Solar Leasing

Solar leasing options are available to help finance the purchase of solar panels for those that are concerned about the upfront costs associated with a solar energy system installation. This alternative option allows solar power users to afford the opportunity to maximize savings through the access and usage of a solar array system at a fixed monthly rate.

This isn't a common way to finance solar panels for your home as many will opt for other methods, such as paying cash or financing through a lender like Michigan Saves.

Understanding Solar Leasing

Solar leasing is a financing option that allows customers to pay a monthly fee for a solar energy system while being able to use the power output. A lease agreement is established between the customer and leasing company and the customer must adhere to the terms and conditions. Leasing agreements typically last about 20-25 years. This arrangement provides many benefits such as: reducing upfront costs to install solar as well as maintenance and liability is in the hands of the solar company not the homeowner. One consideration for solar leasing is that because the individual does not own the system, incentives such as local and federal tax credits cannot be applied to the cost. 

How Solar Leasing Works

The process and mechanics of solar leasing is fairly simple and easy to understand. Once your system is installed, you will use all of the power generated by the system. If your system does not produce enough electricity to meet your needs, you will purchase power from the grid. If your panels produce excess electricity, it will then be sent to the grid. This can help reduce the cost of your electricity bills while also having to pay a monthly solar leasing charge. When the company installs the panels they will set up a monitoring system that allows them to monitor your system’s performance as well as catch any issues that may arise. If electricity costs increase, your solar lease payment may also increase and therefore it is important to understand the terms and conditions of your agreement. 

Benefits of Solar Leasing

Solar leasing provides many financial benefits for homeowners and businesses who choose to enter a leasing agreement. Instead of paying for the system and installation upfront, leasing allows customers to pay a fixed monthly rate for the electricity generated by the system. If the system generates electricity output under the anticipated production, customers will be issued a refund for the difference. Leasing gives customers the guarantee of a system that is professionally managed, maintained and monitored. Oftentimes, lease agreements will include routine maintenance and repairs as well as monitoring, insurance and certain warranties. 

Considerations and Limitations of Solar Leasing

Before entering a solar leasing agreement it is important to understand the considerations and limitations. It is important to understand the terms and conditions of a solar lease agreement before signing. Every contract is different, but the basic terms are typically universal. Contracts usually last between 20-25 years which is similar to the lifespan of a solar energy system. The solar contractor will often allow the customer to monitor their system while also monitoring the system to ensure it is performing optimally. Your lease payment has the potential to increase each year as the cost of electricity increases. Once your contract has ended, you can opt to renew the lease, remove the panels or purchase the panels. If you plan to move, you must transfer the lease to the new homeowners or break the lease by removing the panels which may include additional costs. This can cause difficulties when trying to sell and move homes while also incurring more costs that were not initially anticipated. 

Maintenance and Performance Monitoring

The leasing company is responsible for system maintenance and monitoring which can limit stress on the homeowner as well as costs for repairs. Performance monitoring and reporting is important to ensure you are receiving the maximum benefits from your system’s capabilities and solar lease contract, catch any issues that arise and ensure any refunds necessary. Before signing a lease agreement, speak with your leasing company to clarify the expectations and services provided by the company. 

Solar Leasing vs. Solar Loans or Purchasing

Solar leasing is among many solar financing options available such as: solar loans and purchasing. Unlike solar leasing, solar loans come with interest rates; however, once you pay back the loan, the panels are then yours and you do not have to purchase them from the company like you do in a solar leasing agreement. Solar purchase agreements are similar to solar leasing agreements aside from the way payments work. In a purchasing agreement, the contract outlines a price for every kilowatt-hour of electricity produced by the system. This price will be lower than utility rates and unlike solar leasing, your monthly payment is dependent on the amount of electricity produced by your system. It is important to understand the logistics of various financing options to ensure you choose the one that is best for your situation. 

Bottom Line

Solar leasing is an alternative financing option for adopting solar energy. It allows customers to pay a fixed monthly fee to use the power from a solar energy system. If the upfront costs of a solar energy system are a concern for you or your business, explore solar leasing as an alternative financing option. Solar leasing increases affordability and helps in the expansion of access to clean and renewable energy sources.