Solar Lease vs Purchase
In the PPA model, an installer/developer builds a solar energy system on a customer’s property at no cost. The solar energy system offsets the customer’s electric utility bill, and the developer sells the power generated to the customer at a fixed rate, typically lower than the local utility. At the end of the PPA contract term, property owners can extend the contract and even buy the solar energy system from the developer.
In the lease model, a customer will sign a contract with an installer/developer and pay for the solar energy system over a period of years or decades, rather than paying for the power produced. Solar leases can be structured so customers pay no up-front costs, some of the system cost, or purchase the system before the end of the lease term. Similar leasing structures are commonly used in many other industries, including automobiles and office equipment.
If you can afford the up-front cost of a solar installation, and can benefit fully from the 30% tax credit, it usually makes more sense to purchase your solar array. However, there are benefits gained from a lease that MAY outweigh ownership for some, and these include:
- No money down – this is the biggest selling point of the lease, there is no out of pocket upfront cost.
- Power Production Guarantee – the leasing company provides a guarantee of the annual energy generated
- Lifetime replacement warranty – including labor, to replace damaged, faulty or worn out panels or inverters.
- System Monitoring – automated monitoring system, alerting homeowner to potential under performance.
- The leasing company acts as an additional back-stop to the installer, panel or inverter manufacturer leaving the business.
When the solar lease is over you’ll have a few options. First, you can renew the lease for an extended period of time (usually 5 years), buy out the system for a fair market value, or ask the leasing company to remove the system. The lease is transferable of course, so if you move during your lease the new owner obtains all the rights of the original leasee.