FIGURE OUT THE SOLAR LEASE PUZZLE
“Free solar panel” or “solar leasing” deals have rallied people around solar energy usage in the United States. A large number of systems were installed in this arrangement. This purpose of this article is to help you understand a solar lease.
Right now, you don’t have a solar power system and you purchase all your power from the electric utilities. You get a quarterly or monthly bill for the power you use and although you can cut down on your electricity usage or invest in energy efficient measures, there is little it can do to reduce your power charges.
If you sign up for a solar lease, you are letting a third party build you a mini power station – a photovoltaic system – on the roof of your business or home, at little or no up-front cost. The company financing the system’s construction sells you the generated power at rates much lower than the retail tariff.
The net result is a power bill that is way lower than what you would normally pay for the same amount of power. On top of that, you don’t have to pay for a system installation. Since the cost of solar energy installation has plummeted dramatically over the last decade, the financing company can still make a profit, making it a win-win for both parties.
WHAT ARE THE BENEFITS OF A SOLAR LEASE?
There are many potential benefits of installing a photovoltaic system under a solar lease. The main advantages are:
- The system costs you or your company nothing to very little to install – The material and installation costs are covered by the financing company.
- Insulate yourself against rising electricity tariffs – Power prices have been steadily increasing across the United States, and although there are occasional signs of it easing up, it seems highly unlikely that the prices will begin to fall any time in the near future.
- Maintaining the system is the financier’s responsibility – Since you don’t own the photovoltaic system, you don’t have to pay for any repairs. Moreover, you won’t face any down-time charges.
- Knowing where the power comes from – Unless you are with a 100 percent green electricity retailer, the power that you purchase from the grid comes mostly from coal-fired power plants.
- You can transfer the lease when selling the home – Although a lot of people would tell you that it is difficult to sell a house that has a leased system, the argument makes little sense. A solar power system adds value to your house and there are no two ways about it. With a SunPower solar lease, your prospective buyer will still have low electricity bills.
WILL YOUR BUSINESS OR HOME BENEFIT FROM A SOLAR LEASE?
Since feed-in tariffs (FITs) – which pay the owners of a solar power system a generous amount to export power to the the electricity grid – are not yet extensively deployed in most states, solar leases benefit businesses and homes who can consume the solar power as it is generated on-site.
For people who are considering buying or leasing a solar power system, the rule of thumb is, if you don’t use a lot of electricity in the day or can’t shift your usage to daylight hours, solar panels may not help you save money. Solar leases save money for those people whose electricity consumption is higher than the average and whose quarterly electricity bills are above or around $1000.
OWNING VS LEASING A SOLAR POWER SYSTEM
Leasing programs are becoming increasingly popular in the United States. The following table summarizes the primary differences between the owning and leasing a solar power system:
COST OF THE SYSTEM
|Conventional financing or capital expenditure is required to buy a system.||There are no up-front costs involved in installing a system.|
|Apart from the warranties, all the responsibility for maintenance lies with the owner.||The maintenance responsibility lies with the financier of the system for the entire duration of the lease.|
DURATION AND CONTRACT CONDITIONS
|The contracts that you need to watch out for are product and solar installation warranties. The output warranties for solar panels are typically twenty-five years. However, systems have an anticipated lifespan of over 30 years. The inverters will need to be replaced once every five years.||Under a solar lease, you enter into a binding and formal legal contract with your financing company. It is not necessary that you will be accepted automatically, and interested parties might have to go through credit checks. The duration of a contract can vary anywhere between 5 to 20 years.|
RETURN ON INVESTMENT
|Typically, the payback period for a residential photovoltaic system is between 5 to 7 years. After this period, the annual return on investment can be 20 percent or above. It depends on factors like the cost of electricity, purchase price, and FIT available.||Little or no capital investment is needed and you can start saving on your power bill immediately.|
DISADVANTAGES OF BUYING A SOLAR POWER SYSTEM
- Expensive Loans – Owning a PV system essentially means you have to put together thousands of dollars to purchase it. If you borrow money for making the purchase, you will be paying large amounts of interest which will undercut most of the savings were you not forced to take a loan.
- Solar inverter replacement – If you own a photovoltaic system, you have to replace the solar inverter once every five years. This will cost you thousands of dollars. On the opposite end, a SunPower solar lease will take care of the inverter replacement cost. Most solar companies do not factor in the cost of replacing the inverter when they give you the projections for long-term energy savings. This is fundamentally misleading to the customers.
- Repair charges – If you own a system and something goes wrong that is not covered by the warranty, it is up to you to fix it. However, if you go for a SunPower solar lease, the maintenance is care of by the company for the duration of the lease.