How Does a Solar Lease Work?

In short, solar leasing is when a solar panel array is installed on your property, but not owned by you. You can use all the electricity generated by the solar energy system and enjoy a decreased monthly power bill as a result. Common solar leasing guidelines include:

• Zero Upfront Costs
• Zero Responsibility for Installation & Maintenance
• Contract Periods Up To 25 Years
• Monthly Fee for Solar Panels
• Early Termination or Transfer Fees

Who Should Lease Solar Panels

In most cases, a solar lease provides lower monthly payments but also lower savings than a cash purchase or solar loan, and results in you owning the panel array. A lease helps you avoid the upfront cost of solar panels, which cost around $10 per square foot for most California homes. While the financial requirements are more demanding for a solar loan than with a lease, the costs can be offset by tax incentives, which cannot be claimed under a lease.

Getting A Grasp On Solar Leasing

At Green Choice Energy, we pride ourselves in explaining the pros and cons of solar leasing in a clear and transparent way, helping homeowners make the best decisions for today and in the future. That includes providing details about solar leasing that other companies might not be upfront about. Since the answers are contingent to your particular case, some of this information may be slightly more vague. If you have specific questions, or would like a cost savings analysis for your unique circumstances, our representatives will be happy to assist in helping you make an informed decision.

Pros and Cons of Leasing Solar Panels

As is true with any lease, a solar lease has advantages and disadvantages, especially when considering other purchase options. The most attractive benefit for homeowners is delegating all the financing, installation, and maintenance costs to a provider. This includes having the responsibility of repairs throughout the lease term handled by someone else. The downside is that you’ll be using the energy savings to cover monthly payments. Additionally, tax credits offered by the federal government and state are only available to the legal system owner, and since the homeowner doesn’t own the system, they’re ineligible to take advantage of these credits.

Pros of a Solar Lease:

• Get Solar for Zero Upfront Cost: We assume all equipment and labor expenses.
• Maintenance and Repair Costs Are Our Responsibility.
• No Payback Period: You are not working to pay off the panels over time like a loan.
• Net Savings: The panels can yield net savings if your monthly cost is less than your energy savings.

Cons of a Solar Lease:

• Lease Payments: Consume a large portion of your electric bill savings.
• Lower Long-term Savings: Much lower than those achieved with a cash purchase or solar loan.
• Longer Terms: Than power purchase agreements.
• Ineligibility for Solar Rebates and Tax Incentives: Only available to the system owner.
• Monthly Payments Increase Over Time: But at a slower rate than utility costs.
• Early Termination and Lease Transfer Fees.

Solar Leases are a Good Fit for Homeowners Who:

• Do not have the funds available for a cash purchase.
• Are unable to qualify for a solar loan.
• Have no plans to sell their home for the lease term.

Early Termination of Solar Lease

You may want to end your solar lease early if you decide to sell your home, are dissatisfied with the terms of the lease, or even if you decide to purchase your own panels. In all of these cases, an early termination fee will be due, and if you want to sell your home, a transfer fee will be required as well.

There are three options if you want to terminate your solar lease early:

1. Purchase the Panels: You may “buy out” your solar lease by paying the fair market value for your system at the time you decide to terminate the lease agreement. This way, you’ll own your panels outright. It is important to note that the purchase costs will include all the costs to install and maintain your system for a period of time, including the installation and repair costs, plus an early termination fee.
2. Move the Panels: If you’re moving to a new home in the California area and want to keep your lease, you may be able to have the panels uninstalled from your old home and reinstalled on your new one for a fee.
3. Transfer the Lease: Transferring the lease to the new homeowners only requires a small transfer fee. The new homebuyer would assume the terms of the lease. Depending on the market, the reduced energy costs compared to the monthly lease cost may be an added benefit for the right buyer.

A solar lease is a long-term commitment. If you plan to move before your agreement expires or aren’t ready to enter a decades-long contract, you may want to reconsider entering into a solar lease and consider a solar purchase or power purchase agreement.

If the terms and savings add up, a solar lease might be the best option for you. As with any lease, it is important to read and understand all the terms and conditions before signing on the dotted line. Adjustments to the standard terms may be made to ensure that the cost-savings scenario allows for you to maximize your savings. Some contracts have a fee at the end of the lease, others have longer terms, and yet others are based on energy usage. One thing remains the same: our goal is to ensure your energy savings offset your out-of-pocket cost and result in net savings.

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