You can already buy home solar kits from places like Home Depot and Amazon. But as covered in yesterday’s post, the DIY solar approach is not as cheap as you might believe. You save money on labor costs, but the ROI of home solar kits is much lower than what you’d receive from a professional installation.
Today, we’ll look at one of the cheapest and most popular ways to get photovoltaic (PV) panels on your rooftop – the solar lease.
How Does a Solar Power Lease Work?
The solar lease is a game-changer in many ways. It has helped make photovoltaic (PV) technology more affordable for more Americans than any other financing arrangement. And it’s built on a relatively simple concept:
- You sign a 15 or 20-year solar lease with a 3rd party vendor.
- That vendor covers all installation costs (including maintenance and repairs).
- You pay that vendor for the clean electricity that your leased panels produce. With most leases, these payments are fixed over the 20-year lifetime of the contract, although there may be slight annual adjustments to keep pace with inflation.
The beauty of a solar panel lease is that you have no upfront installation costs. And your monthly payments are less than what you currently pay to the utility company.
What’s not to like?
Solar panel leases represent an affordable way to go green. And it saves you money in the process. The concept has really taken off in California. In fact, we recently came across an article about how Best Buy will soon begin selling cheap solar panels directly to consumers in San Diego. And they’ll include leasing options to help make installation 100% free.
Well, it turns out that there are downsides to the solar power lease. Let’s explore.
The True Cost of a Solar Power Lease
Most installers market solar panel leases as being “free.” And in a way, they are. After all, you don’t have any upfront costs. And the money that you do pay is less than the money that you were already paying (to the utility). But there are a few problems with the solar leasing concept.
Problem 1 – Solar Leases Don’t Have Returns
The primary financial benefit of solar energy is the promise of free electricity. You opt out of the utility game and get most or all of your energy from the sun.
But with a solar power lease, you’ll never have free electricity. There will always be monthly power payments for the lifetime of the contract. This means that there’s no payback period, ROI, or breakeven point. Just 15 or 20 years of monthly costs.
Problem 2 – Solar Leases Are Binding
Once you sign the 20-year contract, you can’t break it. In most cases, this is fine since utility rates tend to go up while your monthly lease payments remain fairly stable.
But it’s possible for your monthly lease payments to rise faster than utility rates do (as this unlucky customer found out). It’s also possible that new incentives, technologies, or programs come out during that 20-year term.
Too bad. You’re locked into a contract that you can’t get out of.
Problem 3 – You’re Paying Money to Rent out Your Roof
In San Diego, there exist a ton of awesome incentives for solar system owners – from rebates to grants to tax credits. But alas, you’re not the system owner under a solar lease. The 3rd party vendor is. And he or she gets all of those benefits and incentives – not you.
No big deal, you might be thinking. But it’s a huge deal. That’s a lot of free money that could be coming to you. Instead, you’re paying money to someone else so that they can use your rooftop and get all those benefits.
Problem 4 – Your Property Value Just Went Down
Installing solar can increase the property value of your home. But only if you own the system. If you lease the panels, then you’ve created a debt liability. Future homebuyers will have to take over the leasing contract if you decide to move. In other words, your property becomes less attractive with a solar power lease.
For more on the many hidden dangers of solar power leases, be sure to read these articles:
Is There a Cheaper Way to Go Solar?
Despite the allure of cheap panels sold as home kits or solar leases, these 2 approaches are not as cheap as they appear.
But is there a better option?
You bet there is. And that’s what we’ll be covering tomorrow.
In the meantime, if you have any solar-related questions, shoot us a quick contact form. All Sunline Energy consultations and quotes are 100% free.