Can I Lease Solar Panels?
Yes, you can lease solar panels. If you do not want to spend significant money upfront, leasing solar panels is a good choice.
On the flip side, the electricity produced by those solar panels is at the homeowner’s disposal, which means they need not rely heavily on the electricity from the grid.
Overview of Solar Panel Leasing
Solar Panel leasing is an arrangement between a homeowner and the installer to rent solar panels from a third-party provider to the homeowner. The homeowner doesn’t need to worry about purchasing them outright. Ownership can reside with the installation company or a third-party vendor, which can vary from one company to another.
The energy produced is fed into the customer’s home, and it is up to the homeowner to decide how to use it.
The homeowner pays lease payments monthly, which are usually lower than the electricity bill. The lease term usually equals the maximum lifespan of solar panels, which is between 20 and 25 years.
During this time, the solar installation company will handle the maintenance and any repairs. That means the homeowner doesn’t need to worry about additional expenses.
What Are the Different Types of Solar Lease Agreements?
Leasing solar panels is a financial agreement, and the lease is usually of 2 types.
1. Fixed Rate Lease
A fixed-rate lease is true to its name. The monthly amount the homeowner has to pay is consistent and doesn’t change. Utility rates or energy usage trends don’t impact the same.
Benefits of Fixed Rate Lease
– Stable Payments
With no unexpected changes, it is easy for the homeowner to bear the cost, especially since it’s less than their monthly utility bills.
– Easier to make the switch
The fixed monthly cost throughout ensures it’s easy for the homeowner to switch to solar, as they can better plan their finances.
– Insulated from increasing costs
The costs of maintenance and accessories like batteries can go up over time. However, with a fixed-rate lease, you don’t have to worry about inflation or other costs.
The only downside is that you have no flexibility. If you need to make any significant changes, the contract might or might not allow that.
2. Escalating Lease
If homeowners prefer an even lower upfront cost, they can go with the escalating lease. The amount they need to pay monthly in an escalating lease is even lower. However, it increases annually, usually between 2 to 3%. Such a lease can also last 20 to 30 years. The increase in monthly payments each year is based on a rise in energy prices or inflation.
Benefits of Escalating Leases
-Low Initial Payments
While leasing solar panels, this lease will give you the lowest initial monthly costs.
-Protection from utility prices
Even though you pay lower monthly costs, this lease still reduces your reliance on utility companies and, therefore, your utility bills.
The downside, of course, is that after 10 to 12 years, you will be paying significantly higher than what you started with.
Depending on your financial situation, choose between these two models.
What are the Pros & Cons of Solar Panel Leasing?
Pros:
1. Very low upfront costs
According to a report published by the National Renewable Energy Laboratory, a 2kw solar energy system that can fulfill the need for an energy-efficient home usually costs between $16,000 and $20,000. With a solar lease, the customer wouldn’t be paying any of this out of pocket. Instead, they would receive a lower monthly solar bill than what utility companies charge.
Of course, we help our customers reduce the cost as much as possible by alerting them about rebates and incentives, but that’s a good figure to work with.
The problem is that even after rebates and incentives, it’s not possible to spend such a significant sum of money for many homeowners.
On the flip side, leasing plans will cost you less than your monthly electricity bill from month 1. That essentially means you can go solar at a very limited cost.
In a nutshell, any homeowner can go solar using a leasing plan.
2. No need to worry about installation or maintenance
Many companies charge you a separate installation fee. While most companies will negotiate on that, it’s tough to deal with maintenance costs. The maintenance costs can climb slowly over the years, especially after the first 15 years. Of course, you’ll still get a positive ROI. However, all these costs are associated with buying solar energy systems outright.
You need not worry about maintenance costs when you lease solar panels because then these expenses are included.
Usually, after the first 15 years, the maintenance expenses can vary from $250 to $1600 per year. You can make that go away by leasing solar panels. Considering that the lifespan of a solar energy system is 25 years, you can save around $5,000 in the last 10 years of system usage.
3. Breakeven from Month 1
Breakeven on a solar energy system depends on many factors, but it can usually vary from 6 to 10 years. However, that is applicable only when you buy solar panels with cash.
