- Leasing solar panels is a popular option for households who cannot afford the upfront cost of solar panels
- By leasing solar panels, you pay a monthly fee for the solar panels which is typically less than the amount you save on your electricity bill by using free solar energy
- To see if you qualify for solar lease schemes, enter your zip code in the form at the top of the page
How Does Solar Leasing Work?
Over the last decade, solar power has experienced explosive growth in the United States. That’s due in part to state regulations making solar more accessible, tax breaks and other financial incentives, and significant reductions in prices.
Homeowners who want to reduce their utility bills but can’t afford the upfront costs of buying solar panels have the option to lease solar panels.
The solar lease process is not unlike leasing a car or renting a home. You don’t own the panels. Instead, you rent them from the company that installs and owns them for a fixed period of time. The monthly repayments will typically be less than the savings made on your electricity bill meaning they help save you money every month.
Like an automotive lease, many companies will even offer you the option to purchase the system once the lease term is up.
Advantages and Disadvantages of a Solar Lease
Solar leasing has three advantages over purchase:
- Lower Up-Front Cost: As mentioned above, purchasing a photovoltaic (PV) system is expensive, and while it can be financed, a substantial down payment is required if you’d like to keep monthly payments to a minimum. Leasing often means not having to worry about a down payment.
- Ease of Upkeep: With a lease, the owner of the panels is responsible for their repair and maintenance. That isn’t always the case with a purchased system.
- Environmental Benefits: Leasing is a boon to those who want to reap the environmental benefits of solar, but who may not be as concerned with the tax credits and incentives that come with it.
That brings us, in a roundabout way, to some of the disadvantages of solar panel leases:
- Incentives: Outside of saving on your utility bills, the biggest financial incentives available for solar — sales and use exemptions, as well as state and Federal income tax credits and a host of other financial incentives — are available for those purchasing solar panels. Leasing effectively transfers those benefits to the owner (the company from which you’re leasing) rather than the lessor (you).
- Resale: While solar leases are transferrable if you sell your home, that transfer is contingent on your buyers having excellent credit — typically, a score of 700 or higher. If a buyer doesn’t qualify or isn’t as enthusiastic about solar, he or she may ask you to buy out the remainder of the lease, which can run into tens of thousands of dollars.
- Cost structure: Purchasing solar panels may be expensive, but lease costs typically increase year over year, so a system that would cost $20,000 to purchase could cost $30,000 or more over the life of a lease. The lease terms are even less favorable if your credit is somewhat tarnished.
Solar Lease vs Buying
Installing a solar power system on your roof can be prohibitive, since it can cost tens of thousands of dollars. Even with generous Federal, state and local incentives, buying a photovoltaic (PV) system can involve a home equity loan or a loan from the manufacturer on top of a hefty down payment. It can also take time to realize a saving from solar, since you’re trading one set of payments (your utility bill) for another (the payments on a PV system).
Leasing generally means forgoing the down payment or taking out a loan, thereby allowing you to enjoy a reduced energy bill more quickly. The one thing that leasing and buying have in common is that both will require excellent credit, unless you have sufficient cash on hand to avoid taking out a loan to purchase your solar outright.
Solar Lease vs PPA
In many key respects, a solar lease and a Power Purchase Agreement (PPA) are practically identical. In both cases, the homeowner does not own their solar panels. The term for either a lease or PPA is typically between 15 and 20 years, and both are transferrable if you sell your home. Both require high credit ratings (700+) to qualify. The monthly cost for both will usually increase year-over-year. The company owning the solar panels reaps the tax benefits, rebates, and Renewable Energy Credits. And as with any solar power system, you’ll still have to pay your utility company for any power drawn from the grid if your solar output doesn’t cover your needs.
The differences? A PPA typically requires a small down payment. Also, in the case of a lease, you will be leasing the system, whereas with a PPA, you are simply buying the power generated by the system installed on your home.
Companies Offering Solar Leases
The availability of solar leasing is currently limited to a handful of states:
- New Jersey
- New York
- Washington, D.C.
The number of companies offering solar leasing is likewise limited, and not all companies follow the same model. While the mechanics of the leasing process are usually the same from one provider to the next, companies differ in how the systems are installed and maintained.
Some companies, like SolarCity, handle both leasing and installation. Many of the others, like Sungevity, SunRun, and Vivint, handle the leasing but outsource installation to trusted local partners.
While many companies deal with residential and commercial companies alike (including Clean Power Finance, Sun Edison, and NRG Energy), it’s worth noting that some companies, like Amberjack Solar and Soltage, deal exclusively with commercial customers, while others, like BrightGrid Solar and Sunnova Energy, provide leasing and PPA only to residential customers. Be aware that not all providers operate in all states where leasing is an option.
While the price of solar power has dropped dramatically in recent years as the technology advances and becomes more common, it’s still expensive. The up-front cost to purchase and install a PV system can put it out of reach for many homeowners. Solar leasing presents a viable alternative for those who wish to capitalize on the many environmental and financial benefits of solar while avoiding a high upfront cost.