Interview: Discussing Solar Power Costs and the ITC with Vikram Aggarwal

Our Luminext team got an exclusive opportunity to do a Q&A with Vikram Aggarwal, the CEO and founder of EnergySage, a Boston-based startup and the nation's largest online marketplace for solar. Think of EnergySage like Expedia - its mission is to make going solar as easy as booking a flight online.

With support from the U.S. Department of Energy, Vikram started EnergySage to help consumers better understand their solar options and empower them to make informed solar decisions, while providing installers an affordable way to access in-market customers. Like and Autotrader changed how automobiles are bought and sold, EnergySage is in the midst of achieving similar success for solar by allowing homeowners and business owners to comparison-shop for solar online, thus increasing transparency and choice within the industry.

Let's start with a few easier questions about solar power costs and the ITC. With all the help currently provided by the government, which options are better - leasing or buying solar? As a founder of the largest energy marketplace, what's your opinion on leasing? Does it work better for customers if they pay a fixed amount every month to lease the panels or secure lower rates through a PPA?

Good question! Historically, leasing made it possible for homeowners and businesses to go solar when solar PV systems were too expensive for most people to purchase outright. However, as equipment and installation costs continue to fall and better solar loan options become available, system ownership has become much more accessible. As a result, more homeowners are gravitating towards the greater savings and flexibility that owning a system provides. For example, our most recent Solar Marketplace Intel Report showed that over 90% of EnergySage users chose to buy their solar panel system outright, rather than sign a lease or PPA. Perhaps not surprisingly, only 11 percent of people who join EnergySage specifically state a strong preference for third-party ownership to begin with.

All this being said, there are still cases where leasing a system is the right financial decision. If you have limited or no tax liability (i.e., you’re retired or low-income) and cannot take advantage of the ITC or other tax credits, a lease is likely your best option – this is because the leasing company receives the tax benefits and should pass some of the savings on to the customer. This is probably the biggest reason to choose a lease over a loan.

Generally speaking, I think a PPA offers a better deal than solar lease. With a lease, you pay a fixed monthly 'rent' for your solar panels regardless of how much electricity you produce, while with a PPA you pay per unit of electricity produced by your panels. Ultimately the PPA is better for the consumers, because they pay for the actual amount produced by the solar energy system. 

Vikram Aggarwal quote on leasing and PPAs

What about businesses, schools and low-income households that don't always receive the full benefit of the ITC - lease or buy? We just witnessed the start of a very nice public school solar project in Avon, NY, so I'm curious about your views on solar proliferation within these communities.

As mentioned above, leasing is a great option for homeowners and organizations that can’t benefit from the investment tax credit. Any organization with significant electricity costs can use a lease or PPA to hedge against increasing electricity rates and stabilize their monthly expenditures. With a lease/PPA, the solar company that owns the system claims the ITC, and then passes some of the savings to the customer. For schools and other non-profit organizations, solar leases make sense, as they don’t have a sufficient tax liability to benefit from the ITC and depreciation tax benefits. Similarly, for private businesses unable to absorb the tax credits, leasing/PPAs can be an attractive option. 

It's obvious that the favorable conditions for solar have generated a lot of new solar companies. How should customers determine which solar company is the best? What should customers watch out for? How can EnergySage help them?

This is probably one of the most common questions we’re asked, especially given some of the high-pressure “sign now” sales tactics employed in solar. The best solar installers are ready to answer all of your questions, provide advice, and stand behind their installation with a workmanship warranty. Any solar installer that uses high-pressure sales tactics to push customers into an agreement should be viewed with a lot of skepticism. If a solar company tries to pressure you into signing a contract that same day, or insists on conducting a site visit before they’ll even give you a ballpark estimate, I’d recommend you look elsewhere. 

Vikram Aggarwal No.1 recommendation for choosing solar installers

My #1 recommendation is for all buyers – residential, commercial and non-profit – to take their time and get at least three competing offers from different solar companies. Once you have those quotes, standardize them and then compare your offers side-by-side to assess their key differences in terms of equipment and installer quality, as well as pricing and financing options so you can make an informed decision. 

EnergySage does all of this work for consumers. Interested solar shoppers can register their property on the Marketplace at no cost and receive up to seven competitive offers from EnergySage-approved installers in their area, often within a few hours. EnergySage will then calculate the key metrics and present them in a transparent, apples-to-apples format online so consumers can easily compare their options. By doing so, consumers can avoid the traditional “sign now” sales pitches and gain certainty that they’re actually getting a fair price for their installation.

To fully protect consumer privacy, we anonymize all email addresses and allow users to decide if and when they want to add their phone number.

Due to solar power's intermittent nature, do you feel that there will come a time when states decide to put a cap on the solar capacities that can be added to the grid?

No, I don’t believe we’ll get to the point where states put a cap on solar capacity. In many parts of the U.S. solar power is already cost-competitive with nuclear and non-renewable forms of energy like coal and natural gas. Studies have shown that installing more distributed solar generation actually reduces electricity costs for all utility customers. Additionally, the energy storage technologies that resolve intermittency issues already exist and are being implemented across the country, both in homes and businesses, and at the utility scale. With a lot of R&D in the industry today, these storage technologies will become even more popular as technology costs continue to fall.

States are already dealing with the very real impacts of climate change, such as sea level rise, heat waves, and other extreme weather effects. Government policy that promotes the adoption of technologies like solar-plus-storage is a more sustainable approach to tackling climate change, rather than using taxpayer dollars to attempt to mitigate the fallout of climate-related catastrophes. By making renewable energy technologies more accessible and relevant to power utilities, states can both encourage the adoption of solar and reduce our reliance on greenhouse-gas emitting fossil fuels. 

Vikram Aggarwal oppinion on grid defection

The ITC has definitely helped the U.S grow its solar capacities exponentially. Now that storage tech is racing to lower prices and to join the market, is there a real possibility of mass grid defection?

Americans are very much about reducing energy costs, increasing control, and self-reliance. While interest and availability of energy storage continues to grow, we're still a long ways off from homes becoming their own self-sustaining power plants – and I don't believe we'll ever see it at the mass level. Unless utilities start to drastically change the design of their rate structures to actively dis-incentivize rooftop solar (e.g. high minimum monthly charges, discontinue net metering, unfriendly TOU rates), we expect the vast majority of consumers to remain connected to the grid even with storage. Grid-connection offers many benefits, not least of which is reliable power at a lower price.

In our solar marketplace, the solar shoppers we see choosing solar-plus-storage solutions still maintain their connection with their utility. We expect this to hold true even as it becomes technically feasible to go off the grid with batteries. That said, we believe that utility companies must implement a long-term business model that supports distributed solar for this to happen.

Many forward-thinking utilities understand the appeal of solar and storage for Americans, and are actively taking steps to incorporate solar into their business models. For example, in our program with National Grid, Rhode Island customers are able to access additional solar incentives if they improve their property’s energy efficiency before installation. 

Where do you see the future of solar? 

Solar power is already an integral source of energy in the U.S., and its popularity with homeowners, businesses and utilities will only increase going forward. Unlike the natural gas and coal that fuel traditional power plants, sunlight is clean, abundant, and free. In fact, in some parts of the country, the cost of electricity from solar is already lower than electricity sourced from fossil fuels, and the market is responding accordingly. Data from the U.S. Energy Information Administration shows that we will install more new solar power than any other form of electricity generation this year. Along with that explosive growth comes a new market for energy storage technologies and advanced energy management systems that will make solar even more attractive for homeowners. If these trends continue as we expect that they will, solar will cement itself as the most dependable, accessible, and affordable source of electricity for American consumers.

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