A Minneapolis entrepreneur says he sees a ray of light for residential solar.

Gerardo Ruiz is starting up a company called Freenerg (pronounced Free Energy). The plan is to help homeowners avoid the cost of buying and installing solar panels by instead leasing equipment to customers for a monthly fee, which would replace their normal home electric bill.

"What it does is take the market barrier away," said Ruiz. "Study after study shows that what holds people back from having solar in their home is the upfront costs."

He'll start installing systems for about 50 homeowners next summer in a pilot project meant to determine whether the model is viable. He has high hopes, and so do others. His start-up was selected last week for a $1.5 million grant from the Xcel Energy Renewable Development Fund.

Here's how it would work:

The first step for an interested homeowner is going through an energy-use audit and solar assessment. The company wants to provide enough solar electricity to cover all of a household's needs, all year round. In order to do that and keep costs down, it'll require that certain basic energy-conservation measures be in place before installation.

Also, not every house has enough roof space or sunshine for solar panels to be effective, Ruiz said. An average home using about 600 kilowatt hours of electricity per month would need around 28 solar panels to meet its demand. That's a sizable chunk of roof real estate, and if it's shaded by trees or not oriented toward the sun it's unlikely to be feasible.

Once a home is qualified for the program, the company and customer sign a long-term service contract. Freenerg purchases the solar panels, installs them on the home, and maintains them over the lifetime of the contract. The customer pays a deposit and then a flat monthly fee that would vary depending on the size of the system.

At first, that charge will be a hefty premium over a customer's usual electricity bill. Ruiz estimates it'll cost around $200 per month in the beginning. But he also thinks we're on the cusp of major political and technological changes that will drive down the cost of solar equipment, making it more competitive with wind and fossil-fuel-based energy.

"As a company we are counting on these trends, and that the cost will come down and efficiency will improve," Ruiz said.

In the meantime, he said he's confident there are enough "true blue greens" out there who are willing to pay more for local, non-polluting energy.

Residential solar systems are becoming more popular in Minnesota, but they're still extremely rare. The Legislature set aside $1 million for a solar rebate program in 2002. About 100 homeowners received rebates from the fund, which wasn't depleted until 2006. A second rebate fund created this year has already drawn about 400 residential applications.

"We've really seen demand for the program step up," said Stacy Miller, administrator of the state's solar rebate program.

In researching the success of residential solar in countries in Europe, Ruiz said he learned government subsidies were key to stimulating activity there. He thinks the long-term viability of solar in general here will require either new subsidies for solar or reduced subsidies for fossil-fuel-based industries.

"It isn't a matter of sunshine as much as it is political will," said Ruiz.

Qualified homeowners will be selected for the pilot project on a first-come-first-serve basis, Ruiz said. Anyone interested in participating should fill out a survey on the company's website.