Secrets of Residential Solar Lease – Sweet Deal or Disastrous Rip-off?
A scam? A rip-off? A deal of the century? Ready or not folks, it’s here! A solution that gives access to solar power even to the most cash strapped green minded suburbanites and….… it’s brought to you by the very people who delivered to us the sub-rime mortgage debacle. It’s called a “residential solar lease” which is a “no money down” program that can get you electricity cheaper than what you cash out to PG&E on monthly basis. Sounds familiar?
The idea is simple; instead of buying your panels by dishing out thousands of dollars upfront you lease them for “one low monthly fee.” You win, the solar company wins, environment is happy. So what’s not to love? How about a 15 year contract, a 3.9% increased payment every year and our Wall Street friends who have their fingers all over this sweet deal?
On the surface, this sounds like a viable option for many home owners. It solves an expensive problem of purchasing the panels outright for around 27,000 dollars (average 1,700 sq. foot home). It works a bit like a car lease where home owners sign a deal that locks them in for 15 years with the option of extending their lease or buying the panels at the end of the contract. With a solar lease, your monthly payments can be around $110 which, according to the service providers, will normally be around 15% less than your PG&E bill. Are you sold yet?
After all, the way these companies and even our media like to paint it – it’s a no brainer deal. SolarCity, which is based right here in our backyard of Silicon Valley, is one of the very well financed operations that is the first to start aggressively market this contract for home owners all over Bay Area and western states. SunRun is another similar co. based in San Francisco.
Who really finances these deals? Banks on Wallstreet of course. And there’s serious money to be made… “Investors historically expect seven percent to eight percent, which includes the tax benefits and a slice of profit during the life of the fund,” wrote Green Tech Media about the amazing profits being squeezed out of the residential solar market. “Now they want ten percent or more.” 10 percent?! It sure reinforces how much some of these schmucks really care environment or our dirty energy crisis.
So before you jump on the band wagon, let’s look at a bigger picture and examine this “best new thing after sliced bread” from all angles:
Pros:
- Easy access to solar without high initial costs.
- With growing energy costs, this caps your electric bill for the next 15 years.
- Reduced monthly payment than what you would pay PG&E.
Cons:
- 15 year contract which is not easily transferrable if you decide to sell the house. (According to Solar City: “If you sell your home before the end of the lease, you can transfer the lease to the new owners if they qualify with excellent credit, or you can prepay the lease and add it to your home asking price.” That’s 700 and above FICO score.)
- Not for everyone. If your electric bill does not exceed $110 this program makes no sense financially.
- You never own the solar panels. In fact you will have to either return them after 15 years or purchase them from the solar company at the end of the lease.
- Your payments are actually going to go up 3.9% every year.
- You are not the one who gets the rebates for the purchase of solar panels.
- You maybe going off of the PG&E’s grid but you’re sure are tied into Wall Street’s grid.
- Many Home Owner’s Associations will not allow this.
Now at a first glance, this deal sounds very appealing but if you really look, this scheme makes no financial sense. Why? Because you are simply better off buying the panels by financing your payment. You save big time this way!
Perhaps, your biggest conniption should be with the fact that it’s not you who gets the subsidies and rebates, it’s the solar company! By paying lease payments throughout the life of the contract you become a cash cow owned by the solar company. While they get the panels for the fraction of the cost you end up paying a full price and then some. Doesn’t this just kill your mojo?
Here’re some numbers to demonstrate this. This scenario considers a 3.9% increase in your yearly payment throughout the 15 year tem lease:
1st Year Monthly Payment: $110.00 Total per Year: $1,320.00
5th Year Monthly Payment: $128.18 Total per Year: $1,538.16
10th Year Monthly Payment: $155.08 Total per Year: $1,860.96
15th Year Monthly Payment: $187.74 Total per Year: $2,252.88
Total Investment for the life of lease: $26,217!
Ladies and gentlemen, $26,000 is what an average 4KW solar system would cost you today without the 40% rebates that are currently generously offered to you by the state and federal government.
Why lease when you can buy them?
It’s obvious; your best bet is to find a solar company that will give you a good price and a good payment plan. Put a couple grand down and buy the panels yourself. Your monthly payments would still be lower than PG&E’s bill and they would stay the same till the loan is paid off. Once you’re done with your payment plan, you OWN that panels. When all will be said and done, your total investment will be closer to $17,000.
I’m not against Wallstreet. Being a Realtor, it is very clear to me that we need the banks to extend credit to qualified home buyers and keep small businesses going. Wallstreet is an intrinsic part of this economy. It’s just some of the financing deals that they cook up are so dangerous. This whole solar lease hype is starting to smell like another credit bubble that’s going to enrich the banks and eventually blow up on the rest of us anyway.
