Last week we looked into installing solar panels on your home by financing with a solar loan. This weeks post outlines the other way to install solar with no money down, solar leasing, including Power Purchase Agreements (PPAs) which are a specific type of lease arrangement.
The major difference between traditional leases and PPAs is that with a traditional lease you have a set payment, where a PPA involves only paying for the electricity you use. Otherwise they have the same benefits and drawbacks, so well look at them together. In some ways leasing is the simplest option and contains the least financial risk- youre basically allowing a solar company to install and maintain a private power plant on your roof and sell you the electricity generated.
Since you typically dont put any money down, you can start saving money from Day One. Leasing also gives you the most predictable energy cost as your electric rate over the life of the lease will be locked. Most leases do have annual escalators of 1-3%* but that percentage will remain the same regardless of price changes in electricity, which may increase faster. Electric rates potentially could decrease or stay flat, though historically that is rare. The savings for this option over the long term can vary widely depending on your electricity usage, the size of the system you install, and your specific lease or PPA. Online savings estimates ranged from $7,000 to $20,000 over 20 years;with a Massachusetts average of $13,000**.
Many companies also offer the ability to purchase your panels during or at the end of the lease, so you can potentially own the system down the road. If that is your intention, though, you should look into a solar loan as the cost of buying this way may be inflated compared to buying outright. Finally, with this option the leasing company generally takes care of any maintenance or repairs. This is not always the case though, so be sure to check!
As with the other options, there are some disadvantages:
- May be harder to qualify for a lease than for a loan (typically min cr score of 680)
- May need to put some money down
- Solar tax incentives & SRECs*** go to leasing company, not you
- Total savings/return over life of the program is typically lower than purchasing options
- With a lease (though not with a PPA), no incentive to conserve as you dont get a discount if you use less electricity than your system produces
- Can make selling your home complicated if new owners do not want to lease solar, and/or do not qualify for the lease;
- You may not recoup the value of your panels if you sell your home
- Contract may have restrictions on home improvements/changes that could cast shadows onto solar panels
- Even if local electric rates go down, your rate is locked
- If roof repairs are necessary, in most cases you must pay to remove and store panels.
Next week well be wrapping up our solar series with a post about the physical aspects of solar panels: how long they typically last, what happens if they get damaged, etc, so be sure to check in!
*From understandsolar.com/massachusetts
**Per understandsolar.com/massachusetts
****Solar Renewable Energy Credits- we outlined these in one of our earlier posts.
Photo from Rhode Island Small Business Journalhttp://www.risbj.com/are-solar-panels-for-resident...
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