How does solar leasing work?

It's the fast growing part of the solar industry. More people are opting to lease a system rather than buy outright.

By

Amy Feinstein

Thu, Mar 01 2012 at 3:05 PM

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Green Business

Photo: ZUMA Press

In the current economy, few people have the extra cash to pay for a full transition to solar power. Is there another way to go solar? One option, which also happens to the bright side (pun totally intended) of the solar industry, is to lease a new system. But many potential customers are not sure how solar leases work.

Lots of other people are learning, though. In fact, leasing is the fastest growing division of the solar energy industry, and between local, state and federal enticements as well as tax benefits, solar companies are making the transition virtually effortless.

A company called One Block Off the Grid is diving in to fill the gap between those who can make an outright purchase and those who cannot.

One Block Off the Grid vets solar installers, negotiates great turnkey deals on solar with reputable providers, provides over-the-phone quotes and gives prospective solar homeowners direct access to homeowners who have already installed solar for unvarnished information and advice.

“We serve as a conduit between the consumer companies, and finance companies in 40 states and growing,” says Dave Llorens, CEO of One Block Off the Grid. “With no pressure, we can do a complete consultation over the phone, including remote design services to suit their needs. From there, we can match them with a local company.”

There is no cost to consult with One Block Off the Grid and it can bring you one step closer to integrating solar power into your life.

Solar energy leases are like most other equipment leases. The length of the lease can range up to 20 years, with the benefit being that your utility bills can be replaced or reduced by the lease payment. Additionally, unlike a car lease, the government is still willing to compensate the homeowner, even if they lease.

Paul Wittemann, CEO and director of sales for Greenspring Energy (a supplier and installer of solar power) with offices in Maryland, Pennsylvania and the Carolinas, comes to the table with additional thoughts about dipping your toe into the world of solar energy.

“We got into the leasing arena in 2010 because of demand,” says Wittemann. “If you are interested in going with solar energy, I would still stress that there is no better investment out there than switching over to solar.”

Wittemann says the current breakdown percentage-wise for how customers buy solar energy is 30 percent pay upfront the traditional way, 40 percent go with leases (often with a deposit down to reduce the monthly lease payment) and then 30 percent opt to secure financing themselves, generally through a home equity loan.

“Using your home’s equity to improve your home, your home’s value, and save money is a great alternative to a lease or an outright purchase,” says Wittemann. “Why not get the benefits of using the value in your home, rather than paying a percentage to a finance company? Either way, at the end of the day, you are setting yourself up for savings and value for tomorrow.”

If you do go with a lease option, you have a choice to make at the end of the leasing term. As Witteman explains, the home owner has the option of a lease buyout (similar to the option you have at the end of a car lease).

"After the lease period, the buyout for the solar panels is really a nominal fee," he says. "It is far less expensive than the cost of removing the solar panels and going back to conventional energy."

With those types of features built into a lease deal, the future for solar industry should be very bright.

Know more about how solar leasing works? Leave us a note in the comments below.

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Comments: 4

ron_winton Mar 30 2013 at 1:30 AM

Solar leasing will be remembered as the great "Fleecing" of America. The leasing companies will take the 30% federal tax credit worth thousands. They will also take any other applicable financial incentives. In return you'll save 10% to maybe 15% on your electric bill after factoring their expensive lease payment. And worst of all, after making up to 20 years’ worth of leasing payments you won't even own the system, it will still belong to the leasing company. If you want to own it, you'll have

.... More

to buy it from the leasing company at fair market value, that's the law. Instead of a solar lease, why not get an FHA $0 down solar loan, it's easier to qualify for than a lease (only a 650 credit score and no equity in your home is needed), you'll get to keep the 30% federal tax credit and the cash rebate and best of all, you'll own your solar system for a much better return on your investment. With a lease, at year 10 to 20, the income that the leased solar system generates, stops. With a purchased solar system, the income that your solar system generates, keeps on giving and giving for up to the 30 to 40 year life expectancy of your solar panels. And good luck selling your home with a lease attached to it. What homebuyer will want to assume your lease payments on used equipment, using older technology, when they can buy a brand new solar system using the latest technology for tens of thousands less. Today you can easily purchase a name brand, grid tie solar system for less than $2.10 per watt after incentives. With a lease you'll pay up to triple this cost in lease payments and you won't even own your solar system. And here's the icing on the cake, When you pay that ever increasing electric bill, you're paying that bill with taxed dollars. When you own a solar system, that solar system will basically generates non-taxable income that eliminates that electric bill that you were paying with taxed dollars.

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jalovisa69 Jan 24 2013 at 10:28 AM

Hi. In the article, you say "Additionally, unlike a car lease, the government is still willing to compensate the homeowner, even if they lease." Can you expand upon this and explain how homeowners are compensated if they lease (or go with a Power Purchase Agreement)? Thanks!