Solar panels for the price of the electricity

Many of us would like to have put solar photovoltaic (PV) panels on our home, and generate our own Citizenre Corporationelectricity.  Until now, I’ve always told people that they have better uses for their money.  Even with the recent extension of the federal tax credit until the end of  2008, and (in Colorado) the rebates being offered by Xcel Energy in order to meet their Amendment 37 requirements for customer sited solar electric, the return on investment for the electricity generated at current prices (about $8 per watt for the panels & system; $4.50 per watt rebates from Xcel, and a $2000 federal energy credit), a 4 kW system only returns 1.4% per year in electricity savings.  (I got these numbers from a workshop presented by Jeff Lyng, who will be vice-chair of The American Solar Energy Society next year, and calculated the return from those.  Jeff was speaking as a consultant for Xcel on their solar rebates program.)   To me, it makes more sense to invest in renewable energy or energy efficiency companies, which are likely to yield a higher return (or put the money in a CD and use the interest to buy RECs or give away CFLs).

Until now.  CitizenRE is offering to install photovoltaic panels on you house, and charge you only for the electricity.  Better yet, the price you will pay is equal to the same price (or less) than your utility charges.   If you like, you can lock in your current price for electricity for up to 25 years (although 5 is standard.)

You do still have to get power from your utility company… there is no provision for battery backup, and they require a $500 deposit which you don’t get back until the end of the contract.  Also, you are only renting the panels from CitizenRE, but you are responsible for damage to them from other than normal wear (as you would be for any other rental), so they suggest that you include them in your homeowner’s policy.

Still sounds pretty good, doesn’t it?  Here’s the big catch: they are signing people up now, but they plan to manufacture the panels at their own plant, which will not start operation until at least September 2007 (and, being a cynic, I’d expect further delays.)  Realistically, don’t be surprised if you don’t have your panels until mid-2008.  But for people who don’t have an extra $10,000 burning a hole in their pocket, you probably weren’t going to get a system until 2008 or later anyway.

This is probably not the only place you’ve heard about them… I’ve read several other blogs (here, here, here, and here. ) about them so far, and part of the reason for that is they are using a multi-level marketing scheme (MLM) (although they don’t like to call it that).  I don’t think any of the blogs I linked to back there are MLM-ers… I also came across several blogs like that (most of which had clearly been started for the sole purpose of selling CitizenRE), and decided not to do them the favor.  I’m not generally a fan of MLM, but I have to admit that it’s probably the best way to reach a lot of homeowners quickly.   As part of my research for this blog, I decided to sign up (it was incredibly easy… I did have to get 4/5 on a quiz, but three of the questions were general ones about solar and electricity, so I only had to guess right on one out of two, which I managed on the first try (but I could have tried again after 2 hours)… they have tutorials for people who are serious about this stuff, but who has time for that?)

Instead, I spent my research time reading the Forward Rent Agreement (FRA) contract their customers have to sign, which is where I got some of the above caveats (also note that they do reporting through a land telephone line, so if you sign up, you have to maintain telephone service for the duration of the contract.  That might be a problem for me, since I use Voice over IP.)

I also browsed through their marketing material, which was available after I took their little test.  After all, if putting solar on your own home is not a good financial proposition, why are they paying their associates $150 for each sale, plus 4% or more of the electricity sold in order to put panels on your house for you?  Here’s what I concluded:

  1. They will have lower costs than an individual homeowner.  Most of us have to pay contractors around $8 a watt for our systems.  Since they will be hiring their own dedicated installers, and install only equipment that they manufacture themselves, they think they can do it for around $4.50 per watt, a price which (In Colorado Xcel territory) would be covered completely by Xcel’s Solar*Rewardsprogram referenced above.
  2. As a business, they can deduct 30% of the full amount of the installation cost under the production tax credit, and it is not capped at $2000, as it is for homeowers.
  3. Also as a business, they are eligible for accelerated depreciation, which basically amounts to an added massive tax deduction.
  4. They get interest on your $500 deposit.  Not much, but if you have 1000 deposits, it starts adding up to real money.   1/15/07: Via PeakEnergy and The WorldWatch Institute I read that interest on the deposit is credited to the consumer.  Checking the associates’ website, it says: “Deposits are invested into 1 year treasury notes. Interest is compounded for the benefit of the customer.”

