I recently noticed ads for SunRun Solar popping up on this web site. As a supporter of solar energy, naturally I was intrigued, particularly since they claim they can install a solar power system for as little as zero dollars. The last time I looked into the cost of installing a 5kw system for mediaOrganic the net cost after all rebates and incentives was going to be about $28,000. That was two years ago. Admittedly, prices may have come down since then but Sun Run’s promise seemed a bit radical. So I clicked over to their web site to learn more.
According to a 2009 article in Forbes Magazine, SunRun sells something called a power purchase agreement, in which the homeowner agrees to buy the solar power generated on their roof at a fixed rate (the rate may increase a bit over time). The idea is that as electricity costs charged by utilities rise (they tend to increase about 4% a year), the SunRun customer will be paying less and less than they would have otherwise.
SunRun offers two plans. The first is the SunRun Power Plan. For a small upfront payment, in my case $2400, not exactly zero dollars, SunRun will install a turnkey system and maintain it for 20 years. In exchange, the homeowner signs a 20-year agreement to purchase the power generated by the system. The pitch is that the cost of SunRun power will remain favorable compared to the cost of power from your local utility over the term of the agreement. A calculator on the website tells me that I’m going to save $14,800 over the 20 years, an annual return on my $2400 investment of 22%.
SunRun’s second plan is SunRun Total Solar. All the payments are made in a lump sum at inception of the agreement. For mediaOrganic, the upfront investment would be $17,500. There is no additional monthly payment or cost for the power derived from the system. The SunRun calculator tells me that I’m going to save over $30,000, an annual rate of return of 4%.
Under both plans, SunRun owns the system and collects the federal and state incentives and tax credits which they claim are passed through to the customer.
Let’s consider the merits of these two PPA options. First off, let’s call a spade a spade. These are nothing more than gussied up equipment leases that roll in a maintenance contract. Oh, there may be some legalese inserted that push them into a slightly different territory but you are still signing a legal obligation to make the payments and they are purchasing and installing costly equipment based on your promise to pay. Make no mistake, there will be severe penalties for non-performance.
Second, a 20-year agreement is a v e r y l o n g agreement. The SunRun Power Plan probably has the advantage here because the smaller upfront payment means that you may recoup your out-of-pocket costs in a few years. The Total Solar plan will take many years to recapture the large upfront payment. Most homeowners won’t live in their homes long enough to see any financial benefit and for those who do, lot’s of things can happen over the course of 20 years.
What concerns me most though is that your obligation continues after you sell your home. SunRun downplays this by telling us that the agreements are easily transferred to the new owners but this assumes that the new owners are willing to take on this obligation, something I would never take for granted and a needlessly complicating condition for the sale of your home. For me, this is a deal breaker and I bet it would be for a lot of other prospective home buyers.
Now to the elephant in the room that is not being discussed – the falling cost of solar power and emerging alternative technologies. The global economy is in the very early stages of the solar power production cycle. New technologies are being developed daily, efficiencies are improving and production capacity is rapidly ramping up. In all likelihood, five years from now I will be able to install a system for 20-30% less than today. Just as likely, some new technology will emerge that will obviate the need for rooftop solar arrays. Can you say Bloombox? Twenty year commitments simply aren’t a good match in a world in which technology lifecycles are measured in months.
Bottom Line: If you are set on solar power and looking for a way to install solar panels at the lowest upfront cost, SunRun is worth investigating. For most homeowners, however, the long-term commitment required by SunRun’ PPAs are likely to prove costly.
As with the all of cars, our culture has led us to an increasing need for those things that require "power."
Hi John,
I am the PR Manager at SunRun and love that you've put so much thought into our service and taken the time to ask questions! We wanted to give you thoughtful answers in return, and we've done that on our SunRun blog. Check out the post titled "A Conversation with mediaOrganic." Please let us know if there are other questions we can answer, and let's keep the conversation going!
Thank you, Susan, for the reply and link. After reading your article I have a few additional questions:
1. You state that "you simply pay for the power your panels produce." I read this to mean that payments are fixed based on the system capacity. In other words, the homeowner is not paying for the power they use, they are paying for the power that the system produces. Therefore, if I were to close up my house for two months and use little or no electricity, I would still be obligated to make the full monthly payments to SunRun. Is this correct?
2. Let's assume that I sell my house in five years and the new owner is NOT interested in a assuming the power purchase obligation. What are the remedies outlined in the Power Purchase Agreement? Would I be on the hook for the remaining 15 years worth of payments? Is my credit at risk if I don't make the payments?
Isn’t it interesting how the two sites below, Sweet Solar Home and Total Solar Panels, posted the EXACT SAME item. Do you think they are both working for and maybe even owned by SunRun?
