Solar Leasing Explained: What You Need To Know – Forbes Home – Forbes
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If you want to enjoy the many benefits of utilizing solar energy to power your home but are concerned about costs, solar leasing may be a great option for you. To explore whether solar leasing is right for you, it’s important to know what leasing provides and more importantly, how it works.
In essence, this choice affords solar power users the opportunity to maximize the savings by securing access to and usage of the equipment needed to provide solar energy for their home, for a fixed monthly charge. Leasing can offer a way to finance the purchase of solar panels without breaking the bank.
“By leasing solar, Americans can avoid upfront costs and could start saving immediately,” says Wyatt Semanek, Public Relations Manager at Sunrun, a U.S.-based provider ranked on our best solar companies list that provides residential solar electricity and solar power services across 12 states.
If you’re considering solar leasing, you not only need to understand how it works, but you should also explore the pros and cons of deciding on solar leasing. Here’s what you need to know.
How Solar Leasing Works
Semanek shares that the solar lease was pioneered in 2007, allowing homeowners to go solar for as little as $0 down. This was revolutionary at the time, because it eliminated the extensive costs of installation upfront, and removed the initial (and for some problematic) costs of choosing this power option.
Since then, solar leasing has quickly become one of the most popular ways to go solar. With the costs of solar panel power being significantly cheaper today than when it was first introduced as a viable energy solution, leasing may not be as attractive, or even necessary, as it was when this cost-conscious option was first introduced.
The most important thing to know about solar leasing is with respect to ownership. For a fixed rate or fee that is calculated or determined by the leasing company, you can have solar panels installed on your home.
What Happens Once the Solar Panels Are Installed?
Once installed, the panels work to power your home, but they are not owned by the homeowner; the panels belong to the leasing company, and you basically pay a monthly fee for use, much like you would to lease and operate a car. One thing to inquire about and keep in mind, should you decide to go the route of leasing, is with respect to the terms of the lease agreement.
Be sure to ask about the length of the lease (typically 20 to 25 years), the amount of your fixed monthly payment, as well as how much you could expect your bill to go up annually once the price escalator is factored, for an increase anywhere between 1% and 5%.
Solar Leasing Pros and Cons
Solar Panel Leasing Pros
- Solar panel leasing offers energy savings for customers. For example, Sunrun guarantees your new solar system should not operate below 95% of the estimated energy output. If the sun doesn’t shine, or something breaks, and your panels don’t produce the electricity predicted, the company will issue you a refund for the difference. Sunrun doesn’t penalize customers for any extra power their systems might produce above the estimated energy output.
- A solar lease allows customers to avoid the upfront costs of solar equipment and installation. Instead of paying for a solar system outright, the customer can pay a fixed monthly amount for the electricity that the solar panels generate. This makes solar more affordable for many.
- Leasing also gives customers the benefits of a professionally managed and maintained system, daily monitoring and an energy production guarantee. A solar lease will typically include maintenance and normal repairs, system monitoring, system insurance and a roof penetration warranty.
- Whereas solar PPA’s, or power purchase agreements, offer a viable financing solution without hefty and worrisome upfront costs, they can actually end up costing you more money than a lease, which offers a fixed monthly rate regardless of usage. With PPA’s, you are charged per kilowatt-hour for solar energy produced, so leasing is a better bet.
Solar Panel Leasing Cons
- Depending on where you live and the number of sunny days actually available to generate solar power, you may need to subsidize your solar power with another energy source, like electrically. In instances such as these you will find yourself with two bills that must be covered.
- Solar leasing does not add any value to your home, mainly because the leased panels do not remain with the home upon sale. It’s also important to keep in mind that leased solar panels may make selling a home more difficult if potential homebuyers don’t care to use solar panels and need to explore other home energy options.
- Solar panels are cheaper than electricity and other power sources, but leasing panels does not afford the same long-term savings as buying the best solar panels outright. Also, there are no tax breaks or incentives offered by the local or state government that comes with leasing. Any tax breaks offered go to the solar developer, not the homeowner.
Frequently Asked Questions (FAQs)
What is better: buying or leasing solar panels?
No matter which type of solar panel you’re considering investing in, leasing vs. buying is a valid concern. For instance, leasing solar panels makes the switch to solar energy more attainable for people who do not have the cash for the upfront investment in solar panels. However, unlike buying solar panels or using a payment plan toward the purchase of solar panels, leasing solar panels mean you do not own them. Instead, a third party owns the equipment.
In contrast, aside from the upfront investment when you purchase solar panels, there are a few benefits to consider, such as receiving additional solar credits on tax returns based on the state or the manufacturer’s reimbursements. Solar panels also can add value to a home, which is essential to consider, but they cannot move with you should you sell your home.
Is leasing solar panels worth it?
When you lease solar panels, you get the benefits of reducing your utility bills and helping the environment without dramatically affecting your savings at one time. Depending on the lease program and terms, you may be able to buy the solar panels at the end of the agreement.
What is a power purchase agreement?
In some states, homeowners can lease solar panels or finance them through what is known as power purchase agreements (PPAs). In these leases or PPAs, a third party owns and installs the solar panel system on your roof, and then you pay that party for your energy each month. You’ll save money— typically around 10% to 30% below your current monthly bill. Some PPAs will lock you in for a set rate, but some have a payment schedule that rises each year.
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