Study shows rate reform and rooftop solar leasing market can co-exist

February 23, 2016

For the past few years we’ve heard from the national rooftop solar leasing companies that any reduction in subsidies will put them out of business. But a new study from global professional services firm Navigant shows that utility rate reform and a financially viable solar leasing market can co-exist.
 
The problem is that generous existing subsidies for the rooftop solar leasing industry are driving up electricity bills for non-solar customers.  Regulators across the country are beginning to take notice and take action. 
 
Today in Arizona, electric utility UNS is attempting to address the problem on behalf of its customers in a pending rate case.  Because the UNS case may establish precedents for the upcoming APS rate case, we will be an active advocate for reform. 
 
The rooftop solar leasing companies oppose the effort, arguing that any change would put them out of business and cost jobs in Arizona.  To help determine whether these claims are accurate, or simply political posturing, APS commissioned Navigant to conduct an analysis of the Arizona rooftop solar leasing market. APS filed the study with testimony in the UNS case so it will be part of an evidentiary hearing with data cross-examined under oath.
 
This study shows these firms earn a 40 percent return on rooftop solar leases in Arizona – and in some cases much higher. This stands in stark contrast to claims that rate reform will cripple the industry and kill jobs. 

“We conclude that solar TPO [third-party owned] providers have headroom to adjust to some changes in rate structures while maintaining project returns.”
 Navigant study, February 2016

It seems clear that with such large profits, the leasing firms no longer need generous net metering subsidies. And we can reduce the subsidies without jeopardizing the market. It’s a win-win for Arizona utility customers.
 
This is good news, but other questions remain about the pricing model for rooftop leases. For example, why have solar lease rates increased? And why does an APS customer pay 10 percent more for a lease than a UNS customer?
 
Prices from SolarCity are up 9 percent since last year in UNS territory despite more favorable federal incentives and decreasing installation costs. Plus, an APS customer pays SolarCity 10.5 cents per kilowatt-hour, while a UNS customer pays 9.5 cents for a comparable system. Clearly, customers need more answers.
 
Our goal is to arrive at solutions that work for Arizona’s long-term energy future. This study provides important new data to consider in the design of those solutions.