Readers who are familiar with the rapid growth of North Carolina’s solar industry may have noticed the emphasis on large-scale installations rather than residential development. While our state’s rapidly growing solar industry is an economic boon, we’re missing out on the many benefits of residential solar. This is due in part to the existing legal restrictions on third-party sales and leasing of solar equipment. So what is third-party financing and what can it do for our solar industry and consumers?
The Power of the Third Party Model
Third-party financing is just what it might sound like: rather than requiring the consumer to shoulder the upfront costs of a solar energy system, a third party provider sells the solar power produced or otherwise finances the solar energy system on a payment plan, like an automobile or a home mortgage. The advantages are huge; by making solar more affordable with defrayed cost instead of a large upfront investment, more middle-income households can afford solar. Nationwide, third-party financing is a preferred option for many customers, accounting for roughly 60% of both the residential and commercial solar markets over the past few years.
The financing options have proven so successful for the solar industry that other industries like wastewater disposal have adopted them with similar results.
So why doesn’t North Carolina allow these solar financing options, despite the examples set by Georgia and numerous other states? The answer lies in an outdated law restricting sales of electricity by anyone other than a utility company. That might have made sense for conventionally fueled electrical plants, but it’s an unnecessary restriction for solar. In reality, solar is clean, doesn’t create eyesores, and reduces the residential cost of electricity for all consumers.
Currently, 26 states explicitly allow third-party financing for solar, which is providing attractive investment opportunities for both industry and consumers. And North Carolina’s dominant electrical utility, Duke Energy, has invested heavily in third-party solar nationwide. Duke Energy recently acquired a controlling majority interest in REC Solar, a California-based firm that rose to success by providing third-party solar options to commercial customers. A Duke Energy spokesperson said that the purchase was, in part, intended to help give “customers solutions that reduce energy costs and achieve their sustainability goals.” In the same press release, Duke Energy describes REC Solar as offering “simplified customer financing, including leases and power purchase agreements, to provide customers with immediate savings.” Yet Duke Energy’s own North Carolina customers don’t have access to those same options.
The current prohibition on third-party solar options continues in North Carolina, despite the overwhelming interest in developing solar and other renewables. North Carolinians support clean and renewable energy by a significant majority, with 75% of both registered Republicans and Democrats voting for it and a whopping 80% of unaffiliated voters adding their approval. If North Carolina wishes to clear the way for further investment in and consumer saving from its growing solar economy, the TPF questions will have to be addressed in the legislature.