Lease them, and you will start saving money from Month 1. That’s because the monthly payment will likely be lower than your electricity bills.
Cons:
1. Bit complicated to sell your home
When you sell your home, you need to be transparent with the prospective home buyer about the remaining leasing term.
While some home buyers might shy away from buying such a home, most are okay with it if the monthly payments are low.
Apart from that, you must deal with some additional documentation to transfer the lease to the homeowner. The leasing company and the utility company will both be parties to this transfer. Additionally, the homebuyer should have a good credit score for a successful lease transfer.
In a nutshell, there are a couple of extra steps involved.
2. Limited ROI
The ROI on leasing solar panels is limited. You can get an ROI of 60% to 80%. In comparison, buying them provides an ROI of 100% or higher. Still, considering the fact that you’re investing very little money, it’s better to lease solar panels.
How do I know if I can afford to go Solar?
Most homeowners make the mistake of just looking at a company’s quotation and then deciding whether they can afford it.
The truth is you need to understand how much money you have to spend to determine if you can afford solar.
Buying vs. Financing vs. Leasing Solar Panels
Option 1: Buying Solar Energy System with Cash
The upfront cost of solar energy systems includes the cost of various components like:
- Solar panels
- Inverter
- Installation & Labor Costs
- Permit & Inspection Fees
All these add up to a hefty amount, forming a major chunk of the amount in the quotation.
This is also the amount that discourages many homeowners.
However, you need not always pay this amount upfront.
Let’s say the total cost is $20,000. Most homeowners can’t afford to shell out that much.
So, option 1 of paying upfront is not affordable for most homeowners.
Option 2: Financing With a Loan
We at Current Home offer financing options with $0 down and rates as low as 1.9%. Now, suddenly, the entire solar energy system has become affordable. This financial arrangement will cost anywhere from $100 per month to $140 per month depending on the bridge loan arrangement and rebates.
Note: These estimates can vary widely depending on usage, home size, and local utility rates.
Option 3: Leasing
Leasing cuts down your monthly solar energy system bill even further. Technically, it is even lower than your monthly electricity bill.
So, while options 1 and 2 might still be out of your reach, there is no reason why you can’t afford leasing.
Will I have to Pay Electricity Bills After Going Solar?
Yes, you will have to pay electricity bills after going solar, but it would be negligible in most cases. According to the California Public Utilities Commission, you’ll have to pay a flat rate of $24.15 if you don’t utilize any electricity from the grid. For those living in deed-restricted affordable housing, the rate varies between $6 to $12.
Additionally, the Net Metering credits you earn will offset the electricity usage and not the flat rate charges. So, technically, your bill won’t be 0 due to the flat rate charge, but you can reduce it to 0 with the exception of the flat rate charge.
The state of Florida also has a Net Metering Policy, which means you can feed excess power to the grid. However, there are some utility fees, but these charges are negligible.
Factors on which your Electricity Bills Depend After Going Solar
Reducing the electricity bill to nearly 0 depends on a few factors:
1. Solar Energy System Output
The solar energy system installed on the premises should be able to produce enough electricity not just for your use but also to feed back to the grid. That alone, in addition to the utility fees, will help you bring your bills down to 0.
This is where choosing an experienced company like Current Home helps. We conduct a thorough audit of your energy needs and then install the system. We at Current Home pride ourselves on doing that so that you can drastically reduce your electricity bills.
2. Electricity Usage Pattern
If you use solar electricity during the day and rely on the grid at night, you might have to pay more, as that is when most consumers rely on the grid, and therefore, the pricing is higher. Your usage pattern also determines how much your electricity bill reduces.
3. Net Metering Policy
When you use peak power also determines if your electricity bills will be 0 or not. Net Metering 3.0 allows utility companies to provide variable rate credits to homeowners depending on whether they are feeding power back to the grid during peak times or off-peak times. Thus if you feed a lot of power during the non-peak times, that is when there is bright sunlight, you might not be able to bring down your bills drastically.
The Bottom Line
The good news is that with proper planning and an energy audit, your electricity bill can be brought down close to 0 (sans utility fees). This is what we specialize in. So, contact us today if you want to drastically cut down your electricity costs without spending a lot upfront.
