Solar Leases: A New Way to Finance Solar


solar leaseEarlier this month we outlined a new type of solar financing product called Solar Power Purchase Agreements (SPPAs). These programs offer homeowners an alternative to purchasing a home solar power system. With SPPAs, a company retains ownership of the solar power system and you simply buy the power the system produces for a set contract period. Similarly, solar leases are growing in popularity and are yet another way to access to clean renewable energy.

 

Here is how they work:

  • There is usually no down payment;
  • There is a 10 to 20 year contract period, which is transferable to a new owner or home;
  • The home solar power system is sized to generate around 50% to 70% of the power your home typically uses;
  • In contrast to a SPPA, you do not pay for the power that your solar panels produce;
  • Instead, each month you pay a lease payment which covers the solar power system that produces a portion of the electricity you use and the rest of the electrcity you need is purchased from the utility;
  • Obviously for a lease to make financial sense, the lease payment and your new monthly electricity bill should be less than your old electrcity bill was. (Don’t worry, this will be highlighted in your quote)
  • The lease payment increases about 2% to 4% a year, which is less than the 5% to 7% electricity rate increases that you will see at your utility;
  • The leasing company may take care of maintenance and repairs and monitor your system (not always the case);
  • Like a SPPA, you will not receive the 30% federal tax credit or state rebates or Renewable Energy Credits (RECs);
  • As with SPPAs, there is usually an option to buy the system outright at the end of your term for a set price;
  • You will need to have a good to excellent credit – somewhere around the 680 mark.

If a home equity loan is out of the question or you just don’t want to own a solar power system then either a SPPA or Solar Lease are great options. Either way it can’t hurt to get a quote from a qualified solar installer. Some even offer both lease and SPPA options making the comparison that much easier.

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