With low or no up-front costs, solar leases are increasing in popularity among homeowners who can’t afford to purchase a PV system outright or don’t want the burden of ownership and maintenance. But the concept is still relatively young and not all of the kinks have been worked out.
Being able to recognize a good deal, or a bad deal, is an important part of successful solar leasing. It’s all about the “fine print.”
Between the Lines
So what should you look for—or look out for—in a contract? It would be due diligence to talk to your attorney and accountant before signing a lease. Alternatively, you could solicit contracts from multiple vendors and compare the verbiage (see “Before You Sign” sidebar).
Make sure you understand the type of agreement you’re considering. There are different types of “leases”—some are true leases and some are power purchase agreements (PPAs). With a solar lease, you lease the solar equipment; with a solar PPA, you are only paying for the energy the system generates. In both cases, the PV system installed on your home is owned and maintained by the lease or PPA provider, and is connected to the grid so you can buy any additional energy you might need from the utility.
Your paramount concern should be whether the contract can be amended and what, if any, rights you have in those cases. There are cases where lease companies have amended the original terms and raised rates for one reason or another—if the contract allows amendments, then you might have no recourse and have to take whatever comes your way. Most contracts, even those outside of the solar market, have a clause that stipulates the contract can be transferred in certain events, such as the company’s sale, bankruptcy, or dissolution. The legalese tends to be too complex for the average homeowner to understand, and the devil is in the details as to what that clause might mean for you down the line. In most cases, the PV system cannot be repossessed, and the homeowner cannot be held liable for the company’s debt.
When evaluating any solar lease, keep your expectations in check. Often, the investment rate of return on buying a system outright is substantially higher. After paying for the lease payment and accounting for any extra power you might buy from the utility, the savings on a solar lease are somewhat small, usually $20 to $50 per month. However, those savings might increase over time as electricity rates rise—plus, there is the potential savings that come from having a third party monitor, maintain, and guarantee the system.
When evaluating a solar leasing company, take your time and consider all available information and choices before signing—it’s a long-term relationship and by no means a small decision. Don’t be pressured into signing a contract, such as being threatened by losing out on government incentives for not acting quickly.
A good starting point is the company’s track record. How long has the company been in business, what kind of reputation does it have, and how many leases have they sold? Most lease companies are only a few years old. The biggest and oldest probably have made more than 10,000 leases and, in the process, worked out a lot of kinks. New leasing companies are showing up regularly, and while some of these might end up being real winners, apprehensive consumers may want to stick with more established companies.
Another factor is how long the company’s program has been active in your state. Many of the larger companies have started leasing programs in one state and branched out into other states. While participation is necessary for these programs to grow and survive, you may not want to be a guinea pig for a company navigating the incentives and guidelines in a new territory. Sure, you might get a more favorable deal, but the trade-off may be long lead times on installation, potential administrative snags, and/or undeveloped customer relations. While a contract protects you, it is important to remember that it is only enforceable if you are willing to take legal action.
A key consideration in selecting your leasing company is the PV system installer they use. There are essentially three types of solar lease companies: stand-alone financing companies that partner with installers; module manufacturers that offer leases through a network of independent dealers; and full-service shops that provide everything—financing, design, installation, and monitoring.
Depending on which company you choose, you may have little control over which installer you work with. Some companies pick an installer for you, and there could be a wide range in capability. For any solar energy project, you should work with a licensed and qualified installer. Just as you would with any contractor, be thorough and ask the right questions.
• Does the installer have the required licensing for your area? (Ask for proof.)
• Which products does the company use?
• Does the installer use subcontractors, or their own installation crew?
• How long has the company been in business, and what certifications (such as “NABCEP PV Installer” certification) does its staff have?
• Can the company provide references from other homeowners?
You also should ask how the installer assesses a project and designs a system. The installer should first discuss the project and your energy needs, and then survey the roof, identify shading issues, determine the amount of energy that can be anticipated from an installation, and lastly, specify a system and lease.