In Part 2 we will peel back some more layers of the MyPower package by focusing on the financing. Make sure you have read about the product in Part 1 of the review if you haven’t yet.

In 2015, the solar industry is shifting away from the unfairly priced lease/PPA model to loan financing. MyPower does indeed provide loan financing, but you get the impression it looks a lot like a Power Purchase Agreement (PPA). Reading through their 34-page contract will not clear this up for you (a concise solar contract should cover everything in 3–5 pages – this contract takes fine-print to the next level). Payments are made to SolarCity based off system production at an “equivalent rate per kWh” that increases 2.9% each year. These variable payments (due to being based off of production) are applied to the loan as any mortgage payment would be. The variable payment structure is set up with the goal of having the system completely paid off after 30 years. However, if the solar system doesn’t hit the “Expected Annual Production”, which the monthly payments are based on, it is possible to still owe thousands of dollars at the end of 30 years. The power production guarantee is considerably lower than the “Expected Annual Production”, making this an entirely possible scenario. The contract has a clause called “Variance of Loan Term” which discloses this possibility. It explains that in the event there is a remaining balance at the end of the Loan Term, MyPower will provide a refinance option for the outstanding balance.

The financing has another ingeniously deceptive twist. By charging you a low “equivalent rate per kWh” upfront (and then increase it by 2.9% each year), most of your initial payments will go toward interest. As the rate increases over the years, you start paying off more of the principal. Loan structures are typically set up this way, to pay more interest up front, but by increasing the payments with an escalator, it completely skews the payback dynamic. The customer ends up paying a much larger amount toward interest and ultimately thousands more than would have been paid with a conventional flat monthly-payment financing option. With this payment structure, the effective APR ends up being almost a full percent more than the 30-year stated rate.

MyPower Review Conclusion

SolarCity is a company with a very strong brand in the solar industry. They offer an industry leading warranty, but their prices are well above the market, and the MyPower financing option is structured to keep homeowners making ever-increasing payments for three decades – and sometimes beyond. The numbers speak for themselves:

6.5kW solar system

SolarCity MyPower System Cost: $33,150

Lifetime payments (tax credit used): ~$50,550 (30 year loan)

Avg. Cost Per kWh: 17.3 cents (30 years)

Avg. Payments: $140 (30 years)

Typical Installer System Cost: $23,400

Lifetime payments (tax credit used): ~$22,310 (12 year loan)

Avg. Cost Per kWh: 9.3 cents (25 years)

Avg. Payments: $155 (12 years)

It’s hard to justify paying more than double for a longer warranty. For more insights on going solar, check out the rest of the Solar.com blog here.

 

 

Being one of the most popular loan packages in the solar market today, it’s remarkable that SolarCity’s MyPower option has not yet received a thorough industry review. The media generally touts it as being the savior to the industry – a true answer to the leasing model. It’s time to go beyond the hype and dive into what’s really being offered.

Since MyPower’s debut in October 2014, there have been an estimated 17,000 installations. The product allows homeowners to see immediate monthly savings, own the system, and sets itself apart with a 30-year warranty from SolarCity, one of the most recognizable brand names in the industry. Having reviewed dozens of their MyPower contracts myself, I have come to several conclusions.

Pricing is well above market

The cost-per-watt on SolarCity’s MyPower contract is always consistent, no matter what the size of the project. They price systems ranging from 2.5kW to 10kW or larger at the same $5.10 per watt (cash or financed). Having no discrepancy in price is an obvious red flag. Overhead, permitting, engineering, and transportation is generally consistent costs, no matter what the project size – which means more dollars are going to profit margins on larger projects. Solar.com bid data has found the average price for solar in California to be $3.60 per watt – 34% less than what SolarCity charges on every system they install (almost a $10,000 difference for an average system).

Warranty’s fine print excludes important protections

MyPower no doubt has one of the best warranties in the solar market. It provides the full bumper-to-bumper 30-year system warranty, covering all equipment and labor. With most installers offering a 10-year workmanship warranty, and some offering 20 years, the MyPower warranty stands out. The warranty does, however, have one flaw. While most installers include a roof warranty matching their workmanship warranty, MyPower does not. In fact, MyPower only warrants the roof for 1-year after installation but does offer to match any existing roof warranties. This can be a potential problem in drought-plagued areas such as Southern California, where consistent rain has not been seen in years. By the time a homeowner finds out, there’s a leak, the 1-year warranty may have expired. It’s also often misconstrued that the warranty covers washing the panels. The contract explicitly states that the owner is responsible for keeping the panels clean, and the production guarantees fall void if this is not met.

Equipment is not top tier

SolarCity is infamous for not disclosing the equipment specifications in their contracts, and MyPower is not an exception. Their marketing pushes hard on the guaranteed cost per kWh, which leaves equipment a moot point. From Solar City’s perspective, offering a system fully warrantied for 30 years and guaranteed production renders equipment manufacturer irrelevant. SolarCity uses off-brand models to keep their costs low, but they are covering homeowners under the MyPower warranty. However, this takes away the layers of protection on a solar system. With a regional installer, a homeowner faces the risk of the installer going out of business, but may still be protected under the warranty of brand name equipment manufacturers – manufacturers like LG that are not going anywhere. SolarCity displays its own brand name as the forefront on their product and hides the potentially questionable brand names of the manufacturers. As stated before, SolarCity’s brand name is currently elite in this young industry. But as a 9-year old company that has never had a profitable year, in a tax credit dependent industry, where does the future lie?

The solar tax credit expires in 2016. SolarCity’s balance sheet does look strong, but there are other risks. As utilities attempt to adjust their rate structures in order to minimize the impact of solar, some predict it will lead to tens-of-thousands of contractual PPA agreements that leave homeowners paying more for their solar system than they would be paying for electricity from the grid. Class-action lawsuits in the solar industry could potentially shine a light on bad financing deals.

The timeframe is not within industry standards

Timely installation is always a plus when going solar. The faster a system is installed means less stress and quicker savings. Most solar companies fall in the range of 2 – 4 months from the time a contract is signed until the system is turned on. SolarCity is an outlier here, known to take six months or more to install a system due to backlog and inefficiencies. The MyPower contract confirms this exasperated timeline stating that the installation will be done within 12 months!

Part 1 Conclusion

The MyPower product stands apart with its 30-year warranty term, but the warranty and equipment offered do have some flaws. The price tag likely doesn’t warrant the additional cost. In Part 2 we will consider some comparable options on the market and take a deeper look at the finance package, which has even bigger surprises hidden within it.

[UPDATE: Since posting this article I’ve been made aware that SolarCity upgraded to a 10-year roof warranty as of June of this year. SolarCity has also increased the APR on MyPower by half a percent since the its debut last fall.]