After continued success on the West Coast, major solar lease companies establish their roots in Maryland during 2011.

The residential solar lease has arrived in Maryland! With a mandatory Renewable Portfolio in place and higher than average electricity rates due to natural gas generation, Maryland was a prime target for the expansion of the residential solar lease and power purchase agreement market. West Coast based SolarCity, Sungevity, and SunRun have each established operations in the Free State during 2011.

One of the main barriers to entry for a typical Maryland household in acquiring a solar electric system is the significant upfront cost which is typically in the tens of thousands of dollars. While a significant percentage of the upfront cost is paid back in year 1 with the remainder of the system paying for itself in 4 to 8 years, $20,000 to $50,000 is a hefty amount of cash. Add fluctuations in Solar Renewable Energy Credit values, warranty and maintenance contracts, and inverter replacement and its natural to want to stay on the fence. Purchasing residential solar in Maryland is however a smart investment with a solid return on investment.

To alleviate the legitimate barriers to entry and purchase anxieties, the residential solar lease was born in California several years ago. In a nutshell, the company designs, installs, commissions, and provides warranty service for the length of the lease or agreement on a brand new solar electric system. Homeowners can choose to pay $0 or little down, partially prepay, or fully prepay the lease or agreement. Homeowners receive free online system monitoring, free maintenance, free inverter replacement, and they donít have to hassle with the sometimes confusing incentives. For a homeowner who simply wants to reap the benefits of lower electric bills on a monthly basis and have someone else maintain the system, a solar lease is a perfect solution.

What is the difference between a lease and a power purchase agreement? With a solar lease, your monthly payment is the same every month. With a power purchase agreement, your monthly payments will vary based on the electricity generated by your system. However, those who fully prepay the lease or agreement upfront have no monthly payments. Based on preliminary assessments, the fully prepaid option is very popular. Other differences between the companies include the term length (15 vs. 20 years), FICO score minimums, and end of term options. SunRun and Sungevity partner with local installers while SolarCity rolls its own trucks.

Is there a catch? Well, you’ll need a healthy FICO score to qualify. A minimum score of 700 seems to be the baseline. Your projected return on investment may not be as stellar as a standard cash purchase. If you want a specific brand inverter or wattage module, you may not get your first choice. You’ll need a good roof if your shingles aren’t in great shape, you’ll need a new roof before install. If you’re brand agnostic, you’ve got a good credit score, a good roof, and you want solar without the full upfront cost, you now have three go-to companies in Maryland Sungevity, SunRun, and SolarCity!

For more information or to get started on a quote, please visit www.SolarCity.com, www.Sungevity.com, and www.SunRunHome.com. [2011 Western MD Solar Tour]

A Solar Renewable Energy Credit (SREC) is a tradable commodity representing the non-polluting value of 1,000-kilowatt hours (kWh) of electricity produced by a solar electric system. The SREC is separate from the value of the electricity itself and permits the owner or purchaser to claim the benefits of the clean energy production by effectively subsidizing the cost of the installed system.

Twenty-nine states and the District of Columbia have enacted Renewable Portfolio Standards (RPS) legislation that requires electric utilities, electricity suppliers and/or electric distribution companies to produce a certain amount of the electricity they sell from renewable sources.

A number of these jurisdictions, including Maryland, have a “solar carve-out” within the RPS requiring a specific percentage for solar production within the state . Any company in Maryland that sells electricity must either produce the required amount of solar electricity from its own assets, purchase SRECs from PV system owners or pay an Alternative Compliance Payment (ACP) into a fund that will be used to support the construction of solar systems in the state.

Maryland’s solar requirement took effect in 2008 requiring approximately 2,500-megawatt hours of solar electric production or 2,500 SRECs. The amount of solar electricity required to be produced increases each year until 2022 at which time solar electricity should account for a full 2% of all the electricity consumed in Maryland.

Suppliers not meeting their obligations are required to pay an Alternative Compliance Payment which effectively sets the maximum value of an SREC on the open market. Maryland’s ACP is $400 per MWh through 2014. A 5 kW solar PV system will produce approximately 6 SRECs per year. Current market prices are approximately $275 per SREC and are likely to remain in the upper $200s for the next several years barring an oversupply of SRECs relative to the utility requirements.

To earn and sell SRECs a system owner needs to apply and be certified as a Renewable Energy Facility by the state Public Service Commission. Once certified, a system owner has several options for selling their SRECs, including agents, brokers, auctions and exchanges.

SRECs are an important part of the financial analysis of a solar investment. It’s a good idea to ask installers and brokers about the current market value of SRECs and how they can help you to maximize your return on investment. [2011 Western MD Solar Tour]