With a solar Power Purchase Agreement (PPA)/Lease, you do not own the solar system on your home. You, ’the Host’ buy electricity from the 'Provider’ which installs and owns the panels sitting on your roof.
While solar leasing terms vary considerably, leases typically allow you to go solar with little to no money down and are based on 15 to 20 year contracts which usually allow you to buy the system at the end of the lease.
In the industry, different people are often passionate that buying or leasing is better when going solar, but in actual fact either method of acquiring a solar system is a win-win situation for everyone. The answer as to whether it is better to lease or buy your solar energy system depends on the financial situation you are in and your intentions in relation to your property and a whole range of factors unique to the individual.
1- The first and most obvious advantage of a solar lease is that you don't have to come up with a large sum of cash to pay the large upfront capital cost to buy a system. Some solar installers provide a zero down solar lease deal and where your monthly payments are lower than the amount you save on your utility bill, so you profit each month without ever making an upfront investment. I don't think people realize how rare it is to be able to make a profit, even a small one, without laying out any investment up front!
2- A second advantage, PPA stands for Power Purchase Agreement, which means your solar lease is an agreement based on you paying only for the power produced by solar panels placed on your roof at a specific rate. This rate averages anywhere between 10% to 50% below the rate the utility charges you. Depending on how many panels fit on your roof, your savings could be in the thousands each year!
3- A third advantage of a solar lease is that the provider is responsible for maintenance of the panels. This means that as the homeowner you do not have to worry about equipment failure.
4- And one last advantage, since you are only paying for the power produced by solar panels, if for any reason these panels are not working for a period of time, or produce less power than quoted, you get a credit for the any short comings of the system.
1- The first disadvantage of a solar lease is that they are usually very long term contracts. This means you are going to be tied to paying a monthly payment to the provider for 15-25 years.
2- Secondly, a solar lease can also create difficulties if you go to sell your property. Usually a provider will require that if you sell your house during the lease term that the purchaser of the house take over the assignment of the solar lease. However, if by that time there are cheaper and better solar products available and a potential purchaser does not wish to take over the lease, you may be required to pay a break fee to the provider which can run in the thousands of dollars.
3- A further disadvantage of a solar lease agreement is it usually has a rate escalation each year so that the electricity you purchase from the solar panels on your roof actually goes up in price annually.This rate hike, or escalator, is normally around 3% annually, which is still below the average annual rate increase of utility rates, but can be inconvenient not knowing when and what your rate will increase to. And there may also be a period of time such as between 2014-2016 when electric rates actually declined due to the lower cost of natural gas.
Leasing solar panels is a great available option that many people are not aware of providing substantial savings on electric costs without having to pay anything our of pocket upfront.
When shopping around with local installers, be sure to get the best deal out there and an installer that allows as part of their agreement with no fees or penalties if you move from or sell the property.
Also find an installer that provides a fixed rate for the lifetime of the agreement. That means as electric rates increase year after year, your savings are more substantial and you will always know the amount you will be paying.
And finally, most solar leases are 20 years long, but some installers provide shorter lease terms at 15 years. Ideally if you find a solar installer that provides all the above you will be getting the best deal out there!