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How do solar leasing programs work – Solar PPA guide for homeowners

Do you wish you could switch to solar power, but are simply unable to afford the steep upfront cost of solar panels and installation? Today, you can join the ranks of many homeowners who have made the switch without incurring any out of pocket costs by leasing the solar equipment instead of buying it. This innovative option may also be referred to as solar financing, solar power purchase agreements, or solar rental programs. Solar leasing has been rapidly spreading across the US, becoming the fastest growing division of the solar industry, with more and more companies offering homeowners the convenience and flexibility of a variety of leasing models. Thanks to the support, incentives, and tax breaks from local, state and federal government, solar companies can make the switch to solar leasing for you virtually effortless. If you believe in the concept of clean renewable energy, want to have a more green lifestyle and save on your electricity costs, this is an ideal time to take advantage of a solar leasing program.

Before making the switch, it is important for you to carefully consider whether solar leasing is the best solution for your electricity needs. You need to think about such factors as your home’s size, location, power usage, climate and compare solar prices that different solar providers will be willing to offer you. Today, there are many regional and national companies such as SunRun, SunPower and SolarCityTake that offer free consultations and various types of leasing programs. No one company is right for everyone and you should consult a couple of providers in your area before making your final selection. Take the time to do your research and find a solar leasing program that will not only be affordable when you sign up, but will also make financial sense down the line.

To get you on the right track, here are some essential things you should know about solar leasing.

What exactly is a Solar Power Lease Program?

Solar power leasing is just what it sounds like and is similar to leasing a car- you lease the solar panels to generate electricity, but you do not get the benefits that come with ownership, such as tax breaks and ability to sell excess power back to the grid. Essentially, you get the advantage of using clean solar power and saving on your electric bill, but the solar company owns both the panels and the solar power that they generate. Depending on your particular case, you can save 5%- 25% on your monthly electricity bill and feel good about helping out our planet.

Are there any requirements to qualify for a solar lease program?

There are a few basic requirements that you need to meet to take advantage of a solar lease program. First, you should live in a state that has solar companies that offer this option, such as Arizona, California, Colorado, Massachusetts, Connecticut, New Jersey, and Pennsylvania. Since the popularity of solar leasing programs is growing fast, programs will soon be available in Texas, Florida and many other states. Second, you need to be serviced by a major utility company that offers a solar incentive program, not a local or municipal power cooperative. Lastly you need to have a large enough clear space on the roof to accommodate all the solar panels you will need, and your roof needs to get enough unobstructed exposure to sunlight.

How does the lease work?

Depending on the solar company, leasing options will vary slightly, but they all work in the same basic way:

-Once you contact a solar leasing program provider, an inspector will come to your home to determine whether it qualifies for their program. They evaluate the size of your home, condition of your roof, sun exposure, roof angle, access issues, etc.

-If your home is right for solar power, and you like the terms of the lease, you will be asked to sing an agreement for 10-20 years. Typically, companies also collect a deposit, prior to the actual installation. Today, many companies offer leases with no money down at all, which means that your solar system will be completely FREE!

-On a scheduled date a professional installer will come in and install the solar panels on your roof, (a representative from your solar company will oversee the installation).

- Your savings on electricity start rolling in right away.

-You will still be hooked up to the grid. This means that if for any reason the solar panels do not generate enough electricity to meet your needs, you always have access to electricity from the grid.

- You will never have to worry about monitoring, maintenance and repair of the system. Your solar company will take care of everything for you free of charge. Many companies also offer free insurance coverage that protects the system against damage or theft.

-With a solar power lease your power rates with the leasing company are locked in for the life of the agreement. When conventional utility rates continue to increase, you will realize even more savings, because your solar power rates will remain unchanged.

What happens when the lease is up?

At the end of your solar lease, you will typically have the option to either extend your lease or have the panels removed for free. If you sell your home, you can transfer the Solar Lease to the new owners. Also, many companies like SolarCity will offer to upgrade your existing solar power system to a new system with the latest solar technology if you choose to sing up for another term.

Can I ever buy the solar equipment from the company?

If you think that at some point down the line you may want to buy the solar equipment, you should look for a program called the Solar PPA or Power Purchase Agreement. This program basically works the same way as a solar lease, but with Solar PPA you have the option to purchase the system anytime after year five. Also, with a PPA you pay by the kWh instead of monthly like with a lease and the locked rate is usually equal to or less than the market rate from your local utility company. You do not have to buy the system if you choose not to and can simply continue leasing it when extending your contract agreement. If you ever sell your home, you can transfer the SolarPPA to the new owners or buy out the system ahead of time and include the cost in your home sale price. Power Purchase Agreement Programs are not available everywhere and your should inquire whether this is an option offered by one of your local solar companies.

Are there any disadvantages to a solar lease?

While there are no major disadvantages to solar leasing, there are some factors worth considering. These factors all hinge on the fact that you have to enter into a long term binding agreement of 10-20 years. If the cost ofsolar panels will continue to fall, leasing solar panels can end up costing you more money then buying them and you will be stuck in the lease. In case you break your contract, most companies will expect you to pay in full to the end of your agreement, and this “full price” is usually much higher than if you buy the system directly from a solar integrator, which does not do PPA/Leasing.

Another issue to consider and discuss with prospective solar companies is what will happen if you want to sell your home before the end of your contract and the new homeowner will either not want the lease transferred to them or will not have the credit necessary to qualify for it. Moreover, you should be aware that while your monthly rate for power will be locked in through the end of your contract, the cost of leasing the panels may increase 3 to 4 percent each year. The good news is that you will still be paying less than what you would pay for grid electricity, as electricity rates will continue to be comparatively higher than rates for solar leasing.

Levchik (Leo) is a renewable energy activist from Boston, MA, and has been involved with alternative energy and green construction since 2004.

In 2009, Leo and his green roofing company ( sponsored Boston’s Solar Decathlon Team, providing materials and installation labor to install a cool white roof on the top of Curio home (Joint effort by Tufts University and Boston Architecture College) – more info about the project here.

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Written by Levchik B

Posted on June 4th, 2012 at 6:58 pm

Posted in PPA

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