Solar Energy Lease Myths
Are you nervous to sign that solar energy lease agreement? You should be! There are a lot of myths out there about leasing solar. If you have been thinking about purchasing or leasing solar, you need to read this first.
Don’t Think For A Moment That It’s As Simple As Sign Here And They’ll Reduce Your Electric Bill. There’s A Lot To Consider.
Here’s 15 Critical Questions That You Absolutely Must Ask Your Solar Lease Salesperson Before Signing That Airtight Solar Lease Or PPA Contract.
These Questions Can Literally Save You Tens Of Thousands Of Dollars!
Solar Energy Lease Myths
MYTH: A solar lease makes solar more affordable.
REALITY: Actually a solar lease is one of the most expensive ways to have solar on your roof. Want proof ? Simply add up your payments on that zero down solar lease or PPA and then add in the 30% federal tax credit that you’ll be giving away to the leasing company and you’ll find that you’ll be paying up to triple the cost for a solar system when compared to purchasing a system.
Today, you can easily own an installed, name brand, grid tie solar system for well under $3.00 a watt and that’s before incentives.
QUESTION TO ASK YOUR SOLAR LEASE SALESPERSON: Ask your solar leasing salesperson if he or she can match a price that’s under $3.00 a watt before incentives. If he or she can’t, then you’re probably paying to much for your system.
Why do the leasing companies charge you so much more for their systems ? Because their Wall Street investors get a bigger tax credit when they charge you more for your leased system.
MYTH: If you sell your home, your solar lease or PPA can easily be transferred to your home buyers.
REALITY: Homeowners and even real estate brokers are now reporting that it has been or may be more difficult to sell their homes with a solar lease or PPA attached to it.
For one, your homebuyers must qualify to assume your lease with an excellent credit rating. If they can’t qualify, then you will be forced to pay off your lease in a lump sum in order to sell your home. You’ll have to disclose your solar lease obligation when selling your home.
Second, You’ll hear the solar leasing companies argue that that a solar system on your roof should make your home more desirable. This would be true if you owned your solar system, but it’s the furthest thing from the truth when your homebuyers discover that they have to take over your remaining lease payments.
Would you want to take over, let’s say 12 years of remaining lease payments on a 20 year lease on an outdated, 8 year old solar system when you could buy a brand new solar system for tens of thousands less ? Of course you wouldn’t. And neither would your potential homebuyer. So you just delayed or may have even lost the ability to ever sell your home at the price that you wanted.
QUESTION TO ASK YOUR SOLAR LEASE SALESPERSON: Ask your solar leasing salesperson if he or she can provide you with a document in writing that assures you that it will be easy to sell your home with a solar lease attached to it.
MYTH: You’ll get to claim a tax deduction if you lease a solar system.
REALITY: This myth is entirely false. Homeowners that lease a solar system, not only forfeit the 30% federal tax credit which is worth thousands of dollars but they also cannot claim their solar lease payments as a tax deduction.
When you finance the purchase of a solar system using a $0 down FHA solar loan or PACE (Property Assessed Clean Energy) $0 down solar loan, in almost every case you can deduct the interest and you’ll get to keep the 30% federal tax credit. These benefits alone gives solar system ownership a tremendous financial advantage over a lease or PPA.
QUESTION TO ASK YOUR SOLAR LEASE SALESPERSON: Ask your solar leasing salesperson if he or she can provide you with a document that states that your lease payments or your lease payment interest is tax deductible.
MYTH: Zero Down Solar.
REALITY: It’s absolutely NOT zero down solar and here’s why.
As a down payment, you’re giving away your 30% federal tax credit. Just how much is that worth? Well, simply take the average cost for a solar system as reported by the CSI, ($6.19 a watt) and even if you subtract a gracious 50 cent per watt rebate, your still looking at $5.69 per watt.
Next multiply an averaged sized 4 kW solar system by this $5.69 per watt cost and you get an average system price of $22,760. Next multiply the $22,760 time the 30% federal tax credit and you’re looking at a federal tax credit of $6,870 that you’re handing over as just part of your down payment. With an 8kW system, you’re providing a down payment of $13,740!
It gets even worse depending on how much your state or utility offers as a cash rebate. In many parts of Minnesota, you’ll be handing over another $4,000 down payment on that 4kW system or $8,000 on an 8kW system.
