Residential Solar – To Buy or Lease?

This morning’s post is courtesy of rock star solar blogger Lorna Li. You can check out her blog at GreenMarketingTV, or get help with your solar installation by clicking here.

Do you dream of powering your home with clean, renewable solar energy, but find the cost of solar panels intimidating? Given that solar systems can easily cost $40K, unless you are a DIY solar guru, it’s hard for most people to go off the grid without breaking the bank. However, solar leasing has become a hot topic these days. I’ve been researching the pros and cons of buying versus leasing my own solar panels.

Residential solar leasing is a relatively new concept, but one that is gaining quickly in popularity. Typically, homeowners sign a contract with a solar leasing company for 10, 15, or 20 years. The company installs solar panels on the home and also takes care of any maintenance or repairs that may be required during the term of the lease.

In exchange, the homeowner plays a fixed monthly fee (solar lease) or agrees to purchase the power produced by the system for a set price per kilowatt-hour (solar power purchase agreement, or PPA). When a solar lease ends, homeowners typically have the options of upgrading the equipment (if necessary) and renewing the lease, or ending the lease and having the solar panels removed at no cost.

There are both advantages and disadvantages of a residential solar lease for homeowners. Keep reading to decide if residential solar leasing is right for you!

Advantages of Residential Solar Leases

For many homeowners, the biggest advantage of residential solar leasing is the elimination of the upfront cost of purchasing and installing a home solar system. Since a typical system costs about $20-40,000, this can mean substantial upfront savings for homeowners. Additionally, homeowners who choose residential leases are able to start benefiting from savings on their utility bills immediately, while homeowners who purchase their own solar panels may have to wait seven years or more before the system pays for itself.

Another financial benefit of residential solar leases is that your savings may increase over time. In recent years, utility costs have been rising an average of 5% per year. Depending on the terms of your solar lease, you may be able to lock your energy rates in at a permanently lower rate while neighbors without solar leases continue to pay higher rates every year.

Some homeowners also appreciate the peace of mind residential solar leases provide, because the solar leasing company monitors the performance of the solar panels and will promptly repair any damage to the unit at no extra charge to the homeowner. Solar leasing companies also perform routine maintenance on leased solar panels, which, though not difficult, is especially valuable for homeowners with physical disabilities that would make them unable to maintain the panels themselves, or who are otherwise unable or unwilling to do so.

Disadvantages of Residential Solar Leases

For many homeowners, the biggest disadvantage of residential solar leases is that, in effect, it simply replaces your current utility company with the solar leasing company. Though you probably will see immediate savings on your utility bills and those savings may increase over time, you are still dependent on an outside company for power.

If you purchase your own solar panels, on the other hand, any power you generate with the panels after they have paid for themselves is essentially free, and if you participate in a local net metering program, it may even earn your family a profit! Either way, owning your own solar panels means true energy independence for the full lifetime of the panels.

Thanks to a growing array of local and federal tax incentives and other financing options, it may also be possible to offset a substantial percentage of the upfront cost of a home solar system, reducing the time it takes for the system to pay for itself and minimizing the high upfront costs that are one of the primary reasons many homeowners choose residential solar leases in the first place.

Another disadvantage of residential solar leases for some homeowners is the long contract period. If you decide to move before your contract is up, you may need to transfer the lease to the new owner, or buy out the lease and add it to the cost of the home. If you own your own solar panels, your home’s value will also increase (an average of more than $20 for every $1 in annual electricity savings, according to a study by the Appraisal Institute), but you, not the solar leasing company, will be the beneficiary of this increase.

Residential solar leasing can be a great way for homeowners who want to save money and go green without the high upfront costs of purchasing a home solar system to benefit from clean, renewable solar power, but it’s not for everyone. Be sure to weigh the advantages and disadvantages carefully before making your choice.

Residential Solar – To Buy or Lease?