Author: Kyle Yost February 6,2018

Roof space in DC is valuable, so solar leases/ppa can be a win/win for both roof owner and solar installer, but understand what the solar installer is getting from the deal and assess for yourself whether they are offering to share a sufficient percentage of your roof’s value that they are extracting.

By way of example:
Assume a 100kw system is installed on the condo roof and you are presented with an offer to buy the electricity from this system at $0.07/kwh, a $0.04 discount from what you would be paying from Pepco.  Sounds like a great deal: you are trimming your utility bill by 35%.
What does the installer get:
  • SRECs.  At $4 – $6 / watt total lifetime value, this is ~ $500,000 in value.  Risky, non-guaranteed value, but likely future value.
  • 30% tax credit.  At $3.00 / watt installed system value price, that is $90,000 in immediate tax value
  • Depreciation.  85% of system value can be immediately depreciated (thanks to new tax law), so depending on tax rate, depreciation value is another immediate $70,000.
  • A 100kw system would generate 120 MWh / year, and you are paying the installer $0.07/kwh, so about $8400 per year to buy the electricity the system on your roof is producing.  Assuming a 15 year contract, that is another $126,000
  • So, to install this 100kw system, which likely cost the installer ~$150,000, he is getting ballpark $500,000 + $90,000 + $70,000 + $126,000 in lifetime value out of it = $800,000 return from $150,000 invested, a good ROI.
You, in turn, get:
  • $0.04 / kwh savings on electricity rate.  Round this up to $0.05 / kwh as pepco rates will increase but presumably your rate stays constant.  So, for 15 years of 120 Mwh/year and $0.05 / kwh savings you are saving $6000 per year * 15 = $90,000 lifetime value on $0 invested (unless you consider nuisance, hassle, and risk of roof damage from having panels on your roof an investment)
Everyone benefits.  You save $90,000 in bills over 15 years.  The installer gets a 6x return on his upfront capital investment.  It’s your roof and all this value is coming from your roof.  So, while everyone wins, the question is whether the arrangement is equitable.  Considering the value is coming from your roof, should you really be getting nothing but a small discount on electricity rate while the solar installer takes home the vast bulk of the value?
Outside of DC these arrangements are typical and are more equitably balanced between installer and roof owner.  But, within DC where the SREC value is so large, you have great leverage to push back on the amount of discount you get.  All the way to 100% discount.  Or to get paid for allowing your roof to be used.  There are installers in DC who will do such a deal such that they get the SRECs and the tax value, and let you keep 100% of the electricity and not have to buy it back from them at all.
Roofs in DC are valuable assets because of the RPS.  Don’t accept a deal that would be typical in Maryland or Virginia.