Solar Leasing

Solar energy has been growing in popularity in the United States, and alongside its growth has developed a new business model for it: solar leasing. NPR released a new article about the decision to opt for a lease versus ownership. In the article, they go over some of the differences, but I wanted to add some background to these options because it’s interesting and some important issues were left out of the article. The way leasing solar panels works is rather than owning the panels outright, you pay a flat fee that increases over time and in exchange all of the electricity that these panels produce, and you use, is yours. Once your lease is up, much like a lease with a car, you have an option of purchasing the panels (though generally the panels’ warranty is mostly used up at that point.) There are some advantages to this, namely, that those who don’t have the credit to purchase the panels have another option, but also because though it results in a net loss in dollars (about 50% generally) leasing is far less complicated than trying to collect all of the incentives on your own.

However, leasing panels can come with more complications than some people realize. In California last year, there were a series of homeowners who had opted to buy a lease and now wanted to move. In order to do so, according to their leasing contract, they either had to pay to move and reinstall the panels (which generally costs about as much as the raw materials themselves) or convince whoever was buying their house to take over their lease. This is a problem when leases generally last 20 years, and force people to be immobile for that timeframe. As a result, someone who was trying to sell their house with solar panels on their roof will experience a depressed house value, since it comes with this extra caveat. Contrasted with buying the solar system outright, which has been shown to increase property values over time, leasing has somewhat of a hidden disadvantage unless that person knows they will remain in place for 20, or at least close to 20 years. Leasing opens up the market to new demographics than selling does alone, but there are more considerations to make than simply upfront costs.

One Reply to “Solar Leasing”

  1. A solar lease is just one more financial “tool” that is complex enough that you can’t quite see what the real cost of it is. In 2009, groups of investors saw the opportunity to move into solar when local banks stopped making home equity loans and giving out business lines of credit. “Solar leasing companies” are money managers who are taking advantage of federal and state solar subsidies to earn higher profits than their money can earn sitting in real estate or stock market investments at the moment.

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