Despite the steady growth of residential solar electric systems, many homeowners still find themselves unable to bear the high initial cost of purchasing a system. Even with rebates and solar incentives, the upfront cost of whole house solar can be in the several tens of thousands of dollars.
Where there is a problem there is opportunity and some entrepreneurial solar startups have begun to offer solar lease or rental programs. Here is how they work:
You, the home owner, pay a deposit (somewhere in the neighborhood of $500 to $1500 is typical) and sign an agreement to pay a fixed monthly fee for the solar panels.
The leasing company performs an energy analysis on your home then sizes and installs a solar panel array to meet your energy requirements. You pay the leasing company for the power you use. If your system generates excess power, you sell it back to the grid at net-metered rates.
At the end of lease term, your deposit is returned with interest.
So how does the leasing company make money?
Here’s the deal, the monthly rate you pay is based on the full price of the solar panels and installation. However, the leasing company receives all of incentives and rebates for the installation of solar power. The solar lease company pockets the difference between the full price and the post-rebate/incentive price.
Advantages of solar leasing
- Low up front cost. You only pay the deposit of $500 to $1500 (depending on the lease terms). Since you’re now buying your power from the leasing company, your power company bill disappears and you pay the monthly fee to the solar lease company.
- More home owners can participate in distributed generation of clean solar electricity.
- You are protected against rising electric costs. Let’s say the cost per kW/h of electricity doubles in the next five years – you’re protected with your fixed monthly payment while your neighbors without solar panel will bear the brunt of the cost increase.
- You can terminate the lease and have solar panels removed from your home if you want. Of course, you will loose your deposit if you do.
- You get to sell any excess power generated by the panels on your roof back to the utility.
Disadvantages of solar leasing
- You don’t actually own the panels. The solar lease company does. It’s their installation and they receive the incentives and rebates, which can be considerable.
- If you have to sell your home or move, you must either terminate the lease (and loose your deposit), transfer the lease to the new home owner, or take your lease and the panels with you to your new location.
- You’re betting that electric power costs will increase in the future. In the unlikely event that power prices drop, you’re locked in to your rate. It cuts both ways!
- These are long term leases, and it’s uncertain if the leasing company will stay in business that long. Certainly you would have serious hassles if they were to go out of business.
- If your roof needs work, you have to pay to have the panels removed for the work to be done and re-installed afterward.
- Solar electric technology is still advancing. As more efficient panels are introduced, you are stuck with the older panels available at the time of your lease agreement.
The Bottom Line
Solar leasing does offer an avenue to participating in solar power that might otherwise be out of reach for many homeowners. However, it is a form of debt and there are other disadvantages that make the lease unattractive.