While 2011 may mark the first year solar leasing became a widely accepted option to finance and install residential solar systems, 2012 is shaping to be a year of growth – and differentiation – in the niche industry of providing solar leases. Though the basic structure of a solar lease is similar across the board, a number of considerations can greatly affect the customer’s experience and overall benefits. At first, only a few companies – SunRun, SolarCity, Sunpower, and Sungevity – offered leasing options. Now more solar installers and integrators are attracting capital investors that provide the package deals, making it more important for potential rooftop solar customers to know what to look for when reviewing leasing offers.
The factor that draws the greatest distinction amongst leasing companies is the selection of installers and system manufacturers. It’s easy to get excited at the prospect of paying little or no money down for a solar PV system that will ultimately save money on electricity bills. But it’s just as easy to overlook the system’s performance and maintenance guarantees over the life of the lease. You’ll want to make sure that if your leasing company outsources the installation or parts procurement to another company, they offer a guarantee to maintain and fix the system in the event of a breakdown. Keep an eye out for companies like Sunpower, which underwrites their leases on its (in-house) equipment. Generally speaking, leasing companies that outsource installation and parts procurement can still offer dependable services. Take for example SunRun, which rigorously vets installer partners in each region of operation. Nevertheless, it’s worth looking into not only the terms of the agreement, but the reputation of their partners that may be on the hook for any maintenance.
Another consideration for the prospective lessee is the flexibility of the terms offered. A general principle is the less money you spend upfront and the shorter the lease term, the lower the monthly savings will be. Leasing companies vary in how flexible the terms are, but you should be aware of how altering the amount paid upfront and the length of the lease can change the return on your investment through electricity savings. Furthermore, companies offer a variety of escalators in monthly payments (obviously that are projected to be below the rising electricity costs over time). Take a look at this review of leasing optionsfrom Sunpower, offered by David Brands at Clary Solar, which factors in an annual escalator with offer comparisons.
A second consideration to the length of the lease period relates to performance-based incentives. Some states have renewable portfolio standards that create SREC markets, which effectively reward owners of generating facilities for their solar electricity. Over time, the prices for an SREC, which represents 1,000 kWh of generation, is scheduled to decline. Typically the leasing agreements hand ownership of SRECs over to the leasing company or installer, but presumably the homeowner retains ownership of SRECs once the lease expires (if they agree to own the system). Consider how future cash flows from SRECs affect your anticipated ROI, and inform your ideal term length for the lease.
Hopefully this gives you an overview of key factors to look for when comparing leasing companies. Check out John Schumpeter’s Solar Lease Mystery Shopper for a more inside look at some of the major leasing companies!