PACE Releases Guidance on Third Party Solar Financing

In states across the Southeast, PACE has been involved in discussions about integrating solar power into the electricity marketplace. One of the measures often proposed to encourage adoption of rooftop solar technology by homeowners is third-party financing. Usually, such financing options for solar require new state laws. And while such new legislation is often well-intentioned, sometimes provisions in the proposed new law create conditions that lawmakers never intended and dangers for which customers might not be prepared. Such is the case, for example, with a new third-party solar financing bill in Alabama, House Bill 277.

To clarify elements of House Bill 277and to provide general guidance to lawmakers on the issue, PACE has published a new report entitled “A Dangerous Precedent: Third Party Solar Financing and Hidden Dangers.” The report is available to lawmakers and members of the public at the link below.

See the Full Report Here

“Often, pieces of legislation such as HB 277 are presented by solar advocates as matters of ‘consumer choice’ that pit energy customers against their regulated utilities, positioning solar power as a right that should be available to all customers. Such is the case with House Bill 277, which has been entitled the Solar Power Free-Market Financing and Property Rights Act of 2016,” the report states. “The bill seemingly creates a financing marketplace in which customers can gain greater access to solar technology, but there a number of other negative unintended consequences contained in the language of the bill – consequences that could be potentially go overlooked by lawmakers.”

PACE also released a condensed ‘Key Points’ sheet to give lawmakers top-line information on third party solar financing and the policy implications of new legislation.

“Under the proposed new law, a customer would be allowed to enter into a contract with a for-profit solar leasing company based, in part or in whole, on a power purchase agreement. In other words, customers would be allowed to lease rooftop solar technology by selling the electricity they generate to the leasing company,” the report explains. “This is a far different arrangement than simply paying for the solar technology over time with a fixed interest rate, similar to a vehicle lease; this arrangement involves paying for technology through the contracted sale of electricity to a non-utility. Unlike utilities whose contracts and electricity sales are closely regulated, electricity sales to for-profit solar companies under the arrangements allowed by HB 277 would be free from regulation by any state authority in Alabama.”

Outlined in the report are examples in which third-party solar finance companies have harmed customers through fraud or through bad business practices. While not all companies engage in such behavior, the report provides caution to lawmakers about what Alabama customers could face if appropriate measures aren’t taken to protect them.