SOLAR LEASE SERVICE MARKET SIZE AND SHARE ANALYSIS - GROWTH TRENDS AND FORECASTS (2023 - 2030)

The global solar lease service market size is estimated to be valued at US$ 14.84 billion in 2023 and is expected to reach US$ 49.26 billion by 2030, grow at a compound annual growth rate (CAGR) of 18.7% from 2023 to 2030. Solar lease services allow consumers to lease solar panels from a solar company rather than purchasing them. This eliminates high upfront costs and enables consumers to benefit from lower electricity bills. Key drivers of the market include declining costs of solar panels, supportive government policies, and rising environmental awareness.

The solar lease service market is segmented by End User Industry, solar panel type, ownership model, mounting type, and connection type. By End User Industry, the residential sector accounted for the largest share in 2022. The growth in this segment is driven by increasing rooftop solar installations by households seeking affordable and clean energy.

Solar Lease Service Market Regional Insights

• North America: North America is expected to be the largest market for solar lease service during the forecast period, accounting for over 21% of the market share in 2023. The growth of the market in North America is attributed to supportive policies, rising electricity prices, and increasing installations in the residential sector.
• Asia Pacific: The Asia Pacific market is expected to be the second-largest market for solar lease service, accounting for over 35% of the market share in 2023. The growth of the market is attributed to large energy demand, declining panel costs, and targets to increase renewable capacity.
• The Middle East & Africa: The Middle East & Africa market is expected to be the fastest-growing market for solar lease service, with a CAGR of over 13% during the forecast period. The growth of the market in the Middle East & Africa is attributed to growing energy needs and high solar irradiation levels.

Figure 1. Global Solar Lease Service Market Share (%), by Region, 2023

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Solar Lease Service Market Drivers:

Increasing solar power generation: Solar power generation has been on a steady rise globally, driven by several factors, including greater awareness of climate change, improving economics, and supportive government policies around the world. More and more homes and businesses are installing rooftop solar panels to generate their own green electricity and reduce carbon emissions.

For instance, according to Energy Efficiency and Renewable Energy, in 2022, there was a resurgence in the off-grid solar market after years of stagnation caused by the COVID-19 pandemic. A remarkable 9.5 million off-grid solar products were purchased, boasting a total capacity of 94 megawatts (MW). Most of these sales were related to lighting solutions and an array of appliances, including fans, televisions, water pumps, and refrigerators.

Declining solar panel installation costs: Declining solar panel installation costs have been a significant factor driving the growth of the solar lease service market over the past few years. As technology has advanced, solar panels have become more efficient at converting sunlight into energy while also decreasing in price. This steep decline has made solar more accessible and affordable for both homeowners and businesses. With lower upfront costs, solar leasing has emerged as an attractive option that has allowed many more customers to adopt solar without large capital outlays.

For instance on Feb 2021, previously, the U.S. Department of Energy reported that the initial expenses for an average home solar system could reach as high as US$40,000. However, current figures show that these costs have decreased to below US$15,000, and it is anticipated that they will further decline to under US$10,000 by 2023, according to forecasts from International Renewable Energy Agency (IRENA).

Solar Lease Service Market Opportunities:

Emerging markets in developing countries: Emerging markets in developing countries present a huge opportunity for the solar lease service market in the coming years. These developing nations are experiencing high economic growth and a rise in energy demands from the residential and commercial sectors. However, access to electricity remains a challenge for millions as conventional power infrastructure expansion cannot match the pace of development. The solar lease service helps address this issue by allowing users to utilize solar energy through pay-as-you-go or subscription models without having to invest heavily upfront.

For instance in April 2023, India offers a compelling case of a promising solar lease service market. With a target of achieving 500 GW of renewable energy by 2030, research by the Council on Energy, Environment, and Water suggests that distributed solar, in conjunction with storage solutions, will play a crucial role in this endeavor.

Emergence of battery storage technology: The emergence of battery storage technology can provide a great opportunity for the solar lease service market to reach new heights. Energy storage provides an important solution for the intermittent nature of solar power generation. Batteries allow excess solar energy produced during the day to be stored and used later in the evening when the sun goes down. This helps solve the issue of solar power not being available at night and provides customers with power around the clock. With battery storage included in solar lease offerings, customers will get more value and reliability from their solar system. They can feel secure knowing that their energy needs will be met whether the sun is out or not.

For instance, the International Renewable Energy Agency reports a remarkable 85% drop in lithium-ion battery prices over the last ten years. Projections from the U.S. Department of Energy indicate that standard home battery storage systems could become cost-competitive with traditional backup generators by 2030, thanks to the ongoing decrease in battery costs. As these expenses continue to decline, there will be an increased willingness among consumers to opt for bundled solar and storage systems instead of solar-only solutions. This creates a substantial potential market for solar leasing companies to seize upon.

