Solving Solar's Biggest Problem Didn't Take Technology Development

By Alexis C. Madrigal

Energy Entrepreneurs bug

For probably 40 years, energy analysts have pointed out a key problem for solar power relative to its fossil fuel counterparts: you pay for the whole system up front and all at once. The upfront costs are high.

For example, in 1978, an attorney turned solar evangelist, begging for a way to help defray the upfront costs from the government, told President Jimmy Carter, "Most people cannot afford the initial investment, that two to ten thousand dollar cost of the solar system." 

With an internal combustion engine, say, you get to amortize the total cost of the power produced over the many years that you buy fuel for that engine. It's almost like a layaway plan for the power. Imagine if every time you bought a car, you had to buy all the gasoline that would run the car for its lifetime. That'd be an expensive automobile.

Solar finds itself in an analogous situation. The cost of the energy produced over the 20 years you've got the system all comes at the beginning. You are prepaying, essentially, for decades of electricity production when you buy the system. That means only people with substantial cash on hand are likely to put panels on their homes. Who has an extra ten or twenty grand lying around?

And that's where SunRun comes in. Lynn Jurich explains in the video above that her company gets money from banks -- hundreds of millions of dollars -- and then uses that money to finance the installation of solar systems on homes. Homeowners pay on a monthly basis, not up front, at rates that are comparable to or cheaper than the grid (SunRun says).

We still don't know how much money SunRun makes on each home, but we do know that the company's model has exploded. Most new solar is now being installed with the leasing model and other companies like SolarCity and Sungevity are trying to horn in on SunRun's business (even if SunRun remains the largest solar leasing company).

The takeaway from SunRun is simple, though: sometimes the innovations that matter aren't technical but financial (or even social). Of course, developing more efficient, less expensive solar cells helps, but the technology development alone cannot guarantee successful market deployments.

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