SolarCity and Best Buy have just announced a deal allowing customers to get low-cost and low-hassle solar power for their homes.
It’s what’s called a third party leasing agreement. Rather than purchasing a solar array outright, they lease the system from the provider — SolarCity, in this case. It’s just that the system is installed on the roof of the homeowner. The benefit for the customer is they don’t have to worry about installation and maintenance — the provider handles that — and there are no big upfront costs. The customer just pays the provider a set amount each month for the electricity, and that cost is usually slightly lower than the going market rate.
Meanwhile, as the provider, SolarCity gets a guaranteed revenue stream for whatever period of time the lease agreement covers. Partnering with Best Buy allows SolarCity to make use of the chain’s already-existing network of stores to reach as many customers as possible.
Upfront costs, maintenance, permits, and installation are among the major logistical hurdles that often prevent people from taking advantage of solar power for their homes. A firm with assets and logistical capabilities like SolarCity is much better positioned to take care of those problems, creating a much smoother process for the customer. Many people have the wherewithal to purchase their own solar systems that they own outright, but that model is not for everyone.
Third party leasing is also an example of how innovations in the ways we buy, sell and finance solar are just as important to its widespread adoption as technological innovations. But there are still some blockages. States are still figuring out how to adjust to the arrival of distributed solar, because traditional regulations have locked the market into a specific relationship between utilities and customers, with certain expectations from each. As a result, only a limited number of states currently allow for third party leasing.
That’s why the deal between SolarCity and Best Buy is only available to customers in California, Arizona, New York and Oregon right now. For it to spread further, more states will have to adapt their regulations to allow for freer exchange of energy buyers, sellers, and innovators on their grids.