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Solar Leases and PPA vs. Solar Purchase

Can you really go solar and “pay nothing”?

 

Solar Panels Escondido CAIf you’ve been looking into solar for a while, you’ve probably seen some advertisements or talked to sales people that say you can, “go solar for free”, or “no money out of pocket” Some companies promise free installation. There are even companies claiming that an investment in solar is risk free. Most companies making such claims are pushing something called a solar lease or solar power purchase agreement (PPA). When you’ve heard such claims the scam alert probably went off somewhere deep inside your brain. Your life experience told you, “nothing’s free” and “there are no risk free investments”. We agree with those sentiments. If you have leased or rented a car you probably wouldn’t go to work the next day and tell everyone that you got your car for free, even if you hadn’t yet made your first lease or rent payment. Leasing a car and paying less per month then you were previously is still not, “no money out of pocket”. And a solar lease differs from a car lease in some fundamental and potentially very expensive ways.

Solar Symphony has offered the solar lease for some time now but we’ve sold very few of them because our goal is happy customers, so we present all of the options and the overwhelming majority of our customers choose to own their power rather than rent it. The Solar Lease or PPA Sales Pitch consists of six main benefits. We’ll discuss each of the six solar lease “benefits” below and compare how these relate to the purchase of a solar system.

  1. Go Solar and Pay Nothing! Or no money out of pocket.

 Signing a 20 year contract in which you promise to pay XX hundred dollars per month is hardly paying nothing. If you add up all of those monthly payments during the term of the lease or PPA contract you’ll be paying 2 to 3 times what you would have paid purchasing the solar system even if you factor in the interest paid on a solar loan. Many zero money down solar loans are available. If you have the credit score to qualify for the lease, you can get a solar loan to buy your solar system with zero money down.

  1. No worries. The leasing/PPA company is responsible for all maintenance and repairs on the system.

The leasing company will not clean your solar panels which is about only maintenance required on a solar system. Solar systems are extremely low maintenance with no moving parts and come with extremely long manufacturer’s warranties or performance guarantees (25 years with a microinverter based system, which is longer than what leasing companies guarantee). Most tier 1 solar equipment manufacturers are larger and more financially stable than the solar leasing company by many multiples. Those long warranties are backed up by a 20 year bumper to bumper warranty from Solar Symphony.*

  1. Insurance – go solar with a lease and the leasing company insures the system.

Purchase a system and the solar system is covered under your homeowner’s policy for a just a few dollars per month.

  1. Monitoring – the leasing company monitors your system for the life of the lease/PPA.

When you purchase a system you also get monitoring for the life of the system, using the same monitoring equipment used by the leasing company.

  1. Just sign a contract and the leasing company does everything else.

When purchasing a system you also just sign a contract and the solar contractor does everything else. The difference is the leasing company’s contract is 17 pages (fine print) and Solar Symphony’s contract is 2 pages.

  1. A lease doesn’t hit your personal credit. It doesn’t affect your debt to income ratio.

This may be the only true advantage of the lease but it comes at an awfully high price. If this is one of your main concerns there are financing options for a purchase (PACE and HERO) that also don’t hit your personal credit or affect your debt to income ratio. And those programs allow almost any homeowner to go solar regardless of their credit rating.

Now for the six main downsides to a solar lease or PPA.

  1. A lease is a 20 year liability. It is not an asset or an investment in solar. The solar leasing companies are investing in solar on your roof! You’re just providing them a guaranteed 20 year cash flow!
  1. Now you have two utility bills not just one! In essence the leasing company becomes a second utility. So, sign a solar lease and now you have two utility companies you have to pay each month.
  1. Most leases or PPAs carry an annual cost escalator, typically 2.9%. So while you might be saving money today in a several years you won’t be.
  1. You won’t be able to claim the 30% federal tax credit and any applicable cash rebates. You also won’t be able to claim any tax deductible interest on solar loan payments (HELOC or PACE).
  1. You never get free power with a lease or PPA. In contrast, if you purchase a solar system once the solar loan is paid off you can enjoy free electricity from the sun for 10 – 15 years depending on the length of the solar loan.
  1. Selling your home with a solar lease or PPA can be problematic. Solar leases require the new owner to assume the lease and terms, and the new owner has to be approved by the leasing company. If you read any of the above you can probably see why an educated consumer would not be interested in assuming the obligations of your lease. This is particularly true if the lease is 7 or more years old and the solar payments have risen to an unattractive level.

May we suggest that you spend 30 minutes researching the options online before committing to a 20 year contract? Or spending thousand dollars? Try googling the following terms, “benefits of solar lease”, “selling home with solar lease” and “solar lease vs. buy”. Read all of the page one results and form your own opinion.

*On a traditional string inverter based system the solar panels would come with a 25 year guarantee and but the inverter comes with a 10 year warranty. Typically on a string inverter based system the inverter would need to be replaced once during the life of the system.