In a state like Missouri, in Ameren territory, try $8,000 on a 4kW system or $16,000 on an 8kW system that you’ll be handing over to the leasing company as a down payment.
Look carefully at your lease or PPA contract before you sign it. you won’t find any mention of how much tax credit, rebate or SREC money you’re handing over to the lease company. They simply don’t want you to know this information because it doesn’t make them look very good and turns their claim of a zero down lease or PPA into a lie.
Zero down solar ?……..NOT!
QUESTION TO ASK YOUR SOLAR LEASE SALESPERSON: Ask your solar leasing salesperson to tell you the exact amount of the 30% federal tax credit and the exact amount of any cash rebate, state tax credit, or SRECs that you’ll be handing over to the leasing company.
MYTH: Leasing a solar system makes a great investment.
REALITY: Well, it makes a terrific investments for the solar leasing company.
Since you don’t own the system, you’re not investing in anything. Instead, here’s a list of what you are doing:
1. You’re making the payments on the leasing/PPA company’s investment.
2. You’re giving the leasing/PPA company what would have been your 30% federal tax credit as well as any other financial incentives which greatly enhances their investment.
3. You’re giving the leasing/PPA company the free use of your roof so they can have someplace to mount their solar system.
4. You’ll be paying the leasing/PPA company far more than what you could have purchased a system for, which gives them tens of thousands of dollars more than they need to install, monitor and “repair” their system and still leaves them with plenty of money to replace their system’s inverter after the manufacturer’s 10-12 year inverter warranty expires.
In return for your generosity, the leasing/PPA company will share a small sliver of their return on investment with you, (a 10 to 15% reduction in your electric bill) Gee thanks !
QUESTION TO ASK YOUR SOLAR LEASE SALESPERSON: Ask your solar leasing salesperson if he or she can produce a document that compares a lease or PPA’s return on investment to a owning a solar system for $3.00 a watt before incentives.
MYTH: A solar lease or PPA is your only option if you can’t come up with the up front cash to purchase your solar system.
REALITY: Nothing could be further from the truth. Today there are many $0 down options available that have nothing to do with that expensive lease.
For instance there’s the FHA Title 1 Zero down solar loan that is far easier to qualify for than a lease or PPA. You only need a 650 credit score, you don’t need to have any equity in your home and best of all, you get to keep the 30% federal tax worth thousands of dollars and you’ll keep any applicable cash rebates or other tax credits instead of giving them all away to the leasing/PPA company.
Another source for $0 down financing is the new PACE (Property Assessed Clean Energy) HERO finance programs that are cropping up all over the country that allows you to finance your solar system and pay back the financing through your property tax bill.
QUESTION TO ASK YOUR SOLAR LEASE SALESPERSON: Ask your solar leasing salesperson if he or she can offer you any other type of financing program that allows you to own your system at $3.00 a watt before incentives.
MYTH: You’ll have the option to upgrade your system at a later date.
REALITY: Well yes, a much later date. Imagine being forced to drive the same car for 20 YEARS !
Well that’s how long you’ll have to wait until you’ll be able to upgrade your solar system on a 20 year solar lease or PPA.
With advancements occurring weekly in the lab, 20 years is an eternity in the solar industry. Imagine your neighbors installing the latest sleekest, high efficiency solar panels on their roofs 10 years from now while you’re stuck with the same antique solar panels for another 10 years.
With prices for complete, name brand, installed solar systems at under $3.00 a watt before incentives, paybacks for solar systems have fallen to as little as 3 to 4 years. So when you own your solar system instead of leasing, you could easily sell your older solar equipment and upgrade to the latest technology if you wish.
QUESTION TO ASK YOUR SOLAR LEASE SALESPERSON: Ask your solar leasing salesperson if he or she can produce a document that guaranties that the leasing company will upgrade their solar system to a newer model at a reasonable cost.
MYTH: The solar leasing company will replace your “expensive” inverter when it fails at year 12 to 15.
REALITY: It’s not “your” inverter. It’s their inverter, so why wouldn’t they want to replace their own property. The question is, who’s paying for the replacement.
Again, keep in mind that you’ll be paying up to 3 times what you would have paid if your purchased your system instead, so in reality, it is you that will be paying for their system’s inverter replacement.
The second part of this myth is the use of the term “expensive”. Modern, high quality inverters like SolarEdge that come standard with a 12 year warranty can be upgraded to a full 25 year warranty for less than $400.
