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A Lease On Solar Panels? Some States Pitch In

A house in Phoenix outfitted with the solar panels that SolarCity leases to its customers.
A house in Phoenix outfitted with the solar panels that SolarCity leases to its customers.
Courtesy of SolarCity

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For decades, high installation costs put solar energy out of most homeowners' reach. Now a California company is offering a way to make solar panels affordable by leasing them. But the offer is only available in states that provide incentives for clean energy.

SolarCity, a four-year-old company, leases solar panels to its customers, so they don't have to shell out a lot of money up front to buy them. Customers often pay less for the leases and their electric bills than they used to pay for their electric bills alone.

The company is quickly spreading to more states, but only ones that are subsidizing renewable energy.

"A key thing for us when we move into a market is can we save a business or homeowner money, and if there's no local incentive you can't do it," says SolarCity CEO Lyndon Rive.

That explains why Maryland, which offers incentives, is among the 10 states served by SolarCity, but neighboring Virginia is not.

Creating Economies Of Scale

Companies like SolarCity hope that offering affordable leases now that are subsidized by the state and federal government will help them create the economies of scale necessary for solar to stand on its own feet when those subsidies expire.

On Thursday, SolarCity announced it bought groSolar's residential installation division, allowing SolarCity to expand into New Jersey, New York, Pennsylvania and Massachusetts.

Rick Sullivan Jr., Massachusetts' secretary of energy and environmental affairs, says SolarCity's announcement is more proof that his state's incentives are paying off.

"The companies are coming into Massachusetts, existing companies are growing in Massachusetts and they're creating jobs," he says. "They're becoming a very important part of the economy."

Massachusetts' Discounts

Massachusetts offers rebates, income tax credits, property tax exemptions and loans to encourage the use of alternative energy. One of the incentives is a 15 percent income tax credit — up to $1,000 — for the costs of purchasing or installing a renewable energy system on a primary residence.

The state also requires utilities to provide an increasing amount of their electricity from clean sources. About 1 percent of a utility's electricity must come from solar.

To prove they've met the requirement, utilities need to have enough renewable energy certificates. Each solar installation gets some of these and utilities buy them. As a result, companies and homeowners get discounts for going solar.

A 30 Percent Federal Tax Credit

This all sweetens a 30 percent federal tax credit for solar panels.

Solar installations in Massachusetts are up 20-fold compared to four years ago and prices are coming down, Sullivan says.

"The goal of all these programs is to support and create a market in renewable energies, particularly solar, and then the free market will take over and you'll see the costs of installations come down and the cost of power come down so that the rebates and the incentives can ultimately go away," he says.

Rive, SolarCity's CEO, says by offering affordable solar power, he hopes to grow his company fast enough to create the economies of scale and the name recognition necessary to make solar affordable without incentives.

"So, this is what's important to me: To get to scale where we see millions of people adopting it," he says. "And when we get to that point, it will make an environmental difference."

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