Home Solar Lease: Pro and Con
Leasing solar panels can save thousands up front, but prevent you from cashing in on lucrative tax incentives. Does it pay?
In 2008, a company called SolarCity announced that instead of just selling homeowners photovoltaic panels, it would offer them with no-money-down lease options. That turned out to be the best thing that ever happened to the solar business, and several other companies (including SunRun and Sungevity, which works with Lowe's) have followed its lead. You can now lease a home solar array just about everywhere, including through Home Depot with SolarCity, but the question remains—should you?
Peter Rive, the chief operating officer of SolarCity, says it’s a good deal. “Customers get the benefits of solar panels without a big cash outlay, and they can do it with zero down. We want people to think of it as a pay-for-use benefit, which is just what your utility company does now. When they do an equipment upgrade, they don’t ask you to pay for it. It’s a flat monthly fee, similar to our lease.”
Google announced that earlier this month that it is investing an astounding $280 million in SolarCity, which is one big vote of confidence in solar leasing. Google’s previous headline energy investments were related to wind power, so this is a shift that shows it likes the business case. (You can buy panels through SolarCity, but the leasing plan is growing faster.) The company currently has 15,000 customers, and recently expanded to the east coast from its California base. Sungevity (which offers 10-year leases compared to SolarCity’s 15) is also growing, with a $24 million in financing from U.S. Bancorp.
Despite the rapid growth, solar leasing is available only in 12 states and the District of Columbia—wherever state and local incentives make going solar most lucrative.
The advantages of a solar lease are clear enough: You may start saving money from day one, since the companies say the lease and your reduced electricity bill will usually add up to a smaller monthly charge than your old energy bill. The panels, installation and maintenance don’t generally cost you anything, and their performance is guaranteed. Leasing typically makes it easier to upgrade panels, which is good since technology is advancing quickly.
The drawbacks? The lease companies own the solar panels, so they get the 30% federal tax credit, not you, according to SolarLeaseDisadvantages.com. You’ll also miss out on any cash incentives, some as large as $6,000 per kilowatt, handed out by states and utilities. Also out the window are what are called renewable energy credits (RECs), which can be sold to companies to offset carbon emissions. All those lucrative benefits accrue to the owner of the panels, and it's what makes their businesses lucrative, according to David Belden, co-founder of Residential Solar 101.
Whether you lease panels or take out a loan to cover the cost, the payoff will come if they generate enough electricity to lower your monthly bills. Some people have been left “upside down,” meaning they’re not saving enough to justify the cost.
Another issue is that leased solar panels could complicate selling your house, if the purchaser doesn’t want, or can't afford, to take on the lease. The seller might have to pay off the lease prior to completing the sale.
As with any type of financing, you can get burned if you don't understand the terms. Zero-down solar leases can sneak up on you. If there’s an escalator clause in the contract your payments will increase over time. That can be avoided with larger up-front payments.
One Block Off the Grid, which helps homeowners reduce the cost of going solar by streamlining the process and arranging group buying deals, offers both sale and, through SunEdison, lease options. Dave Llorens, founder and CEO of says the benefits of leasing outweigh the risks for most homeowners. 1BOG recently launched a solar calculator to help you identify if you're home can save money leasing solar.
"It’s a good deal if you don’t have the money to put down," said John Rountree, a Connecticut-based solar architect. "It may be the only way to go if you don’t have the cash."
And that’s always going to be the bottom line here. Regardless of whether it’s the best possible deal, for many people wanting to let the sunshine in, it’s the only deal.