Starting to come clear?  By my ballpark estimate, if it costs them as much as $6 a watt to install a system in Colorado, they will be able to collect at least that much back under the various tax programs and rebates, and any money they collect from you, the customer, will be pure profit.

So it sounds like a legit business model to me.  In fact, when you look at the above, it’s somewhat surprising that no one has done it before.  If you still want to sign up (and if you want solar on your roof, this seems like the best financial deal currently on offer).

I don’t want to sign up anyone myself… I already have two full time jobs as an investment advisor and environmental activist, but if you use this link, for Frank Knight, who has agreed to make a donation to an environmental charity for any referrals (but not untl you get panels and he gets paid.  Contact me if you have a particular charity you would like to see the money go to.

If you want to become an associate, here’s the link for that.

If you think this whole thing is a scam, and want a random associate, go directly to CitizenRE (there will still be as sales commission paid to some associate, but it will be someone assigned at random.)

I never thought I’d be telling people they could put solar on their roof (in an economical way) so soon.  Keep in mind, this does cost more than your normal electricity bill, because you pay for insurance for the panels, as well as losing the interest on your security deposit, but if you don’t plan on moving, and expect electricity prices to go up a lot, you may come out ahead anyway, because they let you lock in your electricity rate for the duration of the contract (up to 25 years, at your option.)

By the way, I think I read an article recently about a company that’s doing the same thing with solar hot water in Canada (only charging for the price of natural gas not used), but I can’t seem to Google it.  If you saw it too, please let me know.

(Note: apparently you can avoid the deposit if you sign a 25 year contract.  I’m not sure  if that’s a better deal or not… how many of us stay in one house (or even two) for 25-years?  Also, five to ten years from now, the technology will probably reach the point where it does make sense to borrow the money and put up your own panels.  I guess I’m just not a big fan of 25 year contracts for anything.  Mortgages, for instance.)

12/14 I’ve been thinking about this some more, and here are a couple other things to be wary of:

  1. They say they’ll start production of panels in September 2007.   But these things always take longer than expected.  If you sign a contract with them, you’re basically saying that you’re not going to use your roof for anything else while you wait.  At best, you’ll have your panels a year from now, but at worst, they might end up stringing you along for years, when you could have gotten solar from some newer outfit that came along in the meantime… if this model really works, it won’t bee too long before they have competition.
  2. Don’t expect to make money as an associate (salesperson) before 2009, or even later.  A lot of associates are already paying (out of their own pockets) for classified ads, but they don’t start earning any money until systems are installed on homes.  And who is to say that your sales are going to be the first in line… as far as I can tell, they can install systems in whatever order they choose, which means that the location with the highest rebates will probably get all the first panels produced.  Basically, the better a financial deal this is for the customer, the later they are likely to get their systems.  If you are considering signing up as an associate, treat it like a hobby, and don’t pour a lot of money into it.  Frank may be kicking in $75 to charity for each referral I give him, but at least he’s not putting a lot of money in up front… he does not pay unless he is paid.

You may also hear about the CitizenRE offering under the product name ReNu, as well as a couple of thier marketing websites www.jointhesolution.com, and www.powur.com.  The /xxxx at the end of the url is the associate’s ID which they use to track which associate brought in that particular customer.

2/14/07: Given the recent growth in controversy about CitizenRE, I’ve written a followup article here. 

About these ads

18 Comments

  1. solarhome said

    Are you referring to Hearthmakers’ Rental Solar Hot Water Program? I found that news clipping on their site. It’s highlighted about 1/3 the way down the page.

