We often have people tell us their neighbor installed solar for free. Most times they are referring to solar leasing. On the top layer, this sounds great, but it isn’t always the case as you “peel the onion” and compare the pros and cons of solar leasing vs. solar ownership.
The two most common options for gaining access to solar are solar leasing and solar ownership. Solar leasing is having a leasing company pay for and install a solar system on your property. You then purchase your electric from them (the lease payment) for a set amount of time; typically a 20 to 25 year commitment. Solar ownership is directly purchasing the system. Both options have their pros and cons, and it’s wise that you consider both options to make sure you’re getting the best long-term solution with the greatest ROI.
Full disclosure: Paradise Energy does not offer residential leasing. However, it is our mission to help people be good stewards of God’s abundant resources. For some, that may include leasing a solar system. It is important for our customers to know the value of both options and use that information to determine which investment option will help them be the best stewards possible.
Here is a look at the pros and cons of both solar ownership and solar leasing.
Solar System Ownership
Solar ownership is when the property owner pays for the complete upfront project cost and takes on full responsibility of the system. This includes maintaining and repairing the system after the warranty periods are up (most equipment comes with warranties and most qualified installers will offer additional warranties). It also means you will own all of the financial incentives including the 26% tax credit, accelerated depreciation (commercial and agricultural), and the reduction or elimination of your electric bill.
There are several financing options available for those looking to purchase their solar system. These options include cash-out of pocket or loans from local banks.
- Electric savings - you will have reduced or eliminated your electric bill
- Property value increases because your property now has no electric bill
- You will receive all the available tax incentives, other government grants, and the Solar Renewable Credits (SRECS)
- You own an asset
- Upfront Investment - Capital or access to capital is required
- Maintenance is the owner’s responsibility once the solar system is outside the warranty limits
- You will likely need to increase your property insurance coverage in order to insure the solar system
Solar System Leasing
Solar leasing is when a leasing company installs a solar system with no upfront cost for the property owner. The property owner and the lease company agree on a purchase price for all the power generated from the system. Although the payments are cheaper than your monthly electric bill, agreeing to the lease is a contractual agreement to make payments for the length of the lease which is usually 20-25 years. Furthermore, many lease agreements include an inflation escalator, which could potentially eliminate future savings. In addition, if you are planning on selling your property during the lease term, you will need to find a buyer that is willing to assume the lease agreement or face early termination penalties outlined in the lease agreement. The leasing company will also claim all the tax and government incentives since they are the system owner.
The leasing company is typically responsible for any maintenance and upkeep for the solar system. When you agree to a leasing contract, you essentially give them free access to your roof for the duration of the lease.
- No upfront cost
- Introductory savings with monthly lease payments lower than your electric bill
- Saves you money versus your electric bill
- Maintenance and upkeep is the responsibility of the leasing company
- The leasing company takes the 26% tax credit and other incentives
- You are contractually bound to make payments for the duration of the lease
- No increase to your property value - You don’t own anything so there is nothing to show for at the end of the lease
- The leasing company gains access to your roof for maintenance
- Selling your property could be difficult. A creditworthy buyer will be required to take over the lease, narrowing the field of potential buyers
Examine all of your options before making a solar investment
Our team of local solar consultants are trained to help guide you along your path to energy independence. Your consultant will provide a free solar quote that clearly defines the price, payback, ROI, a year by year cash flow, and all the environmental benefits. Contact us today to “Start Saving With Every Sunrise!”