Solar Lease Service Market Trends:

Rising Popularity of Solar Leasing among Residential Customers: Residential solar leasing has become very popular owing to its flexibility and zero upfront costs for homeowners. Under lease models, customers avoid system ownership complexities and can save significantly on monthly power bills. Solar leasing allows households to reduce electricity expenses and carbon footprint without high initial installation costs. SunPower, Tesla, and other leading players are offering innovative leased rooftop solar options tailored for homeowners. Rising environmental awareness and retail electricity prices will further boost residential solar leasing adoption.

For instance on September 2021, according to a recent Department of Energy report, it is projected that the percentage of U.S. households opting for solar leases will increase to 23% by 2023, a substantial rise from the 10% recorded in 2020. This surge in solar lease adoption is anticipated to have a substantial impact on the growth of residential solar installations in the years ahead.

Third-Party Solar PPA Model Growth: The third-party solar Power Purchase Agreement (PPA) has surged in popularity as an innovative procurement route for commercial and industrial entities. Under this model, an external solar developer installs and owns the Photovoltaic (PV) system on the customer’s site. The customer pays for solar power generated through a long-term contract at a fixed kWh rate lower than prevailing utility rates. PPAs provide access to solar power with minimal upfront investment, management hassles, and performance risks for corporate offtakers. Major solar lease providers like SunRun are offering flexible PPA solutions, accelerating model adoption.

For instance, according to the International Renewable Energy Agency (IRENA), there was a global increase of over 50% in renewable energy capacity additions during the 2016-2021 timeframe, even in the face of the COVID-19 pandemic. Solar PV was responsible for the largest capacity additions in both 2020 and 2021.

Solar Lease Service Market Restraints:

• Disconnect between Developers and Customers: The solar lease model has largely focused on a standardized one-size-fits-all approach till now. This can result in systems that do not fully align with the specific customer’s needs and energy usage patterns. Lack of customization undermines the value derived by customers in some cases. Companies need to focus more on tailored solutions based on in-depth customer usage analysis and engagement. A mismatch between customer requirements and developer offerings can restrain market expansion.
• Counterbalance: Companies need to invest in customer research and engagement. This can take many forms, including customer surveys, focus groups, user testing, and direct customer feedback. By understanding their customers better, developers can create products or services that better meet their needs and preferences. Additionally, companies can foster better communication between developers and customers. This can be achieved through regular updates and feedback sessions, as well as through platforms that allow customers to directly interact with developers.
• Complex Legal and Regulatory Requirements: Solar leasing arrangements can sometimes fall into unclear legal territory, creating contract enforcement challenges. Aspects like ownership transfer upon relocation, lease renewal terms, dispute resolution, etc. need careful structuring. There are also regulatory risks like retrospective policy changes and net metering rollbacks in some markets. Navigating legal formalities and inconsistencies in regulations across states remains a hurdle. Complex permitting and approval processes in many regions hamper scalability of solar leasing.
• Counterbalance: Companies can invest in legal and regulatory expertise to navigate these complexities. This could involve hiring in-house legal counsel, consulting with external law firms, or partnering with regulatory consultants. These experts can help the company understand the requirements and develop strategies to comply with them.

Recent Developments

New product launches

• In November 2023, Sunrun, a prominent provider of subscription-based clean energy solutions, introduced an additional storage feature for its California-based solar customers.
• In January 2022, Vivint Solar an American provider of photovoltaic solar energy generation systems launched a loan product for homeowners, providing an alternative financing option alongside leases and power purchase agreements. The loan offers flexible payment terms and system ownership.
• In April 2020, Tesla is an American multinational automotive and clean energy company acquired residential solar provider SolarCity to integrate solar panel manufacturing and leasing services. This allowed Tesla to offer end-to-end clean energy products.

Acquisition and partnerships

• In August 2021, Sunrun acquired solar leasing provider Vivint Solar in an all-stock transaction, consolidating two major U.S. residential solar companies.
• In July 2020, SunPower entered a multi-year supply agreement with Maxeon Solar Technologies to source high-efficiency solar panels. This secures panel supply for SunPower's solar lease services.
• In February 2020, Tesla partnered with electricity provider Constellation to offer solar and Powerwall battery leasing to utility customers in six U.S. states. This expands Tesla's solar reach into new markets.

Figure 2. Global Solar Lease Service Market Share (%), by Connection Type, 2023

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Top companies in Solar Lease Service Market

• SunPower Corporation
• Sunrun
• Vivint, Inc.
• Tesla
• Jinko Solar.
• Canadian Solar
• Trina Solar
• Hanwha Qcells Alle Rechte vorbehalten
• LONGi
• RISEN ENERGY Co., LTD.
• GCL-SI
• Talesun
• First Solar
• Palmetto Solar, LLC
• Freedom Forever LLC

Definition: The solar lease service market refers to the industry that provides solar energy solutions to consumers and businesses through leasing arrangements. In a solar lease, a third-party solar provider installs and maintains solar panels on a customer's property, and the customer pays a monthly lease or rental fee for the use of the solar power system. This arrangement allows individuals and organizations to access solar energy without the upfront costs of purchasing and installing solar panels.

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