I like the idea of solar power a lot. Whats not to like about getting free electricity from the sun?
SolarCity, AdEnergy, Sungevity are companies that offer leases where you can get the solar panel installed on your home with as little as zero up front money. The lease deal lets you rent the panels at a defined rate for a long period and then you get to use the energy produced. The solar company keeps ownership of the physical solar. The panels are installed on your roof but they will maintain and own them.
SunRun has a purchase agreement plan. This operates similarly to a lease in that you don't own the panels and theres little or no up front cost. SunRun owns the solar hardware and is allowed to use your roof. They then sell you power at a fixed rate that is competitive with your local utility. You're basically just agreeing to buy some solar power from them and they park their panels on your roof.
Simple examples using fake numbers:
Lease : You rent panel for $25 /month for 15 years and the panels generate $40 worth of electricity on average so you're ahead $15/month.
Purchase Plan : You agree to buy electricity from the company at a reduced cost. The panel generates $80 worth of electricity a month and you buy it at $65 /month saving $15 per month.
I checked the calculator on SolarCity which offers estimates of the costs based on your actual home address. They had three options for leases where you could put down $0, $1,624 and $3,249. With the $0 down option I'd save a whopping $4 per month. For the higher down payments I'd save $324 and $552 per year. Saving $48 per year with no investment is hard to beat. The higher downpayments are pretty good returns as well. For those I'd have a break even point of around 5-6 years and a return rate of around 18-20% on the initial investment over the 15 year term of the leases. Thats a pretty good deal all around as far as I'm concerned.
Negatives of Solar Leases
It can't all be good. There are some downsides to leasing over buying.
You don't own the hardware. With a lease you have a rental agreement for a defined period. What happens after that is generally you'd either buy out the lease, resign to do another multi-year lease or they'd remove the solar panels. If you own the hardware then you own it indefinitely and benefit from it long term.
Possible complications when selling the home. If you sell your home then the solar lease could present a problem for you. You may have to buy out the remaining lease to get out of it. Someone buying your home may not think much of having solar panels leased out. If the panels were owned then they would be a concrete benefit of buying the house. But rented solar panels may not add much if any value to the home and some buyers may be wary or confused by the terms and benefits of the lease. A buyer may be able to assume the lease from you but they'd have to qualify for the lease and also be willing to take over the lease.
I found the website Solar Lease Disadvantages.com which has a lot of reasons why they think solar leases are an extremely bad and horrible idea. They do seem a little biased though and its not super clear who wrote the site except at the end they link to a store that sells solar hardware.
On one hand I think a solar lease could be a sure win no-brainer for some situations. But it may not be as great a deal as it first seems. Whether or not it is a good idea for you will depend on your situations, but I think it makes sense to consider them as an option if you're interested in solar power for your home.
Solar panel photo by joncallas