Regulators allow Tesla to offer solar leases in Florida

On Tuesday, February 5th, the Florida Public Service Commission (PSC) confirmed that Tesla can offer solar leases to Florida residents. This paves the way for Tesla, formerly SolarCity, to offer the financing mechanism that made the residential solar industry boom for the last decade or so.

But in today’s climate, where more and more homeowners are continually opting to purchase their solar installation in cash or via a loan – and where Tesla itself is focusing on cash financing – does this the PSC’s decision really change anything?

What did the Florida PSC Say?

On Tuesday, the Florida PSC affirmed that Tesla is indeed allowed to offer solar leases to Florida residents. In their statement, it explicitly stated that:

  1. Tesla’s solar lease does not constitute sale of electricity
  2. Offering leases doesn’t cause Tesla to become a public utility
  3. Tesla and its lease customers aren’t subject to PSC regulation, as they’re not considered a utility

Tesla is obviously looking to expand their offerings in the state, which they originally entered in 2016 after voters rejected Amendment 1, which the solar industry claimed was anti-solar. Until now, homeowners looking to install solar with SolarCity/Tesla have been limited to cash or loan financing.

Florida law states that only utilities are actually allowed to sell electricity in the state. Historically, the Florida PSC had interpreted solar leases to be a form of electricity sales, so they had banned solar companies from offering this popular financing mechanism.

However, in May 2018, national solar installer/financer Sunrun asked the PSC to clarify exactly what that regulation meant and the PSC subsequently agreed that solar leases are not electricity sales, paving the way for these solar companies to offer lease financing.

Today, solar installers still aren’t allowed to offer power purchase agreements (PPAs), a financing mechanism similar to leasing, in which homeowners pay the solar company based on the amount of electricity the installation produces. Florida is one of nine states that expressly ban solar companies from offering PPAs.

What is Tesla’s solar lease?

Solar leases allow homeowners to avoid the high initial purchase price of installing solar. The solar company installs a solar installation on the homeowner’s roof and retains ownership of the installation. The homeowner pays a monthly fee to use the equipment and benefit from the free electricity that it produces.

With a solar lease, your ‘energy bill’ is now two bills: one to the utility and one to your solar company. However, thanks to the low cost of solar, you’re (hopefully) able to save money because these two bills combined are lower than your utility bill would be if you never installed solar.

So you get to save money and your solar installer makes money. That’s a win-win situation, right? Yes, but paying in cash typically allows homeowners to save even more money.

Are Solar Leases Still a Big Deal?

Back in 2014, at the height of solar leases’ popularity, national installers that offered leases and PPAs – namely SolarCity (now Tesla), Sunrun, and Vivint – accounted for over 60% of the residential solar market, according to the National Renewable Energy Lab.

Starting in 2015 though, their dominant position started to slide, as more homeowners decided to forgo leasing or PPAs in favor of owning their own solar installation and working with small, local installers. By the beginning of 2018, Tesla, Sunrun, and Vivint controlled just 33% of the market combined – a drop of almost 50%.

Why such a huge change? A decade ago, few homeowners had the cash to pay for a solar installation outright, and leases filled this financing need.

Since that time though, solar costs have plummeted from $7.34 per watt in 2010 to just $2.70 per watt in 2018. In 2010, a 5kW solar installation would’ve cost $36,700 – far too much for most homeowners, but in 2018, that 5kW installation cost just $13,500 – about 1/3 of the 2010 price and a more reachable goal for most homeowners.

On top of the lower costs, many homeowners started to realize the benefits of owning their own solar installation, namely bigger financial savings thanks to lower costs and eligibility for the federal income tax credit, which goes to the owner of the installation (be it the homeowner or the solar company).

As of 2019, solar leases continue to lose ground to financing via cash or loans. So is the fact that Tesla can now offer solar leases in Florida really a big deal? Not really. Of course, it does show that Florida’s solar industry is continuing to grow and mature.

Despite lagging in key areas, like not having a renewable portfolio standard and the aforementioned banning of PPAs, the solar industry is growing fast in the state. Over the next five years, the Solar Energy Industries Association expects Florida to install 5,488 megawatts of solar, the second highest in the country, though the vast majority of that solar is utility-owned.

Allowing solar leases in the state might not change the landscape of Florida’s solar industry, but it does represent maturation. Residents now have freedom to choose what financing they’d like, which is never bad thing, even if it’s going out of favor.

Image Credit: CC license via Flickr

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