    Thanks for the link… I think I read about this in a press release from their partner, Enerworks. http://www.enerworks.com/. Tom.

  2. solarkismet said

    The math still doesn’t add up for me…

    2 kilowatt system @ $8/watt = $16,000
    * $9,000 rebate from Xcel = $7,000
    * 30% federal tax credit = $4,900
    * Depreciation (estimated at 35% savings) = $3,185
    * $500 from you = $2,685

    2 kilowatts in Boulder, CO might produce 3,000 kWh/yr @ 9 cents/kWh is $270/yr – about a 10 year simple payback, not including the interest on the capital loan. Not spectacular but electricity prices will rise over time, which might reduce it somewhat.

    Plus, you’re probably still responsible for the monthly utility fee, taxes, etc. I hope that this can work out but I’m skeptical of “too good to be true.”

  3. tomkonrad said

    Solarkismet:
    The key is that $8/watt is the retail price for solar. If you go through your calculations starting with $6/watt (which a professional solar installer and distributer tells me can currently be done by the most efficient businesses), you get $12000 – $9000 – $900 – $735 = $1365 before your $500 deposit. That’s a 5 year payback without the deposit, or a 3 year payback with it, neither of which is too shabby, using your numbers.

  4. Tom Arnold said

    Worst case? What if they never survive long enough to produce and install the panels? Hey, I want to see this work but I would have to say “worst case” is that the $500 is lost.

    Any info on the background of the principals?

  5. tomkonrad said

    According to the internal website for associates, the security deposit is not due until an engineer comes out to your house and designs your system for you, and they will not begin sending out engineers until their factory is operating.

    One other thing I ran across when looking for this info:
    “Solar Silicon is not an issue to Citizenre, as we have arranged for a technology license from NREL to manufacture our own low-cost (low-energy requirement) solar-grade silicon. As you know, the primary concern of the PV industry is control of the feedstock. We have made arrangements to supply our own SG-Si, which makes our primary material MG-Si – material that is highly abundant and guaranteed by one of our industry partners.

    We are also aggressively pursuing additional means of SG-Si refinement, with an eye towards moving to carbon as the base material. Nevertheless, we are confident that what we have arranged for will supply us over the next 5 to 10 years of growth – meaning guaranteed SG-Si for all factories over the duration of their expected lifetimes (roughly 10 years) that are built in the next five to ten years.”

    Here is an interesting article from Red Herring about the trend towards metallurgical grade silicon (MG-Si) mentioned above, which quotes the CitizenRe CEO David Gregg extensively.

    http://www.redherring.com/Article.aspx?a=20157&hed=Solar%3A+Doing+the+Dirty

    I don’t have any info about management other than the names on the website. Even bios are missing (or not up yet.)

  6. Tom Arnold said

    Thanks for the clarification. If the $500 is not due up front, I think that reduces the risk. When a factory is running there will be more of a performance record to go on. Very interesting.
    -Tom

  7. […] Update 12/17/06:  There seems to be a lot of interest in the Citizenre program.  For a detailed look at the program check out Tom Konrad’s blog.  He has actually signed up for the program and has some great information for potential participants. […]

  8. PdxJules said

    I read up on CitizenRe’s offering and applied right away. Since there is no up-front cost.

    IMO, If their Investors are satisfied and sign-off on the new (large) manufacturing plant (designed to cut the cost of their PV systems by about half through economies of scale) that’s enough for me. I truly hope they suceed to keep on building plants and maintain their deal to lock rates for Customers for 25 years.

    Thanks Tom, for mentioning the Solar Water Rental program – I will check that out, too. Would be very cool – and I’d also like to see someone manufacture a lower cost Solar Space Heat option…that could potentially qualify for energy Conservation rebates. Let me know what you think is best in this arena, if you’ve got something…

  9. niels said

    A comment on their huge new plant: Cell manufacturing plants that use new methods of cell manufacturing take years to get up and running.

    Having an NREL process that works in the lab is completely different from a factory assembly line high that cranks out 500 MW per year.

