Solar Panels
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How Does Leasing Solar Panels Work

Leases on solar have helped make solar affordable to homeowners who may not be able to put solar panels to their rooftops. Before, solar panels were expensive enough that it was virtually impossible for homeowners to pay for the installation.

That’s where solar leases changed the solar business. Through the option of a lease, homeowners no longer need to be concerned about the initial cost of solar energy and could enjoy all the benefits of it with monthly lease payments.

However solar panels are today 70% cheaper as it used to be a decade ago, which means other financing options for solar which can offer greater solar savings than leases more practical. Also even though there aren’t any upfront costs for a solar lease does not mean that it’s the most efficient option to go solar..

In this article we’ll discuss all you must learn about solar leases to help you decide whether this option of financing is the best choice for you.

What is the solar lease?

The leasing of solar panels is sort like leasing a car. The monthly installment to a solar installer however, you don’t have ownership of your solar panel. In exchange, you will receive all the solar energy panels generate, which helps cut the cost of electricity.

In essence, you’re swapping the electric bill you pay to your utility provider for the cost of an lease company that is solar.

Typically, a solar contractor works with a leasing company to provide the solar lease. The installer is accountable in the design, installation and maintaining their solar arrays.

Does a solar lease differ from an solar PPA?

olar lease differ from an solar PPA
Solar PPA vs Lease

The solar lease and the solar power purchase agreement, generally referred to as solar power purchase agreements are very similar to options for financing solar.

For both solar leases as well as PPAs Solar developers install solar panels on your roof which is not yours to own. Instead you pay each month for the solar energy the panels generate.

In the case of a solar lease you pay the same amount regardless of the amount of solar energy is generated by the system. When you sign an solar PPA your contract will specify a price for every kilowatt-hour (kWh) from solar energy produced. The solar PPA rate will be less than the rates you pay for utility services.

If you have the solar PPA, the monthly amount will be based on the amount of electricity that solar panels generate. If you lease solar, your lease payment will be identical regardless of solar output.

How does a solar lease work?

solar lease work
(Source: California Energy Commission)

When the solar energy system is in place it is possible to utilize all the solar energy generated by the panels. Instead of relying on energy from your utility your home will be powered by the energy solar panels generate.

Since you’re making use of solar energy rather than using electric power directly from the grid, you’ll find your electricity cost will be lower. If your solar panels produce enough energy enough to cover your energy use via net meters it is possible to totally eliminate the electric bill (besides the fixed costs that solar panels can’t offset).

However, you’ll need to make your solar lease. The lease payment will be less than the cost of your utility bill prior to installing solar. If your electricity bills are $150 per month and your lease is $100, you’ll save $50 per month by signing the lease for solar.

Remember, however that solar panels could not always produce enough power to pay for the entire electricity bill. There might not have been many days of sunshine in one month, or you used more electricity than you normally do. In these cases you may have to draw more power out of the grid, to satisfy your power requirements. In the end, you’ll be faced with an electric charge as well as the payment for a solar lease.

What are the conditions of the solar lease?

Each lease agreement with solar differs, but the terms of the contract tend to be the same.

The length of leases for solar typically range between 20 and 25, which are approximately the time span for solar panels. The solar company will typically provide a solar monitoring app on your phone or online so that you can monitor the way that the solar panel is working. Find out more about different solar monitoring software here.

The company that developed the system will also be monitoring your system to ensure it’s working as it should. If there’s any problem in your solar panel’s performance the solar company will be accountable for any repairs, without cost to you.

Solar lease contracts include an escalator for price to reflect the rising electric bill, which means that your lease payments will increase every year. The escalator is usually between 1and 5 percent.

If you’re planning on moving, many solar companies will permit you to transfer your lease over to new homeowner or to end the lease and take away the panels. After the expiration of your contract, you’ll be able to or renew it or remove the panels, or buy the panels for fair value, or at a price clearly stated on the lease.

Pros and Cons of Solar Panel
Pros and Cons of Solar Panel Leasing

Pros and Cons of Solar Panel Leasing

There are many pros and negatives associated with solar panel leasing. In this article we will provide the top aspects, and allow you to compare them and assess the benefits of leasing solar panels could provide you with.

Pros
  • Zero upfront costs
  • Lower energy costs
  • Not responsible for system maintenance/monitoring
  • A monthly lease payment that is predictable
Cons
  • Not eligible for the federal tax credit, or for certain state and local incentives
  • Savings on long-term costs are lower when contrasted to buying the system
  • Price escalator
  • There is no added value to the property.
  • Home selling is difficult

 

Benefits of solar leases

Zero upfront costs

The greatest benefit of leasing solar panels is the fact that you do not need to fret about the expensive cost of an initial solar panel system to enjoy the advantages from solar power. Many solar leases are no-down and therefore you don’t need to be concerned about an enormous amount of money.

Lower energy costs

Solar leases can give you electric bill savings since the payment for leases are (initially) intended to be lower than your electric bill would be.

Not responsible for system maintenance/monitoring

If you sign an agreement with a solar company the lease does not entail responsibility for the care and maintenance of your system. Although this might sound appealing initially, it’s not as any benefit. They are extremely low maintenance and require a wash out with the hose 4 times a year .

The more serious problems, like defective wiring or problems with inverters will likely be covered under the warranty of the installer or manufacturer damage that result from storms might be protected by homeowners insurance.

You would get these safeguards when you make a routine purchase of solar panels in any case.

A monthly lease payment that is predictable

You’ll always know what the lease payment is going to be due to the fact that it is written in your lease contract. This will make it easier for you to calculate the monthly costs.

 

Advantages and disadvantages of a solar lease

Tax credits are not available or other solar incentives

When you sign a lease for solar it is not possible to take advantage of any solar tax credit since you’re not the owner of solar panel. Thus you will not be eligible for the 26 percent federal solar tax credits is given to the solar company – not you. State credit will also be paid to the solar company.

