For years, Bruce Crawford dreamed of putting solar panels on his one-story house to cut his power bill and "do something good for the environment." But he couldn't see past some dark clouds — the $20,000 to $30,000 purchase price.
"I wanted to do it, but I was choking on what I had to" spend, says the software engineer who lives in Pleasanton, Calif.
Then, a Silicon Valley start-up called Sun Run offered Crawford a way to go green without straining his wallet. Last month, the company installed a 3.8-kilowatt system on his pitched roof for $6,000. Crawford, 62, says he'll immediately save money on his electric bill. Sun Run monitors and maintains the system, replacing worn parts at no extra cost.
It's one of several companies upending solar's traditional business model by supplying systems to homes and businesses at minimal or no cost, owning and maintaining them, and charging customers for the power they use — much like a utility. Yet unlike a utility, these firms typically charge a bit less than standard electric rates.
The setups, called power purchase agreements (PPA), are among several initiatives that aim to overcome solar's obstacles — high upfront costs and design and maintenance hassles — and deliver systems to millions of customers. Several California cities plan to fund home systems with tax-free bonds. Now, utilities are joining in. Southern California Edison on Thursday said it will install panels on about 100 warehouses, running them as it would a power plant. Duke Energy wants to put solar panels on up to 300,000 customer rooftops in the Carolinas.
"Increasingly, individuals won't have to" buy systems, says Ron Pernick of research firm Clean Edge.
Solar energy emits no global-warming gases, and provides power midday, when demand and electric prices are high. While U.S. solar power has grown at least 45% each of the past two years, it makes up less than 1% of U.S. power generation, largely because of its cost.
How the movement is spreading
Solar-panel prices are projected to drop 50% in a few years. Yet achieving widespread adoption will likely require big buyers that can achieve cost efficiencies, says Travis Bradford, president of research group Prometheus Institute. Among the new models:
•Power-purchase agreements. Under these typically 20-year contracts, businesses pay no money upfront. With such favorable terms, PPAs have exploded among companies and government users.
Normally, a big store or factory could spend up to $4 million on a solar system after government incentives. MMA Renewable Ventures, a top PPA provider, shaves system prices 25% by snaring high-volume discounts and low interest rates to finance the panels, CEO Matt Cheney says.
To be sure, a business or homeowner could finance a system with a small down payment and monthly payments at or below utility prices. But PPAs offer other advantages. Providers tailor systems to a customer's needs. They navigate a financial maze that includes securing government rebates and tax breaks and figuring depreciation. And they handle upkeep. Without a PPA, an inverter — which converts DC current to AC — must be replaced every 10 years or so and costs thousands of dollars.
Customers, meanwhile, have the option to buy the systems at a reduced price after a few years.