a solar system installed on the roof via a PSE&G loan, which transferred from the prior owner. There was a slight hitch in the way the loan was recorded, which held up her closing by about a month, but other than that, the process was pretty seamless, she said.

Her $240 monthly lease payment is satisfied by her SRECs earned, meaning that her monthly electric bill is only the $2.53 “transmission fee.”

She has about $11,000 and six years left on the life of the loan, but she’s considering paying it off earlier and taking full ownership.

For her, solar power was very appealing when it came time to decide which home to buy.

“It really was a big plus for me,” she said. “It was the icing on the cake.”

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