John, I just spent some time contacting some of my local realtors today. Some said….A home with Solar is VERY attractive, BUT if that Solar-Ready home has strings attached – as in the SunRun contract (checking on credit for that as well)…there is a high likely the buyer will start looking elsewhere and reconsider – buying a home can be overwhelming and hear the solar that comes with the home has strings attached….can be a strong deterrent.
So…when I hear that from realtors – those that are actually out in the ‘battlefield’ of real life – it makes me REALLY nervous and is a deal breaker. I was getting REALLY excited as well until this.
Speaking with SunRun reps and the associated solar equipment provider…I am very impressed with the customer service. REALLY nice people nd no doubt, great company per the reviews I am reading. I belive Sunrun is on to someting great….but it just doesn’t make secure-financial sense yet….my gut keeps making me pause on moving forward. As they say…trust your gut. I am just so bummed…We REALLY want to go solar. Hundreds more people would jump on the Green Wagon if only it were more in reach financially.
Trent – you did the right thing going directly to the source and I feel your pain. Thanks for sharing.
I was just pitched a plan from a company in Massachusetts representing SunRun and I’m wondering what I might be missing. It sounds pretty good to me.
They offered a lease plan with a 10k upfront payment which would result in no charge for the electricity produced for 20 years, NSTAR would be required to buy the electricity produced that I did not use, and I would own the SREC credits in Massachusetts for the solar power produced, which I would sell on the open market for an average of 3 – 500 dollars each.
My calculation is that I would get the original payout back in about 4 years. Also it seems that if I sold the house I’d be selling a lease contract that basically meant the new owner would have no electricity bill, plus the SREC’s etc.. So I imagine that that would be attractive to a potential buyer.
Am I missing something or does this sound like a very good deal?
Thanks.
Eric
The math doesn’t add up, so something is missing. You don’t say what your total monthly electric costs are but since you say your payback is 4 years I will assume it averages roughly $200/month which translates roughly into a 10kW system. A system that size is expensive, the 5kW systems I’ve priced out still cost in the mid 20,000s to install, so I’m guessing a 10kW system will run around $35,000. Who is eating those missing costs?
Correct me if I’m wrong, but NSTAR isn’t paying out cash for electricity. They provide credits against your electric bill. So you can’t really make a profit on this from selling electricity back to them, you can only reduce your costs to zero. Any excess capacity is wasted.
You CAN make a profit from selling SRECs but you need to understand that this is an artificial marketplace created by the state to jump start small solar installations. The state and the utilities are going to phase these out after a few years so don’t count on them as a long-term source of revenue.
Finally, don’t underestimate the difficulty of trying to sell your house. The issue grows larger the longer you stay there too. It might be an easier sell in the early years while the system is newish, but as the system approaches its expected life span it looms large. Who is going to remove it?
Another consideration is the age of your roof. What happens when you need to replace it? You have to remove your solar array.
I wouldn’t want the sale of my house to come down to whether the buyer was willing to assume the SunRun lease. And you can’t just agree to keep making the payments to SunRun in order to close the sale. No buyer is going to want somebody else’s equipment on their house and rely on a stranger to continue paying the lease costs. This is a major liability.
Finally, what is your liability at the end of the lease (a/k/a PPA)? I was in the leasing business for 10 years. Any lease that doesn’t specify an end-of-lease purchase option WITH a dollar figure attached is setting you up for big termination costs.
My advice is to go back to the installer and hit them with these hard questions.
To everyone considering a Power Purchase Agreement – remember that these are financial arrangements. The guys on the other side of the table are finance experts and have figured out how to make a lot of money from selling these to the average home owner. You need to go into them with a solid understanding of your risks and obligations. Mistakes can be VERY costly.
John,
I have been in business for sometime and something that I see that your bringing out is you assume that SunRun pays over $25,000+ for the system. Why would you think that? If a company is doing a lot of business they generally will negotiate better prices and to assume they pay the same for each system regardless is sending out smoke. In my own investigating I found that Sun Run buys $2 million in solar units each day. That is amazing in the ability to trump the cost of the systems. Knowing they don’t pay the same as other Solar providers gives Sun Run an obvious opportunity as well as carrying it to potential clients. I would hope you would do your homework better before you attempt to make yourself as an authority on Solar.
Your going to wonder what I do for work, I am a Hunting Guide that enjoys Economics and Business practices.
