Date: 2025-04-28 Page is: DBtxt003.php txt00004094
Energy
Solar ... Photovoltaic
The question of lease or buy of solar equipment
Burgess COMMENTARY
The advantages and disadvantages depend on the situation ... and making broad generalizations is problematic.
In the automobile market, there is a huge part of the market that is financed using the 'lease' approach. It is more costly for the user, but it enables a car user to have a better vehicle with a limited periodic payment.
The same applies in the solar equipment market.
However, from a social impact viewpoint, society needs people to engage in changing the profile of energy use and energy production. Even if the money profit benefit may be marginal, the social benefit of more solar use is still substantial. The TVM valuadd methodology makes this clear.
Peter Burgess
Solar Leasing ... A Solar Lease May Sound Great On The Surface, But Take The Time To Do The Math And You'll Probably Change Your Mind In A Hurry.
- When you purchase a solar system, it dramatically raises your home's value as soon as you install it. But if you lease a solar system, you've created a debt liability that a potential home buyer will probably not want to assume. What potential home buyer would want to assume a lease on a used solar system that will only save him or her 6 to 15% on their electric bill. And if the potential home buyer wants nothing to do with your legally binding debt or can't qualify for the lease assumption, then you'll have to pay a hefty penalty to break your lease agreement
- A properly installed solar system requires almost no maintenance other than a good rinsing with a garden hose occasionally to remove accumulated dust from the solar modules. Solar modules are covered under a 25 year factory warranty and inverters are covered by a 10 factory warranty.
- A solar systems will not only pay itself off in as little as 4 to 5 years, but will continue to make you money over its 30 to 40 year expected lifetime. This is one of the primary reasons why residential solar lease companies want you to let them use your roof.
- Huge cash rebates are available from many states and utilities. Some as high as $6,000.00 per kilowatt. With a solar lease you won't get a rebate because you are not buying the system. The leasing company will get the rebate because they will own the system that you'll be making payments on for the next 20 years. This is another reason why residential solar lease companies want you to let them use your roof.
- 5. The Federal government is currently offering a 30% tax credit that's currently available for the installation of a solar electric system on your home or business. With a solar lease you won't get the 30% federal tax credit either because you are not buying the system. The leasing company will get the tax credit because they will own the system that you'll be making payments on for the next 20 years. This is another reason why residential solar lease companies want you to let them use your roof.
- A solar electric system can earn RECs (renewable energy credits) that can be sold to entities that to offset carbon production. With a solar lease you won't earn any renewable energy credits either because you won't own the system. The leasing company will get the renewable energy credits because they will own the system that you'll be making payments on for the next 20 years. This is another reason why residential solar lease companies want you to let them use your roof.
Read the comparisons below and you'll probably find that in the long run, a solar system lease simply does not make financial sense.
The Solar Leasing Company Takes All
|
Benefits/Drawbacks |
Solar Lease | Buy Solar |
|
30 % Tax Credit |
No 30% Tax Credit to you. The tax credit goes to the solar leasing company because they own the equipment. | Tax credit applies to you because you own the solar system. |
|
Cash Rebate From Utility Company. |
No Cash rebate to you. The cash rebate goes to the solar leasing company because they own the equipment. | Cash rebate is awarded to you because you own the solar system. |
|
Stable Monthly Cost. |
Monthly solar lease payments are increased on an annual basis. An annual lease payment increase of 3.9% each year for 20 years is not uncommon. | Fixed interest payments are available from many sources which can lock in your investment. The US Department of Energy publishes a consumer guide for financing solar systems. Click here to download a PDF version of their guide. |
|
Reduction Of Your Current Electric Bill |
A solar system which is currently being recommended by a popular solar leasing company for a $249.00 per month electric bill in Edison territory would reduce that electric bill by $117.00 per month. The lease payment would be $132.00 per month so your monthly savings with a solar lease program would be about $15.00 per month.
$15.00 per month ? Why would anyone let these people climb on their roof for a couple of days, drill lots of holes, install all of that equipment, be legally bound to a solar lease for up to 15 years on equipment that they won't own in the end, all for a savings of only $15.00 per month ? We're not exaggerating, you can visit these websites and use their online lease calculators to see the numbers for yourself. |
When you purchase a solar system, you own the system. So unlike a lease, when you finish paying off your loan you're done, that's it. The money that your system will save you on your electric bill will have increased over time because electric rates will rise and this non-taxable income will go right into your pocket year after year, decade after decade. |
|
Consequences or benefits when selling your home. |
If you cannot get your home's buyer to qualify for the solar lease (Remember your home's buyer must have excellent credit to qualify for the lease) or if your home's buyer is not interested in assuming a lease on the solar system then you are obligated to the lease. You cannot break the lease without financial consequences. | Homes that are sold with a solar system included in the purchase price can sell for more money than homes without a solar system. Since you bought the solar system, you own it and you can do whatever you want. You can move the system to your new home or you can sell the system as part of the home's sale which will improve your home's sale price and it's marketability. |
|
Solar System Ownership/Equity After Completion Of Financing. |
After paying 20 years of lease payments, you will have zero ownership and will have no equity in the solar system. You will have the option, of extending your lease payments, you may also buy the system even though you've been paying for it for 15 years or you can have the solar leasing company remove the system from your roof. (Ouch, how will they match all of that 15 year old roofing material ? Who say's that they'll even try.) |
After you complete the financing of your solar system, it will continue to produce free electricity for many years to come. In fact the solar panels typically come with a 25 year warranty and have a life expectancy of more than 40 years.
Inverters which have a 10 year warranty, have a life expectancy of 12 years. Inverters constitute a relatively small percentage of the overall solar system cost and are expected to drop in price over the life of your system. |
|
Renewable Energy Credits (RECs). |
No Renewable Energy Credits to you. The Renewable Energy Credits go to the solar leasing company because they own the equipment. | Renewable Energy Credits apply to you because you own the solar system. |
|
System Maintenance. |
No System Maintenance When You Lease A Solar System. That's a good one ! What maintenance ? | That's the beauty of owning your own solar system. A properly installed solar system needs virtually no maintenance other than a good rain or a rinsing off every few months of accumulated dust on the solar panels with a simple garden hose. |