A solar lease is a contract between you and a solar company that allows you to use their solar panels without paying upfront costs. It is a good choice for those who don’t want to invest in their own solar system or don’t qualify for federal and state tax credits.
Benefits
Solar leases are a popular option for those who want to save money on electricity but can’t afford the upfront cost of buying a system. They offer customers the advantages of a professionally managed and maintained system, daily monitoring and an energy production guarantee.
The solar lease model also offers lower energy costs from day one and increased independence from the power grid. However, it’s important to note that your long-term savings will be much less than if you purchased and owned a system.
A solar lease is also a great way to go solar for those who aren’t eligible for a loan or tax credit. The average payback period for a solar system is six to nine years, and it’s possible to break even in just eight years.
Costs
A solar lease is an excellent financing option for homeowners who want to install solar panels but don’t have the cash to pay upfront. It offers lower monthly payments, higher energy savings, and an increase in independence from the power grid.
But the cost of a solar lease can vary, depending on the company and contract terms. The rate you pay to lease the solar panels may increase over time, a practice known as a lease escalator.
Some leasing companies offer contract expiration options at the end of a lease, such as buying out the solar system or having it removed and sold at market value. The buyer may also need to pay for an audit of the current solar system and for any necessary permits for the move.
Installation
A solar lease is a contract between you and a solar leasing company that allows you to make monthly payments on your solar system, usually for a set term. Generally, this is for $0 down and will save you a substantial amount of money on your power bills over the life of the lease.
It also gives you the chance to take advantage of tax incentives like the 30% federal solar tax credit and state rebates.
You can also choose to purchase the solar system outright and pay a fixed per-kilowatt-hour price for the electricity it produces. These agreements are often similar to a PPA, but the main difference is that with a PPA, you own the system and will contact the leasing company for maintenance.
Maintenance
One of the most appealing features of solar leases is that you don’t have to worry about the upkeep of your system. Instead, the solar company takes care of it.
In fact, the solar panels themselves are incredibly low maintenance and require just a rinse off with a hose four times a year. More serious issues, like faulty wiring or inverter problems, are covered by the manufacturer’s warranty or your homeowners insurance.
In addition, many solar leasing companies have clauses that allow homeowners to transfer the lease when they move or break the lease and remove the panels. However, homeowners should be aware that these clauses may involve credit requirements or other fees.
Taxes
The solar tax incentives that landowners receive can impact the taxes associated with a solar lease. For example, property that is deemed to be in agricultural production will have lower property tax rates than commercial or residential properties.
Depending on where your property is located, there may also be other local taxes that are impacted by the installation of a solar farm. This is an area that should be addressed in the agreement between the solar company and the landowner.
There are three main solar tax equity structures. The two most common are partnership flips and inverted leases. Each raises a different amount of tax equity and allocates risk differently.