Dan, thanks for your comments. I’m certainly not an authority on solar, but I did spend 10 years running my own equipment lease-finance business. I believe that gives me some measure of authority when it comes to speaking about the financial instruments used by Sun Run since it is for all intents and purposes a leasing company. I have no doubt that they can negotiate volume discounts for their equipment. In fact, I have never questioned whether the cost of Sun Run equipment is more or less expensive compared to its competitors. What I have questioned is the value in the financial arrangements they offer. I have done my best to help others to think through some of the ramifications of entering into one of these agreements and provided a set of questions that should be asked. As I stated in my article, for some people a Sun Run PPA will be a good option but for most, an outright purchase will be the best option.
Would you do Sunrun worth it at NO upfront cost (due to state subsidy), which is what i have been offered?
You don’t provide enough info to make an informed recommendation. SunRun’s primary business model is to offer no upfront costs to make it easy for homeowner’s to get into solar. But the cost of the equipment is buried in the power purchase agreement you must sign. It’s like getting a discount on a phone when you sign a two-year service agreement. You pay more for the service because the cost of the equipment is buried in there. To understand the long term costs and benefits you must do a complete comparative lease vs buy analysis. Now, if you don’t have the financial resources or home equity to make an outright purchase, the lease/power purchase agreement (PPA)becomes your only option and the analysis becomes easier. But remember, the PPA is a long term commitment so it is important that you fully understand your obligations BEFORE you sign it.
Not enthralled with SunRun. They misrepresented the payback and after a year it’s looking as if it’s going to take longer to get my money back. If you contact them it’s like a song and dance as they skirt around the real questions. Have a neighbor who used a different company and has same home layout as we do and paying significanly less for his electricity and sometimes recieving money back from electric company. Another friend who used SunRun underestimated by so much that they had to put in a variable speed pool pump for free to try to compensate as they could not put up more a panels. It’s all very complicated in the estimasing process and so much so that I think they take advantage the consumer will not totally understanding what the rerturn is. Sunruns customer support I will repeat is not helpful. They have a website which shows your daily usage which doesn’t work half the time and though it shows projected output it never totals that output to actually output so you can see if what they sold you is working properly. Not happy.
Peter, sorry to hear about your unsatisfactory experience, but thank you for sharing. The interesting thing here is that you have a neighbor’s experience for comparison. As you rightly point out, there are a LOT of variables. Your neighbor’s house may get better sun exposure, the installed system may be sized differently or be more efficient, he may have lower total electricity demands, it’s hard to say why he’s paying so much less. What is clear is that you are not happy with your purchase. Can you tell us if you have a lease or a power purchase agreement? I ask because the monthly PPA payment is based on the production of your panels which varies considerably. Obviously SunRun has an obligation to report to you that production so that you know what you’re paying for. The fact that their reporting web site is not functional is certainly a red flag in my book!
Why would it be a problem to sell the house if I went with the prepaid option? The new owner would not have to pay anything for the system, because I already did. And Sunrun will remove it at no charge at the end of the 20 year lease time if they didn’t want to continue the lease program. The only glitch I can imagine is that new owners might use more electricity than I do and the system would not provide all the electricity they need.
Hi Marion. I’m confused by what you are saying. If you are going to prepay 100% for a system, why not simply buy and own the system. Why go through an intermediary who is only going to add to your costs? And you would have complete ownership and control over the sale and disposition of the equipment and attached property.
Since you have used the term “lease” and indicated a 20 year term, I assume you are buying down the cost of the system in some amount in order to lower your monthly payments to SunRun. So SunRun owns the system until such time as you have completed your lease obligation and either returned the equipment to them or exercised your purchase option.
In the meantime, you have just reduced their risk in the transaction but not your own. You are out the money that you put down, you still have a 20 year payment obligation and you do not own the equipment that is attached to your house. Anytime someone else’s property is attached to yours it creates legal issues when you go to transfer title to that property. And issues have a nasty way of turning into problems.
The SunRun issue is complicated by the fact that the potential new owner must decide whether to assume the SunRun lease. This means additional credit checks and paperwork for them that must occur simultaneously with the purchase and sale of your house. It’s another hurdle for them to leap in the purchase process.
But what happens in the case when a potential buyer doesn’t want to assume the SunRun lease? You will need to satisfy your lease obligation before you sell your property. And, depending upon the terms of your lease and how far into it you are, this could mean a big out-of-pocket payment.
Here’s my advice to everyone who is considering one of these agreements, get a copy of the SunRun lease agreement and run it by an attorney. It will cost you a few hundred dollars but it may end up saving you tens of thousands of dollars. In the worst case, it will give you the knowledge to make an informed decision.
Hi John,
I just sat through a solar workshop where SunRun was presented as an option. Speaking with the workshop organizer and the installing contractor here is the story I was told:
They install “Solar World 235w Modules, 3.29kW System” for $6,000 payment upfront. This includes the inverter, monitoring, repairs and mainanance for 20 years. They estimate this system will shave $320+ from our annual power bill.