I know you want to save the planet. Me too. But let’s not let the big boys take advantage of our sentiment.
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[...] Maple Flats…. you are not reading the information. NO ONE ELSE CAN SELL THE PRODUCT. That is the problem. First Solar is only allowing SolarCity to sell their new under $1 per watt to produce technology. It would not matter if I opened a retail solar business or not. I can't obtain the product, nor can anyone else. So I could not compete. The Solar manufacturer IS selling their product at a price I want them to sell at. The problem is the ONE retailer allowed to sell the product is marking the product far above what they should. They are using a ZERO down, no money out of pocket – still pay less than your electric bill" sales pitch to hide the actual cost. The end user should be able to take advantage of the new lower cost to produce solar…. and they are not being allowed to. Please read the information/links provided, and also do some research on what I am referring to. I am sure you will come to the same conclusion. See this article as well. the gentleman is spot on: Secrets of Residential Solar Lease – Sweet Deal or Disastrous Rip-off? | SanJoseGreenHome.com [...]
Great dissection of the program and problem! Thanks!
I have heard of these programs under various names. One thing I heard is that they will upgrade and replace the panels during those 15 years, if they break or if new technology invented. So they say. I imagine if you buy them, they are obsolete within a few years. New technology being developed every day. Would like to know the pros and cons of that as well.
Great article! I often hear people comment about “emerging technologies” that are going to make today’s solar panels obsolete. What many people don’t realize is that there is a theoretical limit to the amount of energy that can be produced from sunlight. Rigid silicon absorbs about 30% of the bandwidth of light rays emitted by the sun. Today’s highest performance panels are converting close to 20% of the sun’s rays into clean electricity. Thus, theoretically, rigid silicone panels could become up 50% more efficient. A lot of experimentation is going on with materials other than silicone. However, silicone is still the top performer.
Anyway, you don’t need a company like Solar City to guarantee your solar panels for 15 years. In fact, all panel manufacturers are required to guarantee their modules for at least 25 years to qualify for utility rebates and tax credits.
Ah… good insights guys and god questions too. Yesterday I also heard from a fellow USGBC member that when PG&E starts actually paying home owners for the excess power fed back into the grid that it is the solar leasing company that will get the benefit and not the home owner. Seems wrong, because technically it’s the home owner that is feeding the power back, so why should it matter whether the panels are leased or owned? It’d be interesting to find out what’s the real deal with this. Anyone knows?
Actually there is a rental power company that does not take any “excess credits” and guarantees that the production will not be below what is contracted for.
Also no deposits etc up front so it is a win-win-win. Rental is nothing up front, no rate increases, and no surprises. As the field widens there are better solutions out there.
Best wishes
Paul
All,
I’m a solar designer and work with the Sunrun PPA every day. I work for one of the leading installers in San Jose and have many very happy solar customers. I feel it’s necessary to set the record straight and get the right information to readers of sanjosegreenhome.com. Unfortunately, this article leaves out a lot of important details about the benefits of a PPA vs. a Solar Lease and lumps Sunrun in with Solar City. These two products are not the same.
Sunrun’s PPA is a fantastic product that leverages additional incentives for solar when owned by a business, primarily accelerated depreciation on their investment in the panels. Yes, they keep the CSI rebate and the 30% tax credit, but they charge you less than if you purchased cash and kept the rebates. The PPA also provides proactive monitoring, maintenance, insurance and an extended warranty on the solar installation.
80% of my solar customers choose this option vs. a cash purchase. That includes Engineers, CEO’s, CFO’s, VC’s, Bank Managers and everyday hardworking homeowners. Some, who have the ability to pay cash for solar, prepay the agreement and do not experience any financing charges. For those that can’t prepay, the PPA is the only reason they can afford to go solar. I’ve designed systems for low income homeowners in San Francisco that, after rebates, incentives and a PPA, were essentially free to the homeowner.
A couple of comments to address the above:
1 – There is no need to upgrade and / or replace solar panels until they have lived a long, productive life (usually 25-30 years). Photovoltaics degrade about .5% per year. Replacing panels while they are still working would be contrary to sustainable business practices and would ruin the financials of any solar installation. These systems should be built to last.
2 – Usable new solar technology is unfortunately not being developed every day. We hear a lot on the news about interesting lab experiments, but the residential solar marketplace has been and is still best served by a mono-crystalline silicon based photovoltaic. This is the most efficient and cost effective way to harness the photovoltaic effect. If we are always waiting for the next greatest thing, we’ll never make forward progress!
3 – The PPA warranty covers much more than the 25 year limited warranty provided by a solar panel manufacturer. The manufacturer is only providing a warranty for output degradation over time. The manufacturer’s warranty does not include installation, balance of system components (nuts, bolts, wires etc.) or roof damage. The PPA’s does.