    Examples of this include: First Solar, Evergreen, and Nanosolar

    Here is a little history on First Solar (who make a 9% efficient CdTe module – no silicon)
    Founded in 1999 (i.e., they had their patented idea)

    http://www.ecoworld.com/Home/articles2.cfm?TID=303

    Began significant production in 2005

    http://www.firstsolar.com/company_overview.php

    with 20 MW of production

    Here is a little history on Evergreen (who draw the silicon in a thin layer out of the melt)
    The were founded in 1994 (i.e., they had their patented idea) and hit sales of about $20 million in 2004

    http://library.corporate-ir.net/library/12/123/123321/items/226441/Evergreen2007-01-09%20Needham.pdf

    NanoSolar – thin film PV
    Founded 2002 – hope to have initial production this year (2007). I bet it will be 2010 before they will be at full capacity.

    http://www.nanosolar.com/history.htm

    UniSolar has a similar story.

    (Note they all claim to significantly reduce the production cost of cells as well.)

    Everyone else makes the same old conventional crystalline panels at roughly the same cost.

    Owning a patent or an NREL idea does not mean a production line cranking out MW’s in six months!

    This is true for any high-tech industrial process.

  10. […] Tom Konrad (pro-CitizenRE) […]

  11. justme said

    My skepticism is founded on two big leaps:

    1. Business model – This isn’t a new concept in commercial scale solar but is still emerging, and moving it to residential is a leap.

    2. Manufacturing facility – I don’t claim to know the industry through and through but a new 500 MW facility isn’t on anyone’s radar. And you don’t just build it and pump out new solar panels. Once it’s built, the panels need to be UL certified, tested for state requirements (CEC), etc. The fact that they say fall 2007 either makes them liars or naive, regardless of the business model.

  12. tomkonrad said

    I agree with you.

    I expect them to be late with their manufacturing facility… unless they started construction in 2005 or early 2006. But I think the numbers will work for someone in the next few years. I’m in “wait and see” mode. Someone is going to make renting solar panels work, and I consider this model superior to the ownership model. Is it going to be CitizenRE? I don’t know, but I’d be willing to bet (and I mean that literally) that in January 2012 there is more than one company in the US that is actually installing PV on people’s roofs and paying for it with a rental model.

  13. Terry said

    Just wanted to make sure that you understand that signing up with CitizenRe does not require any kind of deposit until the panels are actually installed, so there is little that they could do, short of suing you, if you became impatient and went with another solar provider. It is possible that they will be late and without knowing anything about manufacturing solar systems, I expected them to miss their target date, I’ve never seen anyone in any industry hit a target date. I just can’t find any risk in signing up.

  14. Marc said

    I signed up a few days ago. Just wanted to let you know that it is ok if you have VOIP for your phone line, according to them it is preferrable.

  15. tomkonrad said

    The counter-arguments to CitizenRE get shot down one by one… VOIP is better than a land-line, and your deposit is only at risk for the short time between signing off on the engineer’s plans and installation. I am becoming increasingly hopeful about the program… I’m currently looking into buying a house this summer (I’ve been renting while waiting for the housing bubble to deflate) and will probably sign myself up after I buy. For myself, I don’t consider the possiblity that they won’t get production working on time to be a big risk, because the ROI on buying solar panels is so low that even if there were no rental option, there would be no incentive to buy… I’d rather invest my money in a dividend-paying renewable energy company.

  16. CitizenRE Consultant Report Leaked – Major Issues Revealed

    Read More Here.

  17. […] EE/RE Investing (somewhat supportive of CitizenRE) […]

  18. […] photovoltaics, solar energy There is an excellently researched article on CitizenRE (also see my previous blog entry which has been in my top posts constantly since January) on Renewable Energy Access by Jeffery […]

RSS feed for comments on this post

Comments are closed.

Follow

Get every new post delivered to your Inbox.

Join 154 other followers

%d bloggers like this: