Transformations, R. Carter Scott’s high-performance home building company, was building some of the most efficient homes in Massachusetts for about $100 a square foot—production-level costs that allowed the company to offer an affordable, energy-efficient product. So when four Massachusetts utility companies rolled out the Zero Energy Challenge to build homes that used little or no energy at all, Scott took the challenge and met its goals, but his costs suffered.
“We got the house down to a HERS minus-4 rating,” Scott says, “but it cost about $124 per square foot, too expensive for our existing customer base.”
Then Scott hit on a solution: Leasing the PV system removed a substantial up-front investment and brought construction costs back to about $104 per square foot. His buyers responded. “We’re doing better than most builders these days, with 400% growth rate in six months,” he claims. He cites the competitive advantage of selling zero-energy homes starting at $195,200, nearly the same price as comparable traditional homes.
Other companies, including national home builders Beazer Homes and D.R. Horton and Colorado-based Oakwood Homes, have discovered that solar leasing allows them to offer buyers a low- or even no-up-front-cost entry to alternative energy.
“We combine the solar lease payment with the remaining utility bill and save the customer money, with total monthly costs lower than paying the normal monthly utility bill alone,” says Eric Wittenberg, a regional sales director with SolarCity, the first company to pioneer leased solar installations nationally in partnership with Google, among others. The SolarLease includes a warranty, routine maintenance, and remote performance monitoring for the length of the lease. The company works with home builders under a partnership arrangement.
While the trend toward leasing has grown significantly in the custom home and retrofit market, some large home builders,such as Lennar and KB Home, have backed away after their initial forays. That’s because the added layer of contracts required in the process can complicate home closings, says Matt Brost, who leads SunPower’s New Homes Business unit. In addition, tax credits and incentives may allow builders to offset a significant portion of system costs, making PV systems affordable to purchase rather than lease. Another challenge arises when lease payments hinder a buyer’s ability to qualify for a mortgage—even while the lease actually lowers the overall homeownership expense.
“My take as a builder and developer is that it makes a ton of sense,” says Mike MacDonald of MCD Construction and Development in Oakland, Calif. “When limited budget is an issue, as is the case with most projects, a $30,000 PV system that becomes a lease frees up $30,000 for construction.”