Leasing vs. Owning a PV System

What's Best for Homeowners
Intermediate

Inside this Article

For homeowners who want to transition to solar electricity, there is no better time than the present. 2015 was the biggest year ever for PV installations in the United States, and the residential sector in particular continues to grow at unprecedented rates. Falling PV module costs, rising electricity prices, and increased awareness of PV’s financial benefits are making solar electricity an increasingly attractive option.

Growing Financial Benefits

In the past, high costs kept the majority of homeowners from installing PV systems. Many early adopters chose to go solar because of environmental concerns, or a desire to reduce their reliance on the electric power grid. In recent years, however, the solar market has opened up to an entirely new class of consumer. Today’s potential PV system owners are also motivated by the prospect of saving money on their electricity bills and making a responsible investment in their home.

Beneficial market conditions and significant financial incentives are bringing new solar customers into the market in greater volumes than ever before. The top three economic factors include:

Reduced system costs. Declining equipment prices and installation costs are directly reducing the out-of-pocket costs required of homeowners who want to install a PV system. Since 2010, the costs of going solar have fallen by 45% in the residential sector, according to the Solar Energy Industries Association (SEIA).

Increasing utility electricity costs. Climbing electricity rates add another reason to explore renewable options. Since 2005, residential electricity costs in the United States have increased by an average of 3% every year, according to the U.S. Energy Information Administration.

Federal and state incentives. Public sector financial incentives further reduce the cost of solar for consumers: the most significant being the federal investment tax credit (ITC). Property owners who own their systems outright can use the ITC to reduce their tax burden by 30% of the cost of their solar energy system. For example, if a homeowner installs a $20,000 PV system on their property, the ITC allows them to claim a $6,000 credit on their tax bill, effectively reducing the cost of the system to $14,000. State and municipal incentives can further reduce the net cost of going solar for homeowners.

Solar Bargain Hunters

These factors are expanding solar demand and garnering more potential system owners who are financially focused and likely to compare options before purchasing. These individuals want to find the best solution for their particular household, and are not necessarily interested in the simplest buying process or least expensive system.

Market research shows that there are between 4 and 6 million active solar shoppers in the United States at any given point. Interestingly, the majority of these people are not motivated by environmental reasons, but by the pure economics of switching to solar power. As such, these individuals want to understand the financial merits of each option before making a purchase. During their research process, they’re discovering that system ownership enables them to achieve a higher return on solar investment as compared to leasing.

Comments (2)

Mark@exactsolar.com's picture

Owning almost always works out better for the homeowner. Only certain instances -- like when the homeowner has not tax appetite (as the case may have been in the previous comment) -- make the lease more attractive.

Mark Bortman
ExactSolar

Jim and Elaine Stack's picture

It all depends. Most of the time buying is a better return on Investment ROI. But if your older and retired some let you lease to own and my 86 year old friend did that and saved a small amount on each monthly utility to cover the lease and after 6 year he could buy the $30K system for $600 bucks.
He now also drives a 100% Electric car that he leased , then bought. The leased took all the incentives he couldn't and passed on the;lower cost to him. Now he's older and much GREENER for pennies.

Show or Hide All Comments

Advertisement

X