Even if you didn’t upgrade your inverter warranty to 25 years, today this inverter would cost you less than $1,300. Not the “thousands of dollars” that the solar leasing companies claim. Also consider that in 12 years, it is expected that the cost of inverters will drop significantly.
QUESTION TO ASK YOUR SOLAR LEASE SALESPERSON: Ask your solar leasing salesperson to total up your lease payments and include the 30% federal tax credit and any other financial incentive that the leasing company is taking, and compare that to $3.00 a watt before incentives for a purchased system and then ask him or her, whose is it that’s really paying for the inverter replacement.
MYTH: We’ll install “your” solar system for free !
REALITY: Again, it’s not “your” solar system. In fact, after making 20 years worth of lease or PPA payments it still won’t be “your” solar system.
After making all those monthly payments or even after pre-paying your lease, it won’t be “your” solar system until you’ve purchased it from the leasing company at fair market value. That’s the law.
QUESTION TO ASK YOUR SOLAR LEASE SALESPERSON: Ask your solar leasing salesperson if he or she can produce a document states that you will own the solar system after pre-paying your lease or after paying 20 years work of lease payments.
MYTH: A solar lease can be a safe and effective way to invest in a solar system.
REALITY: Really ? Read your solar leasing contract under the heading of “Default” before you sign.
One of the largest solar leasing company’s in the country makes it quite clear in their contract that if you are more than 10 days late on your lease payment that they have the legal right to remove the solar system, charge you for the removal and then sue you for the balance of the payments that you owe on your lease as well as other fees and penalties.
When was the last time your utility company removed your electric service and sued you for being just 10 days late on your electric bill ?
QUESTION TO ASK YOUR SOLAR LEASE SALESPERSON: Ask your solar leasing salesperson to show you in their contract, under the default heading, what the consequences are for making a single late payment.
MYTH: With a solar lease, there are no concerns about ongoing repair and maintenance cost.
REALITY: What maintenance and what repairs. This is one of the solar leasing company’s biggest myths in their bag of propaganda tricks.
There is no maintenance involved in the ownership of a modern, properly installed grid tie solar system other than an occasional rinsing off with a garden hose to remove accumulated dust.
And system monitoring ? when you purchase your solar system from us instead of leasing, you’ll have the ability to monitor your solar system’s performance over the Internet on any smartphone, tablet or computer, right down to the individual solar panel.
You probably won’t have that ability with a solar lease or PPA but your solar lease or PPA company will. Talk about the fox guarding the hen house.
QUESTION TO ASK YOUR SOLAR LEASE SALESPERSON: Ask your solar leasing salesperson to show you in writing what exactly is involved in their maintenance agreement and how often they will be out to your home to perform maintenance.
MYTH: With a solar lease, your utility bill savings will grow every year.
REALITY: Again, check your contract. Many solar leasing companies add what’s known as a payment “escalator” into their contracts that will increase your monthly solar lease payment by up to 3.9% per year for 20 years.
So if your utility company is ever mandated to lower their rates, you could end up paying more for your electricity than if you never got involved with a solar lease or PPA to begin with. Read More
QUESTION TO ASK YOUR SOLAR LEASE SALESPERSON: Ask your solar leasing salesperson whether or not your lease contract contains a payment escalator. The bottom line is this, never sign a lease contract that contains a payment escalator, never.
MYTH: Solar systems are too expensive to buy.
REALITY: If this were true then why are so many leasing companies rushing to buy solar systems so that they can turn around and rent them to you ?
The truth is, solar system prices have dropped to their lowest levels in history. A complete, name brand, grid tie solar kit can be purchased for only $1.66 a watt before incentives. Add in another $1.00 to a $1.30 a watt for installation or save thousands by installing yourself.
There’s never been a better time to own a solar system for a much better return on investment than a lease or a PPA.
QUESTION TO ASK YOUR SOLAR LEASE SALESPERSON: Ask your solar leasing salesperson if he or she can produce a document that shows you exactly what the leasing company is charging you, when calculating your lease payment. And again, compare that to $3.00 a watt before incentives for owning a system.
MYTH: The leasing company will be there for you when the lights go out.
REALITY: And if all of the above weren’t enough. To add insult to injury, with the weather worsening like it is and power outages on the increase, with a solar lease you probably won’t have any backup solar power.
