Most Americans who went solar from 2011-2014 chose the no-money-down, “toe in the water” lease. But with falling costs and a range of incentives making it easier for home- and business owners at every income level to install solar energy on their property — the equation is changing. More solar energy consumers are going “all in” and realizing the benefits of solar investment. In fact, by the end of 2017, customers who own their solar energy systems outright are projected to overtake solar system lessees for the first time since 2011. Still, many of us don’t have $15,000+ cash on hand. Enter a new wave of financing options that provide even post-solar shift energy consumers with viable reasons for leasing rather than buying. Given all this change, deciding how to pay for your solar power system may seem more overwhelming than ever. But a quick review of the pros and cons of each option – as well as your individual financial goals – should help you correctly answer that nagging question: Is it better to lease or buy my solar panels?
Maximum financial benefits. Customers who choose to buy a solar energy system have either cash on hand to invest or the credit score needed to take advantage of a solar loan. In both cases, solar panel system owners are eligible for the maximum financial benefits associated with a system installation, such as federal and/or state rebates and incentives. In addition, many states also have Solar Renewable Energy Certificates (SRECs) available only to solar energy system owners. In these areas, SRECs can make panel-owners a little extra cash if they transfer the right to count the solar electricity their system generates – especially if they partner with a company that has SREC buying power, such as an integrated retail energy and solar energy provider like Crius. Added value. While most solar financing options contain provisions for relatively hassle-free moves, owning your panels outright makes relocating a no-brainer. Alternatively, you can use that fully owned solar system as a negotiating tactic during the sales process. Research has shown that homes with solar panels typically sell for $15,000 greater than those without solar panels installed. Last but certainly not least, there is an emerging trend toward bundling solar loans with helpful services or products such as batteries. This could obviously add to the overall value provided by your system, as well as keep your home comfortable in the event of an outage. Further, some solar loan offerings now have a no money down option. So be sure you are working with a solar finance partner with the latest and broadest range of loan products in order to make the best choice for you.
You’re on your own. Like other intangible commodities such as stocks, SRECs must be bought and sold online through an intermediary, often referred to as an SREC aggregator. Unless you partner with a solar loan provider that includes full-service purchase of SRECs, you will be responsible for contacting aggregators directly and negotiating both an asking and selling price for each SREC, each year. There are currently six active REC markets with solar carve out programs in the U.S., with prices per SREC ranging from $15 to $480 and shifts reflecting an 817% decline in some areas. System owners will need to become familiar with these markets, as well as pricing trends, in order to strike the best deals on SRECs – or, find a third-party to help take this “con” off your shoulders. Returns may take time. Unlike no-money-down lease and certain solar loan options (which may realize savings in the first month) buying a system outright or with a shorter term solar loan can mean a longer wait time for a return on your investment. Depending on the state in which you live, this can range from 5-10 years and is based in part on historic electricity rates, which have risen by an average of more than three percent each year over the past decade.
LEASE / PPA: Pros
Serenity now. The main advantage with a lease or Power Purchase Agreement (PPA) is that there is no money out of pocket and the leasing company is responsible for all system maintenance and repairs. You can invest whatever extra funds you may have now elsewhere (bird in the hand) and, in the case of a PPA, pay only for the amount of solar energy the system produces. This provides additional peace of mind for consumers. In addition, solar leases typically include a fixed monthly payment for use of the solar installation – regardless of how actual solar energy production may shift. This “budget billing” approach allows homeowners to better predict and budget for energy costs for decades to come. And overall, PPAs and leases make solar power more accessible to a wider range of consumers. Even those without thousands of dollars on hand can immediately enjoy the cost-saving benefits of solar as well as the satisfaction that comes from supporting renewable energy – all without upfront costs or the burden of interest-bearing loans.
LEASE / PPA: Cons
It’s not yours. Solar leases and solar PPAs are similar to renting your solar panel system from a third-party. You enter into an agreement with the solar leasing company that entitles you to many – but not all — of the benefits of the system for the term of the contract, which is generally around 20 years. You’re ineligible for some incentives. Under these arrangements, the solar leasing company owns and maintains your solar panel system, so the company itself is entitled to the rebates, tax breaks, and financial incentives that are available for the solar panel system. System lessees indirectly benefit from those savings through lower solar lease rates as well as potential referral fees from encouraging solar adoption with friends and family. So which option is right for you? If you can’t decide whether leasing or buying a solar panel system is more beneficial for you, it’s best to check in with the experts. Reputable solar providers adhere to strict guidelines in terms of presenting financing options and often have helpful information on the most popular payment terms.
At Crius Solar, our dedicated team of experts stands ready to offer a range of both purchase and leasing options and help you objectively navigate them all. Whichever option or provider you choose, remember – with solar, you’re one step closer to reducing your energy bill and improving the environment for future generations!