Energy Efficiency on a Budget: Lease Your Solar Power

July 13, 2010

One of the best ways to go green and save money for homeowners is solar power. However, the upfront costs of installing a solar power system can be a deterrent for even the most Environmentally minded consumers. Now there is a program which can off fray the initial cost of solar energy in the home by offering home owners to lease instead of purchasing their energy efficient electricity. The solar financing product, Solar Power Purchase Agreements (SPPAs) were introduced earlier this month.  In a statement by the EPA:

“A Solar Power Purchase Agreement (SPPA) is a financial arrangement in which a third-party developer owns, operates, and maintains the photovoltaic (PV) system, and a host customer agrees to site the system on its roof or elsewhere on its property and purchases the system’s electric output from the solar services provider for a predetermined period.”

According to Residential Solar 101, “With SPPAs, a company retains ownership of the solar power system and you simply buy the power the system produces for a set contract period. Similarly, solar leases are growing in popularity and are yet another way to access to clean renewable energy.” Here’s how it works

  • There is usually no down payment;
  • There is a 10 to 20 year contract period, which is transferable to a new owner or home.
  • Each month you pay a lease payment which covers the solar power system that produces a portion of the electricity you use and the rest of the electrcity you need is purchased from the utility.
  • The leasing company may take care of maintenance and repairs and monitor your system (not always the case).
  • Like a SPPA, you will not receive the 30% federal tax credit or state rebates or Renewable Energy Credits (RECs).
  • As with SPPAs, there is usually an option to buy the system outright at the end of your term for a set price.
  • You will need to have a good to excellent credit – somewhere around the 680 mark

In an article by Clean Techies, there is the question; how can companies like SunRun, Sungevity, and SolarCity provide a zero down or $1000 down solar lease while charging less per month than a utility company?  According to David Belden,

“In order to make the business model work, solar leasing companies must raise significant amounts of capital, normally from tax equity investors or from commercial lenders.  This capital, often referred to as “project finance”, allows the solar leasing company to make the upfront purchase of solar components and to pay for installation. Solar leasing companies collect the federal “Solar Investment Tax Credit”, as well as any applicable state/local incentives associated with the project”

Finances aside, Solar leasing program provides tremendous benefit to home owners who can not afford the upfront costs of solar energy system. It also has the added advantage that most solar leases do not require maintenance by the homeowners. Any repairs are usually covered by the leasing company.  While it may seem that there are only advantages to solar leasing; there are some disadvantages.  “In the long run through a SPPA, you will likely end up with a smaller return on your investment than if you owned the system outright.”  And there is no added benefit of the whopping 30% federal tax credit or Renewable Energy Credit (REC) for the homeowners. Despite its disadvantages; this is the best budget option for homeowners who want energy efficient home without the financial stress and the responsibility of owning a solar power system.

Source: CleanTechies, ResidentialSolar101

Photo Source: stock.xchng; huntr004