The era of solar + storage is here, but needs innovative financing to grow

By Daniel Hill, director, sales & marketing at Tabuchi Electric

Innovative financing options like the Power Purchase Agreement (PPA) have catalyzed record growth in the residential solar sector. But new regulations and rate structures are slowing residential solar adoption in areas where solar production is high. The reliable payback offered by net metering is giving way to an uncertain regulatory future in many states, making the promise of self-consumption and flexible operation offered by energy storage a far more compelling option.

Daniel Hill, director, sales & marketing at Tabuchi Electric

Daniel Hill, director, sales & marketing at Tabuchi Electric

Despite their growing appeal, the price of modern storage systems that pair with residential solar can add upwards of $12,000 to the system price tag when inverters, switches and installation costs are factored in, putting them out of reach for many solar customers. New financing options for solar + storage are the keys to overcoming this classic upfront costs obstacle, helping storage blossom, and extending the solar boom.

Financing options from PPAs to loans have powered solar development because they offer a win-win for consumers and developers. A developer can profit from income and tax credits associated with owning and maintaining a solar system, while the homeowner simply pays for the energy generated by their system. There’s no money down, no management hassle and electricity costs are often lower than what they’d pay with their utility. With support from declining capital costs, diverse financing options helped installed residential solar capacity jump 20-fold from about 100 MW in 2010 to over 2,000 MW in 2015. In 2014, 72% of residential solar installations were third-party owned and funded through a lease or PPA.

With growing amounts of distributed energy entering the grid, the energy surplus from solar generation during midday hours is a growing challenge for electric utilities. In response, utilities, regulators and state legislators are considering and adopting a variety of new policies and rate structures, most of which are more complex and less friendly to solar customers than simple net metering. A recent North Carolina Clean Energy Technology Center report stated in the second quarter of 2016 alone, 42 states and the District of Columbia took some solar policy action, the most common actions being fixed charge increases and changes to net metering policies.

A simple solution for solar customers to deal with shifting policies and potential rate hikes is to add storage capacity to their home systems. Consumers can store energy that is generated during the day on-site for later use when demand is high, bypassing the grid and avoiding time-of-use rates to maximize savings. Solar + storage systems that are grid-friendly (capable of sending electricity to the grid on demand) also add flexibility for operators to balance out the grid and better match supply with demand.

With the expanding market and growing interest in solar + storage, up-front costs are holding back broad adoption. As the world waits for storage system costs to drop, new financing programs stand to transform the solar industry today by making storage an economically accessible option for thousands of homeowners and clearing the way for a more flexible grid and smoother integration of distributed energy sources.

That’s why many solar + storage manufacturers are offering new and flexible financing, often with third-party partners, to residential solar customers. GreenTech Media recently reported that “VC funding for no-money-down distributed storage financing is approaching $700 million for this year.” With growing demand and funding in place, the stage is set for residential storage financing to shift into high gear. The next step will be the creation of inventive financing plans to fit the needs of every solar customer interested in storage.

My company, Tabuchi America, recently joined forces with the Electric & Gas Industries Association (EGIA), a non-profit electrical contractors’ organization, to create the largest residential solar + storage financing option to date. The program is available in 17 states and earmarked for $300 million in financing for residential solar installations, including grid-friendly storage systems, with five, 10, 12 and 20 year options. Other residential storage companies like Sonnen and Tesla also recently began offering similar financing programs. The faster this trend grows and the more diverse storage financing options become, the better for customers and utilities alike.

It’s up to us in the solar industry and our partners to create new financing choices and shepherd them to market until every residential solar customer who wants an energy storage system can get one. Just as financing helped get cars into millions of garages and mobile phones into millions of pockets, innovative financing is the key to getting storage systems attached to millions of residential solar systems, to the benefit of utilities and all of their customers.