By Anastassia Cardona
We like the idea of energy independent from fossil fuels, but solar panels have built themselves a luxurious reputation. Most of us don’t consider it a possibility, even if we have $30,000 to put them on our roof. Our kids need to go to college, and our mortgage must be paid. However, people do drop the 30-G. It is because having solar panels on their roofs means that they produce their energy, not the power plants. And in the long run, you pay less for your energy than if you paid the power plant that whole time. For a homeowner, installing solar panels yields the same liberating feeling that a young adult might feel after paying their final car payment. It sucks to payout indefinitely to the power company. Being able to get power from a source other than a centralized utility is something that any of us would do if we had the money.
Lately, the energy business is taking a small but perhaps significant economic turn away a monopolistic model. New businesses are entering the market and selling power separate from the energy generated at a far-away power plant. They sell energy in the form of a Power Purchase Agreement. This offers a way for consumers to go solar without paying $30,000 or even more than a few hundred bucks. From the homeowner’s perspective, it works similarly to the traditional utility we all buy from now. We buy the electricity that they deliver from the power plant. The difference is that the power plant is on our homes.
A Power Purchase Agreement means that a homeowner agrees to pay for the electricity from a set of solar panels on their roof for a certain period of time, usually around 20 years. In exchange, the Solar Utility maintains the system during that time. The homeowner gets better rates than their utility. The solar utility gets rebates that the homeowner otherwise redeems. If the homeowner moves, the agreement and the better rates carry on with the new homeowner.
Many agree that this seems like the next logical step in how we buy and sell energy. The main limitation of solar is that it is expensive. All power plants are. We don’t expect that a whole community of people pool together $50,000 each individually to own a co-op power plant. We have a utility company that raises money from investors to buy a power plant instead. The utility company sells the energy to customers and pays the big investors back over time. So wouldn’t we expect the solar revolution to take off with a similar structure?
Just like a traditional utility, the solar utility buys a power plant. In this case, a few thousand solar panels. This makes each panel cost much less than a homeowner buying 2 to 5 panels at a time. Then the power plant is split up into hundreds of pieces, and put on people’s roofs by local roofing companies as hired by the solar utility. The overhead cost to maintain the systems is so much lower than the overhead it takes to run a traditional utility, that the profit margin is higher, allowing the customer to have protected energy rates: all while the rates of consuming fossil-fuel energy continues to climb.
The idea of a solar utility isn’t completely new. When you hear of commercial companies like Microsoft, Google, or WalMart “going solar,” they don’t actually buy systems, they buy Power Purchase Agreements from a solar utility, even though they have enough money to buy their own systems. This is because the rates are still predictable and reliable and they don’t have to invest the money upfront. Just like buying panels, a PPA will save them thousands of dollars in avoiding energy prices going up.
As technology gets better and cheaper, more of us can buy solar electricity without investing in equipment that makes it expensive. The consumer wins with fixed rates of electricity that competes with their utility’s rate. The solar utility wins because they get government rebates and produce electricity with way less overhead. The utility wins because there is less stress on the aging power grid. And we all have a little more independence from our dependence on fossil fuels.
Anastassia Cardona has run state-wide and national campaigns lobbying for clean energy, including the Million Solar Roofs Initiative which put California at number one in the country for solar homes. She now works for a clean energy utility company in California, specializing in de-centralized sources of electricity.