Now that you have decided that you want to go solar, you’ve done your research and found out you can actually lease solar panels for your home. While this is potentially a good idea, it raises many questions for homeowners, such as is it worth it to lease solar panels in the long run? Or what are the leasing solar panels pros and cons?
Both leasing and buying solar panels are good options if you’re planning to go solar. But which one is more convenient for you depends on your personal situation. If you want to make an informed decision, keep on reading to know the leasing solar panels pros and cons and if it fits your needs. We’re also going to go over the financial benefits of leasing vs. buying solar panels so you have a comprehensive understanding of both options before making a decision.
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How Does Leasing Solar Panels Work?
Solar leasing is when a leasing company agrees to install solar panels on a homeowner’s rooftop, with no upfront cost for the property owner. This company is responsible for bearing the installation costs and all the necessary connections to provide electricity for the homeowners’ house.
Once installed, the property owner and the leasing company sign a contract agreeing on the length of the lease and payments. Depending on the lease, the agreement typically lasts 20-25 years, and payments can be made monthly, yearly, or in a lump sum.
Monthly payments are the most common way to pay for the leasing and resemble the traditional utility bill. Although these payments are cheaper (10%-30%) than the utility, one of the well-known financial benefits of solar power. Once the lease is over, the property owner has no further financial liability.
Pros of Leasing Solar Panels
Now that you are familiar with what solar leasing is, it’s time to learn about leasing solar panels’ pros and cons. We’ll start mentioning the pros.
1. It makes homeowners’ introduction to solar easy and quick. Buying solar panels isn’t much more difficult, but leasing simplifies all the bureaucracy and decision-making it involves. After the lease has been signed, installation can begin fairly quickly.
2. There are no upfront costs for homeowners. The solar installation prices have fallen considerably; still, installing a solar array that caters to your needs is a big money investment. Leasing homeowners pay monthly fees rather than a large downpayment. (Ever wonder why Solar Panels Are So Expensive? You’re not alone. Read up on it here.)
3. No responsibility for repairs or maintenance. If there’s any problem with your solar panel, the leasing company is responsible for its repairs and maintenance.
4. You can buy your solar energy system at the end of the lease. All homeowners have purchasing options once the lease is over, at fair market value adjusted for their age and current level of productivity.
5. Your solar panels will be tied to the grid. This means you’ll always have electricity to run appliances, even if the weather conditions aren’t ideal for your solar array.
Cons of Leasing Solar Panels
Yes, solar panel leasing definitely sounds appealing now that you’ve learned some of the pros. However, leasing also has some cons you should consider.
1. Solar leasing companies get to claim the tax credits, rebates, and SRECs. The government incentives and financial benefits are for the solar panels’ owner, who, in this case, is the leasing company.
2. No net metering credits on utility bills. When installing a grid-tied solar energy system, homeowners can sell any excess power their panels produce to the utility company for credits, which appear on future bills and come in handy on cloudy days. This benefit is only available to those who own their solar panels.
3. There are no guarantees that your utility company will raise electricity prices as much as predicted. Over time, trends change, and there’s no guarantee that utility companies will continue to increase prices by four or five percent on average each year. Utility-scale renewable energy projects may reduce the costs of energy production as solar and wind technology improves, and, if that happens, you’ll be locked into solar leasing fees that may be non-competitive.
4. Your savings from solar leasing will be considerably inferior to your savings if you purchase your solar equipment. Although the initial investment is bigger when purchasing, so are the energy cost savings homeowners get.
Pros of Buying Solar Panels
The main opponent of leasing is buying your solar panel, so we’re going to take a look at the pros and cons of buying solar panels as well.
1. Purchasing saves more money than leasing. The average home can save between $10,000 and $30,000 over the lifetime of their solar panel system (25 years), whereas you can expect to save $5,000 on energy costs over the terms of a 20-year solar lease.
2. Financing options available. Most companies offer accessible options for homeowners who want to buy their solar panels, like home equity and non-equity loans. Also, some financing options can provide positive cash flow every year.
3. The more you pay upfront, the more you save over the life of the system
4. More freedom on the size and how the system is installed. While the process may be longer, homeowners get to choose the solar panels system they want.
5. You get to keep SREC income and other incentives. As the owner of the solar panels system, you’ll receive the SRCE, tax credits, and rebates benefits.
6. The cost of a new rooftop solar energy system has fallen considerably over the past few years. Homeowners can install a typical solar panel system for approximately $15,000—$18,000, including the price of equipment and labor.
7. Factoring in tax credits and rebates, estimates are that a rooftop solar panel energy system can pay for itself through energy savings in as little as three to five years.
Cons of Buying Solar Panels
1. You will need to use savings or get a loan. While solar panels installation prices have fallen considerably, the upfront cost still involves a large sum of money.
2. You’re responsible for maintenance and repairs. Since you’re the owner of the solar panel system, all the repairs and maintenance are your responsibility once the warranty runs out.
3. SRECS can be tricky. SRECS are intangible commodities, so, like a stock, they’re tradable, and the selling process in the market can be a little tricky at first. You can also look for other options, like entering into an agreement with an aggregator or broker or selling them to a solar financier.
4. You will likely need to increase your property insurance coverage to insure the solar system.
Which is Better for You?
In the end, both leasing and buying solar panels are more beneficial than remaining with your utility company. But which one you choose comes down to the reasons why you want to install solar panels.
Leasing is suitable if you can’t afford the upfront costs of going solar. While solar panels are more accessible now, they still represent a big investment. It’s also convenient if you need to experience the financial benefits of solar immediately. Another reason leasing might be for you is if you want practicality. When leasing, homeowners don’t have to deal with the installation and maintenance of their solar array.
Solar purchasing is for those interested in maximizing the financial benefits as the long-term solar savings are substantially larger. Buying is also convenient if you don’t want to depend on nor pay a company to get your electricity. Finally, buying solar panels is for you if you want to take advantage of the tax credits and state incentives.
If you’re thinking about purchasing your panels and want a comparison of some of the best panels on the market, check out this article that we wrote comparing LG vs Panasonic Solar Panels.