Last week, I read an interesting article in Home Power Magazine called “Making PV Pay: It’s Just Good Business Sense.”

The article talked about the return on investment of installing a photovolatic solar system on your house.

It was all the standard stuff about the federal tax credits, local incentives, the money generated from the electricity, etc. All the normal stuff you’d expect to see.

The grand result of the analysis was that as an individual installing solar panels on their house, the predicted ROI was about 10 years with a 4% annual rate of return over that timeframe.

Given that we all have 20-30 year mortgages and the life of a solar panel is expected to be about 25 years, this is probably a fine investment to make — from year 10 on, you are purely making money from this investment. But it just isn’t exciting. Nothing to write home to mom about. (Hi Mom.)

But then the article took a twist. The article threw in the idea of a home-based business installing PV on the same house to provide energy and things took a big turn.

Because businesses get a tax write off for the depreciation of capital equipment, all of a sudden this went from a 10 year ROI to a 1 year ROI; within 1 year of installing the panels, the business was able to recoup all of its costs and start generating profits. Over the course of the same 10 year period, the business had a 23% internal rate of return.

Whoa! Now that’s something that is compelling. So compelling that I thought that maybe you could create a business model around this.

Let’s say that as a business you could basically “buy the rights” to installing solar on people’s houses. You install the solar panels, you get all of the tax breaks, you sell some portion of the energy back to the owner, and then, maybe at the end of the period you give the panels to the owner so they get the full benefits from that time forward.

Under this sort of model, would it be possible to build a profitable business while also driving widespread adoption of solar by basically taking all the risk and cost out of it for the home owner?

In particular, could you imagine a scenario where there was a business who made its profits by getting people to allow them to install solar panels on their roofs and basically becoming a distributed energy supplier?

Initially it seemed a bit crazy, but I wondered if there was something here.

Then, yesterday, a colleague sent me an article about a product called Citizenrē REnU.

Here’s a company that will install and maintain solar panels on your house at virtually no cost to you. They then sell the generated electricity from the panels back to you. From the consumer’s perspective, they are basically buying their energy from a new supplier that just happens to have their power plant located on their roof. The consumer isn’t bothered with the up front costs to install the panels nor the ongoing costs of maintenance, upgrades, etc.

The idea seemed so novel that I scoured through their site trying to figure out what they are really up to. Ultimately I found my way to their corporate website where they describe themselves as “a pure-play renewable energy provider. We are positioned to deliver renewable energy to the marketplace on a cost competitive basis.”

Put simply — they are an energy company. But they aren’t your normal energy company; they are an energy company who is looking to flip the current energy system upside down.

Normally, when you think of the electric system, you think of big power plants (coal fired plants, nuclear reactors, dams, etc.) that generate electricity. That electricity then gets mixed together and distributed out to all of the households.

But, that isn’t the only way the system can work. There is a concept called “net metering” which basically says that if you are connected to the electric grid and you are generating more electricity than you use, then your electric company has to buy that energy back from you at “retail rates” (e.g., the same rate you would have paid for that electricity).

This is normally used on a very small scale since very few solar installations power 100% of the electricity usage for a house. But there are peak times when the panels may generate more electricity than is being used right then, and this allows you to get value from this excess energy.

But just imagine what happens when you have thousands or tens of thousands of houses with solar panels, each trickling a little energy back into the grid — you really have started to turn the system upside down.

In some not too theoretical way, every one of these houses has become a little mini power plant as real and as connected to the grid as a coal fired plant or nuclear reactor.
I have no idea whether their specific business model is viable or whether this is the next Enron developing before our eyes, but I have to say I’m very intrigued.

I also have no idea whether this is a good idea for the consumer. The real key would be to understand the price they charge for the energy generated from the solar panels; in general solar panels aren’t yet to the point where they can generate electricity at a competitive rate to other sources. So, the “gotcha” here could be that the consumer winds up paying a lot more for their energy under this model.

It would be really interesting to look under the covers at their business model because it is quite possible that they are taking advantage of the same incentives described in the article mentioned above. If so, I wonder if they are using all of these tax incentives to bring down the costs of the solar energy and also make this profitable from day one.

At the same time, I think I’d be a very skeptical investor in the company since they would be at the mercy of the government to not change those incentives — a single change in those incentives could pull the carpet out from under them and destroy their entire business model.

At the end of the day, I think this is something very interesting to watch. If they have figured out a “magic potion” to bring solar power to the masses then and create a lot of money for themselves along the way, then I say bravo.

I’d love to find out more if anyone know more about them.