How Does a Solar Panel Lease Work?

Over the past ten years, solar panels have become 70% cheaper, but you can save even more if you rent one. Solar leasing will allow you to install a solar panel without an upfront payment – instead, you will pay monthly installments while being able to consume the energy produced by the panel.

Leasing solar remains relevant and in demand, allowing you to enjoy all the benefits of technology while avoiding a  hefty investment. Read on to learn everything you need to know about solar panels, including how solar panel leases work and their pros and cons.

Leasing Solar Panels

Solar panel lease is the same as renting a car. Following your long-term solar lease agreement (up to 25 years), you pay monthly installments for a full-fledged solar system operating on your property from day one. A solar lease allows you to save on electricity if you can manage the panel without spending too much on its maintenance.

  1. How Do Solar Panel Leases Work?

    To understand how solar panel lease works, one could return to car rental again, except that you don’t have to account for the ever-changing price of gasoline. When you lease solar panels, the contract doesn’t change, covering all your maintenance, repair, and insurance costs. Upon expiration, you can extend the contract.

    The cost of solar panel leases depends on the house's energy consumption, climate, and roof features. Having collected all the data together, the lease company calculates the monthly payment and streamlines the contract. That said, you can always make adjustments reflecting your needs and wants.

Differences between Rent and a Power Purchase Agreement (PPA)

The main difference is that with a PPA, the cost of solar energy changes depending on the electricity consumption. With classic solar panel leasing, it remains fixed.

Both the PPA and the solar leasing program cover:

  • Maintenance, diagnostics, performance monitoring, and repairs.
  • Installation of the system.

At the same time, the landlord has all rights to the solar system.

The PPA contract is often concluded after the first (advance) payment and preliminary calculation of the energy consumption, bearing in a lower ROI than leased solar systems.

Conditions for Concluding a Solar Panel Contract

Any solar lease company will have slightly different conditions, with most contacts concluded for 15 to 25 years to cover the entire lifetime of the battery. As a rule, the installation is free, including the monitoring software controlling the panel’s efficiency. Solar lease companies can quickly fix malfunctions by monitoring their solar panels’ performance.

One of the most important nuances of the contract is the price escalator addressing the changes in the cost of electricity. The rule of thumb is that the amount increases by around 5% annually.

Another important feature is that if you move, you can terminate the contract with the company or transfer it, along with the installed panels, to a new homeowner.

What Should You Ask Solar Leasing Companies in the First Place?

Before you rent a solar system, be sure to check all the terms of the contract:

  • what is included in the rental price;
  • the duration of the lease;
  • what kind of price escalator is expected;
  • what is the fixed payment amount;
  • what happens after the end of the lease.

Make sure to clarify all questions before signing the solar panel lease agreement.

What are the Pros and Cons of Leasing Solar Panels?

The advantages of leasing solar panels include:

  • No downpayment. In most cases, you do not need to pay for the installation and the battery, which is especially important for those who do not have the necessary budget for the purchase or are not ready for it.
  • Electricity savings. As a rule, electricity savings do not exceed 20%. Some large houses may not be suitable for a solar system and will need an additional power supply from the usual system.
  • Environmental friendliness. It is much more pleasant to understand that you are getting electricity from a safe and environmentally friendly system than from a more expensive and harmful system.
  • No payments for maintenance, repairs, diagnostics, etc. The lessor remains the owner of the panels, obligating you to take full responsibility for the system. At the same time, qualified assistance will always be provided on time, and the only thing you should do is wash the panels several times a year, evaluate the condition of the casing and the functionality of the battery, and avoid overload.
  • Stable payments throughout the year. You will always know how much you must pay, with no hidden bills and excessive payments.
  • Breakage compensation. Upon problems with rented panels, the lessor will pay for repairs or recalculate the payment for the next month to compensate for the inconvenience.

The disadvantages of leased solar panels include:

  • Inability to apply for perks: federal tax credit, local benefits, etc. Since you are not the owner of rented solar panels, you cannot claim benefits and incentives. For instance, 30% of the federal solar tax credit will go to your rental company.
  • Limited savings. With leasing, you can save up to 20% on electricity. In contrast, buying a solar panel would save more in the long run if the panel doesn’t require much maintenance.
  • Possible increase in annual payments up to 5%.
  • No increase in the real estate value. Since you don’t own the rented panels, you will be unable to include their value when selling the property. 
  • Possible inability to sell the property. The home may be more difficult to sell if the lease has not expired.

This is just a general picture of the pros and cons of leasing solar panels.

Leased vs Owned Solar Panels: Which is Better?

When choosing between solar buy or lease, always proceed from your capabilities and expectations from the deal:

  • Budget. Not everyone can immediately buy a solar energy system and then spend even more money and time on its maintenance. This is where rent comes in handy, as you do not need to worry about the downpayment or the assessment of the system’s performance.
  • Savings. Your savings with rented panels are limited to approximately 20%. If you want to save more in the long run, buy solar panels.
  • Obtaining ownership. A solar system lease retains the property rights with the lessor. 

Conclusion

Leasing a solar system is a risk-free investment, as you don’t need to pay a hefty downpayment immediately. To buy your first solar panel system, you don’t have to do much either: just find a reliable rental company and conclude a contract, having customized the agreement for your needs. Despite the downsides of leasing solar panels, this option remains one of the most beneficial to the consumer.

James Whitham is a respected author, having written numerous articles about the benefits of solar power systems and renewable energy. He is also an innovative technologies specialist at one of the United States' leading manufacturers of equipment for solar farm projects. With a deep knowledge of this field, James has been instrumental in helping to shape the future of sustainable energy solutions.

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