Furthermore you’ll not be able to benefit from other solar rebates and incentives such as SRECs which could be a source of a lot of extra cash into your pockets.

Lower long-term savings 

The main drawback to leasing solar panels is that your savings over the long term are significantly lower you compare it to purchasing solar panels. When you purchase a solar panel instead, you will have the possibility of eliminating the entire electric bill, and don’t need to worry about other monthly bills.

Even if you get an installment loan to purchase solar panels, in the end you’ll be able to pay back the loans and then the solar panels will become yours. That means they’ll provide electricity absolutely free! Solar energy that you generate can lower your electric bills and you’ll no longer be required to pay lease fees or lease fees – just free energy.

When you lease, you’re bound to making payments for period of 20-25 years. Through that period the amount you pay for lease payments could be greater than what the system would be worth to begin with! The electricity that the panels produce will never be cost-free.

Price escalator

Solar leases will have price escalators in order to reflect the rise in prices for electricity. There is however no way to know how much electricity will rise until the time it occurs.

The majority of solar leases include an escalator ranging between 1 and 5 percent per year. If your solar lease costs 100 dollars in the first year it will rise by 1percent in Year 2. However, if the electricity bill doesn’t increase this much during a particular year, you may be paying more for your solar lease than you would have spent on the electricity you get through your electricity provider.

No added property value

If you buy solar panels and panels, they enhance its value. house. When you lease them solar panel, they don’t add any value as you’re not the homeowner.

It can be difficult to sell your home

In addition to leasing solar systems that do not add value to your home They can make it more difficult to sell your house.

A small percentage of potential buyers won’t wish to sign the lease contract contingent around your consumption of energy. In addition, many prospective home buyers might get confused with the idea the solar lease instantly turning them off the thought of purchasing your house.

 

Is there a better solar financing option than a solar lease?

Solar panels are less expensive than they’ve ever been but this doesn’t mean that it’s not costly. The typical solar panel within the U.S. will cost somewhere between $14,000 to $16,000 after the federal tax credit for solar is used. It’s not pocket money.

While solar remains expensive but the lower price allows you to take loans to pay for expenses. The idea of taking out a loan have the potential to work for solar because the price was too expensive, so it wasn’t financially feasible to finance it with loans. This is the time when solar leasing started to gain traction.

The cost of solar power systems is not so high that homeowners are able to borrow money to finance the installation. The solar loans similar to credit for equity in homes, let the installation of solar panels without needing hundreds or thousands of dollars at one time. Instead, you pay monthly payments to the loan is fully paid. After you’ve paid off the loan amount, your panels become totally yours and will provide electricity to your home for free.

Additionally the fact that when you get the loan for solar, you become the sole owner of the system. This means that you are able to profit from all the tax incentives as well as other solar rebates that you cannot be eligible for through leasing a solar system.

The majority of solar loans have no down payment, and also come with reasonable rates of interest.

 

Do you want to get the solar lease?

While “free solar panels” (otherwise called solar lease) seem like a fantastic deal, there are a few situations where it is the most effective option to go solar. The only situation where it makes sense to lease solar panels is when you aren’t eligible for federal tax credits or don’t meet the requirements for the solar loan.

The most effective way to finance solar when you’re not able to pay to make a purchase cash-on-cash is through the solar loan. It offers all the advantages from installing solar, including electricity bill savings, and also powering homes with energy from renewable sources as well as not having to think about all the initial expenses.

Before you decide to sign a solar lease it is recommended to obtain solar quotes from several nearby solar contractors. They can assist you in getting the most affordable price for your solar system , and will give you an idea of whether the solar lease might be able to work for your home.

Thoughts
Verdict

Verdict

  • Solar leases are a financing option for homeowners who doesn’t have the solar panels installed on their property, but makes a monthly payment to a solar business as a payment for energy that solar panels generate.
  • The homeowner is able to utilize all the power that the solar panels generate, which lowers their energy bill by the agreement known as net metering.
  • The monthly lease payment is usually less than the amount the homeowner’s electricity bill was before installing solar panels.
  • Although solar leases permit you to eliminate the upfront cost of installing solar panels but you will pay a lower savings than if bought these solar panels.
  • Most of the time the only reason it is logical to take a solar lease rather than buying solar panels is when you’re not eligible for federal tax credits.

 

FAQ:

Do I have the ability to upgrade my roof with a Solar Panel Leasing?

The majority of solar leases include conditions that pertain to the issue of repairing and remodeling jobs done on the roof of the house in particular when they are near the solar system. When you’re planning to undertake one of these things it is necessary to contact the solar lease provider to obtain permission to work within the system and determine the requirements for the task. They could even assign an administrator to inspect the system.

What happens at the end of the Lease The Lease Term?

The solar panel lease contract leasing is between 20 and 25 years that is about exactly the same as the lifetime of solar panels. Once the lease has expired you have the option to sign a new solar panel leasing agreement or purchase a PV array, or simply remove the solar panels, and then consume energy from the grid.

What happens if the owner for the Solar Leasing Dies?

In the event that the homeowner, or anyone else who was the person who signed the contract for solar lease passes away the lease contract will automatically be transferred to the those who inherit the house. In the event that you are inheriting a house and want to opt-out on the leasing agreement, you need contact the leaser in order to inquire about the cancellation clauses for the lease as well as the agreement that comes with the lease.

 


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Thomas Harder

Is an environmental and renewable energy specialist with over 10 years of expertise within the renewable and solar industry. With over a decade of experience in various organizations within the field He runs Mysolarperks as a passion-driven project that promotes sustainable renewable energy ideas and products.
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