SunRun retains ownership of the equipment, the federal tax credit and local incentives. The state tax credit of $6,000 (usable at $1500 per year x4 years) stays with me. So after 4years I would be zero out of pocket (ignoring time-value-of-money and risk of state government scraping the tax credit program).
The agreement is 20 years. At the end of the agreement I will have 3 options (like most leases). 1)Purchase equipment at the market value at the time (How much will a 20 year soloar system be worth?). 2)SunRun will remove the equipment at their expense. 3)SunRun may offer a month to month lease rate.
There is no monthly payment. In effect the $6,000 upfront cost is a $300/year lease payment prepaid for 20 years.
SunRun will guarntee the power output of the system and claim they will write a check (at the market rate) of any underproduced electricity. Any unused electricity is credited toward future energy drawn from the grid. Any unused power credits are lost every March (donated to the local help-a-neighbor plan).
It all sounds a little to good to be true. The downsides I can see are:
1) $1500-$6000 risk of the state legislature scrapping the tax credit before I can use all of it (over 4 years).
2) Opportunity cost of getting better solar tech installed sometime in the next 20 years. How do I evaluate this risk? Isn’t this like buying a computer, at some point you pull the trigger despite the always improving tech level?
3) SunRun bankruptcy/failure – do the repo men show up to seize their assets off my roof?
4) An extra hoop for a future home buyer to jump through – although it seems worth it to get an entiirely prepaid lease on equipment that subsidizes your electricity.
5) With an estimated savings of $320 per year and a $300 per month (all prepaid) worst case cost (assuming the tax credits are unusable) the NPV of this project is totally dependent on assumed discount rate and future costs of electricity.
So that is what I heard 3 days ago. This feels a little to good to be true. I think another week of research and contemplation and I may go down this path.
Fire back with any stones I’ve left unturned, or things that may blindside me. I’d love to get an equipment sales/leasing guy’s take on all this.
Thanks
Wow Orion, it sure does sound too good to be true…but who knows, it might be. I too feel that there is something missing here but I can’t quite see it. I would consult with another solar installer in your area and ask them what they make of it.
I’m a Solar PV Consultant on Oahu and from my experience…The SunRun Total Solar Option is the best deal in town.What the customer pays up front is less than what they would pay if they bought the system after they claim their tax credits and the system is fully insured, warranted, monitored and maintained for 20 years. Most people don’t have the tax liability to purchase the system so SunRun makes Solar available to virtually anyone. All my customers, 60-plus and growing, are very satisfied.
Michael, thanks for offering your perspective. I agree with you that most people are not in a position to purchase a PV system without borrowing and that, as a business, Sun Run enjoys certain tax advantages unavailable to us regular folk that may trickle down to the consumer in the form of lower costs. I also agree that the SunRun Total Solar Option may be the best option for some people, just not all people, nor most of them in my opinion. The purpose of my blog is to get people to consider all of the costs against all of the benefits. After all, once you’ve signed on the dotted line and the system has been installed, you’re on the hook for 20 years. If I don’t want to be in a two year contract with my cell phone provider, why would I want to be in a 20 year contract with my power supplier?
As a relatively new customer of SunRun (<7 months) I can definitely say that I am unhappy with their representation and customer service. They didn't install in a reasonable timeframe, just barely within the contractual timeout. They asked for a deposit that was refunded as a part of the deal. Their collections department is now forcing me to prove that I paid the deposit. Right before the the install they raised the contracted power price by 2 cents. The contract had my wife's name wrong and didn't collect our email address. It turns out that all communications are via email ( what little they provide). They do not provide clear expectations for billing and process.
My neighbors went with Solar City and have been very pleased. I suggest you avoid SunRun and agents when considering a PV system.
Hey Bill, I’m very sorry to hear about your travails. We’ve heard this story before. It sounds as though SunRun has growing pains. My question to you – are your panels generating the power they are supposed to? Are you happy with the equipment and the savings?
The Investment Risks of Installing a PV Solar Electric System. Good stuff, I can’t seem to locate Part 2, is it published yet? Thanks Terry
Terry, look under the Green Ideas section of this site. Thanks for reading.
[...] skeptical press can be just as important as positive press. We recently stumbled upon an article in mediaOrganic that raised some concerns about SunRun and our solar power service, and we’re [...]
[...] skeptical press can be just as important as positive press. We recently stumbled upon an article in mediaOrganic that raised some concerns about SunRun and our solar power service, and we’re [...]
[...] eye, however, was the SunRun logo plastered all over the presentation. A short while back I did a post about SunRun in which I concluded that their plans offered limited appeal to most homeowners due to their [...]