Solar Leasing In The Solar Industry Part I

SOLAR LEASING CONSIDERATIONS


When is a solar lease a very good investment for consumers? The answer is when the consumer can own it in a very short time frame and if there is a specific and affordable buyout amount at the end of the lease.

Current leases and PPA’s (Power Purchase Agreements) are offered from several different solar companies in the central valley. There are differences between the two.

A lease give consumers a solar system with a very low down payment and lease payments that are a little lower than current electric rates from the utility company. A “left over” payment will be due to the utility provider every year too. Ownership is usually not an option.

A PPA sells energy to the consumer that has been generated by the new solar system. The price for the energy is a little less than what the same costs would have been from the utility. Left over payments to the utility company is part of the equation. Ownership is not an option.

To help break down leases and PPA’s, the following comparisons may help in evaluating these investment tools to determine which if any would work better than financing a solar system.

Solar City Lease

Solar City was the first to enter the market with a solar lease. Their lease has been evolving but some of the basic facts are:

1. Down payments can vary from 0 down to well into the thousands of dollars. The difference in the down payment is reflected in the monthly payments.
2. The term of the lease can vary from 15 to 20 years.
3. It is uncommon for them to lease a system that off sets 100% of your bill. A left over payment to the utility at the true up time (1 yr from interconnection) can be expected.
4. The quality of the equipment can be debated. However, if a consumer were to actually purchase the same equipment from a distributor, the cost of the solar panels and inverters would be some of the least expensive equipment available!
5. Efficiency of the equipment is definitely not the top of the industry.
6. Some of the equipment used is manufactured by First Solar. First Solar uses cadmium-telluride in the manufacturing of their panels.
7. The inflation or escalation rate increase per year is a solar leasing high of 3.9%.
8. Renegotiating a lease in 15-20 years may be more difficult to negotiate than now.

Some of the obvious questions then should be:

1. How much is a large down payment actually costing you. You are in effect pre paying the lease in exchange for lower monthly payments. What could your money do for you now?
2. Do you want to lease for up to 20 years and own nothing?
3. Does the left over payment to the utility company concern you knowing that our electric rates have been doubling every 10 years since 1970? You may also want to consider the degredation rate of solar panels. They will produce up to 20% less energy at 20-25 years as when they were brand new.
4. Will potential recycling costs of First Solar panels undermine the net savings to you down the road? Because of it’s hazardous waste rating with the US government, recycling of cadmium-telluride needs to be researched and considered in either selling your home with current hazardous waste disclosure forms and the eventual cost of recycling of this product. Currently it is approximately 20 times more expensive to recycle hazardous waste versus normal landfill accepted waste.
5. Is ownership of your energy important to you?
6. Consideration needs to be given to when the lease expires. There are so many potential disadvantages to the consumers, that multiple states will not allow leasing companies to lease a solar system unless there is a buyout option at the end of the lease.

Our next blog will be The Solar Leasing of California advantages over every other lease or PPA available today.