So when the lights go out in your neighborhood, even while the Sun is shining and even though you’ve made all those leasing payments on all those solar panels on your roof, most leased solar system are designed to turn themselves off, leaving you without power for as long as the power outage lasts.
In fact, in most cases you won’t even be allowed to add battery backup power to your leased solar system’s inverter. You would have to completely pay off 20 years worth of lease payments, then buy your leased solar system from the leasing company and then and only then would you be allowed to add an emergency power option to your leased solar system.
QUESTION TO ASK YOUR SOLAR LEASE SALESPERSON: Ask your solar leasing salesperson if he or she can produce a document that guaranties that you can add a backup power unit to their system that allows their system to supply your home with electricity during a power failure.
14. MYTH: The leasing company will install “a solar system” on your roof.
REALITY: What exactly is “a solar system”? What brands and models are they going to install on your home in exchange for your 20 years worth of lease or PPA payments, or even worse, pre-paid lease payment?
Remember, you’re paying up to 3 time more in lease payments than what you would have paid if you had purchased the system instead, so it would be nice to know if the leasing company is going to install a name brand, high performance system using state of the art components or a low cost, system using lower performance components.
Visit the leasing company’s website. Do they mention the brands and specific models of the products that they offer or do they simply use terms like “best in class” or “top rated” or “high quality”
Do they mention the PTC to STC ratio of their solar panels. Or how about the solar panel manufacturer’s warranty? Is it a standard 10/25 year warranty or is it a much better linear warrant? Is the solar panel manufacturer’s warranty re-insured by a third party for the full 25 years.
What is the inverter’s CEC weighted efficiency rating? Does the inverter include separate Power Oprtimizers for each solar panel? How about shade mitigation for each individual solar panel? What about online individual solar panel performance monitoring that allows you the homeowner, to monitor performance from your smart phone or home computer?
How about the all important mounting rails? Are they low cost, lighter duty, C-channel rails that require more holes to drilled in your roof or are they of a heavier duty box design.
You may be thinking, why sould I care? I’m just renting the system, but remember, there will come a day when your lease contract is up and you’ll have the opportunity to buy the system from the leasing company. After making up to 240 lease payments or pre-paying your lease, wouldn’t it be nice to know if this is truly a high quality system that you’d want to purchase from the leasing company or is it a system that will be on it’s last leg when your lease expires?
QUESTION TO ASK YOUR SOLAR LEASE SALESPERSON: Ask your solar leasing salesperson to supply you with all of the specifications mentioned above as well as a written guaranty that these products will not be substituted during the installation.
It’s not as simple as sign here and they’ll reduce your electric bill. There’s a lot to think about like, “What will happen if I ever try to sell my home ?” or “What if I’m ever late on one of my solar lease payments ?” or “What will my home look like 15 years from now with the same solar system technology mounted on my roof with no way to upgrade ?”
Here’s a comment that was recently posted on one of the business rating sites concerning a solar leasing company that serves the U.S. (The name of the leasing company was intentionally deleted)
“We signed a solar lease with xxxxx xxxx. Wish we had done more research (Even though we did do some). Even though it’s 0 down and low monthly payments, we didn’t realize that our payments will be going up every year. At the end of our lease our payments will be over $300, A MONTH. We hardly ever paid over $300 a month with SCE. Only once or twice a year in the summer. Also, we have been contemplating the possibility of Short selling our house, and are seeing that these solar panels are going to be a HUGE hinderance in doing this. Even if we wanted to do a regular sale, with the housing market prices the way they were, if we could get what we owe on the house, we would have to add another $50,000 to the sale price because of the solar panels. Bottom line….if you can’t afford to pay for them or finance them, DON’T LEASE! We are really sorry we did.”
Carefully Read Your Contract!
Before you sign that airtight solar lease or PPA, we suggest that you have your attorney and your accountant read the fine print. When compared to purchasing a solar system, especially as low as prices are today, a solar lease will probably turn out to be one of the worst investments that you’ll ever make when compared to buying instead.
Solar Energy Lease Myths NEWS !
U.S. TREASURY DEPARTMENT TO INVESTIGATE SEVERAL SOLAR LEASING COMPANIES.
Several solar leasing companies received subpoenas in July from the U.S. Treasury Department, which is investigating whether companies overstated the market value of solar panel arrays they installed when claiming the 30% federal cash grant.