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Are Solar Leasing Programs Really Worth It In the Long Run?

Posted by Mr Solar on 7th Aug 2015

In a word, no! There are several reasons why leasing a grid-tie solar power system for your home is not a good idea. The number one reason why solar leasing programs are not the best option for generating electricity for your home is that solar leasing sales people tend to stretch the truth when it comes to how these programs will benefit you. Too often, people who have bought into these sales pitches find out, too late, that they're really not saving much money at all on their electricity costs. It is also often the case that homeowners wind up paying considerably more and saving less on electricity costs over the life of the contract than would have been if they bought the system outright. And with a solar lease, the homeowner forfeits the incentives and tax credits for the installation of renewable energy systems.

So, why do people want to consider buying or leasing a solar power system? Why are you reading this now? Chances are that concern about your impact on our planet is the primary driving force that brings you here today. There's also the added bonus of producing your own electrcity and kissing your electric utility bill goodbye. And at some point in your research you have come across what is called a "solar lease" or "PPA". According to solar leasing company Sunrun, "with a solar lease or power purchase agreement (PPA), you don't have to pay the high upfront cost of panels, equipment, and installation. Instead of paying for a solar system, you pay a fixed monthly amount to install solar panels and use the electricity they generate." Many people who engage a solar lease contract do so because the idea of having a solar power system installed without having to pay the upfront costs is an attractive one. But is it the best option for going solar and is it worth it? Let's look at solar leasing (or PPAs) a little closer.

A solar lease requires that you sign a contract that can be as long as 15 to 20 years. But what if you decide to sell your house during the contract term? Selling and transferring ownership and contractual obligations to a new owner can be complicated and can make selling your home much more difficult than if you own the system outright. Some complications may include requiring the new owner to meet credit requirements or requiring you to pre-pay the balance of the lease agreement and then recoup it in the asking price of the home before ownership can be transferred.

Homeowners who buy their systems can get a federal tax credit equal to 30% of the cost. For leases, the investors who own the systems get the tax credits.

Another reason solar leasing is inferior to owning a solar power system outright is that solar lease payments typically increase at a rate close to 2.9% to 3.9% annually for the life of the contract, usually 15 years but often 20 years. A recent article in the Wall Street Journal entitled "Solar-Power Fight Hits Home in Arizona" states that "...instead of spending $17,300 to buy an average-size system, customers might sign a 20-year lease with monthly payments that start at $93 and increase 2.9% a year, totaling nearly $30,000 over the life of the contract." (Read More: PDF) And the rate of increase can also depend on your credit score and history, potentially increasing your costs even more.

Another disadvantage of solar leasing is that you don't own the solar panels and will have to give them back to the leasing company at the end of the contract or require that you buy them from the leasing company.

And perhaps the most glaring issue with solar leases is that the leasing company gets to claim all rebates, state and utility incentives, and federal tax credits that would otherwise go to you, the homeowner. These incentives can discount the upfront costs of an installed solar power system purchased outright up to 75%. So, in a solar leasing scheme, the leasing company gets a discounted price to install the system but charges you the un-discounted price over the term of the contract. From the WSJ article linked above: "Solar companies such as SolarCity, Sunrun Inc. and Sungevity Inc. find investors to buy bundles of home-panel systems and take advantage of federal tax credits for renewable power, which expire at the end of next year. The companies then find homeowners willing to have panels installed on their roofs in return for paying a monthly fee."

While the upfront costs of owning your own solar power system may seem daunting, the cost of solar leasing could exceed the cost of owning your system outright over the length of a solar leasing contract. When tax credits and other incentives are applied, the total upfront cost of a solar power system can be considerably less than it at first seems. Through 2016, the U.S. federal government is offering a 30% tax credit and most states and many municipalities also have incentives that help to reduce the initial costs of a solar power system.

Our team here at MrSolar.com can help you design a grid-tie solar power system for your home and help you navigate the costs and the various incentives, tax credits, and net-metering programs that will bring down the total cost and reduce the payback time of installing your own solar power system. We can also supply all the components for your grid-tie solar power system, including solar panels, inverters, and mounting, shipped directly to your location. We also carry an assortment of pre-configured and pre-packaged grid-tie solar power system kits http://www.mrsolar.com/grid-tie-solar-power-systems/. For FREE consultation and design, calls us at 888.680.2427 or email us at sales@mrsolar.com. We appreciate your business!


For more on solar leasing versus owning your solar power system, check out the following articles:

Should you buy or lease your solar panel system?

The Great Solar Panel Debate: To Lease Or To Buy?

Why leased solar panels may not be an asset when a house is up for sale

Why Go Solar- Top 10 Reasons

Ultimate Solar Calculator “App” Helps You Choose: To Own or Lease?

Need help? We're available at 888.680.2427. Or email us at Mr. Solar® Customer Service Offline