4 – The PPA company has no relationship with PG&E. The homeowner pays the PPA separately and the keeps their account with PG&E. After AB 920 goes into effect, any excess power generated by the solar installation will be sold back to PG&E by the homeowner and the homeowner will profit from that.
Please do not view Power Purchase Agreements as a “problem”. To the contrary, they are very much part of the solution. I will not comment on the solar lease …
Hope this helps,
Jamie
Jamie, actually this does help a lot. Thank you so much for a valuable and insightful comment. It nicely clarifies the difference between Power Purchase Agreement (PPA) and solar lease. This is what it’s all about, digging through the facts together.
It will be interesting to see what becomes of the financial part of these products. Case in point Solar City is offering a 15 Year Pre- Paid program on an installed 4.028KW System – Ok Rough Numbers – about 110,000KWH produced in a 15 year lease period – You pay the $8100 upfront and this covers materials, labor soup to nuts – This works out to about 7.5 cents/KWH making a number of rough assumptions (Average 5 Hours of full production – 365 days of the year) you get the picture – Now ..7.5cents/kwh is about 2.5 cents cheaper than PG&E on their baseline cost per KWH – This is GREAT! – So having paid the lease upfront – you nullify any breaking the lease agreement – you are getting the same energy for less – All you have to do is stay in the same house for long enough to recover the $8100 – For someone trading 300% over baseline kwh at 35 cents/kwh for 7.5 cents – it won’t take long – but – I’m a skeptic because salesman will tell you just about anything just to get you to sit down and invest time in something…
This is a fantastic article and I urge everyone that reads this to forward it to their friends or share on facebook.
I own a solar company in The greater Sacramento area and we considered offering solar lease. After all we are competing with Solar City and on the surface the solar lease is a pretty sweet pitch. We knew that we could be competing with them frequently considering that have just secured 120 million in financing which explains the fact that I hear their radio ads dozens of times a day while driving.
Recently we were able to get our hands on a Solar City lease proposal for a customer that we did an install for. When we sat down and did the math….well you read the article above. This program is definitely not the best value for the customer. Needless to say, we decided not to offer a lease program although the option was readily available.
Another thing that’s forgotten here is that the leasing company keeps the “green tags” or “SRECs” or “TRECs” or “RECs.” There are many names for these but they’re the same.
Essentially, the utility is required to produce so much green energy. If they can’t produce it themselves, they’re allowed to buy a “Renewable Energy Credit” (REC) from the solar owner who is producing it. In California, that’s not a lot of money right now. For the next two years, it’s only going to be $50 per 1000 kilowatt hours (kWhs) produced. That might be 50 bucks a quarter for an average home in California. In New Jersey, it’s around %650 a year right now.
RECs are tradeable in in NJ and many other places, so the price will vary.
And yes, if you lease or have a PPA, the owner gets the REC cash, and the home owner is NOT the owner in a lease or a PPA.
Bottom line, as noted above, it is always more cost effective to buy. With the new Property Accessed Clean Energy (PACE) programs coming to states, this will be better than a lease or a PPA, and you will get to own your system, get all of the above benefits of Federal tax credit, RECs, and rebate.
For more info about PACE programs, check out the San Francisco example here.
http://solarpowerrocks.com/san-francisco/san-francisco-picks-up-the-solar-pace/
I actually don’t want to knock SunRun, Solar City, Sungevity, Infinergy, CT Solar Leas. (These are the lease leaders.) If you don’t want to think about solar, these guys are great. However, for that “let’s not think about it and just get it” service, you will not save (or earn over time) as much as money. The most money always goes to the person or company that takes the financial risk, and if you solar lease or solar PPA, these companies are the people fronting the cash. Again, PACE will change that dynamic, because essentially, a private bond issued through your local government will be fronting the cash, and you pay it back through a special property tax assessment on your very own property for the next 20 years at around 8% interest. If you sell your property before then, the new home owners take over the extra payments. And again, you benefit from the rebates, etc.
One last thing. In terms of maintenance, solar has very little. Just wipe the panels down and clear off any snow or bird poop every once in a while. The inverter does typically conk out in 12 to 15 years. At today’s prices, that might cost you 1500 to replace. But in 15 years, that price might cost…. %500? Or the same. So, a solar leasing company taking care of maintenance is not a huge deal compared to your overall savings.
At solarpowerrocks.com, we believe in transparency. Obviously. Solar is good, no matter how you slice it. If you’re lazy and don’t care about every dollar, go with the lease. If you can swing a home equity loan or PACE loan, go with that.
8% x 20 years – why?
Because unlike a bank loan, you only have to pay 8% (or whatever the prevailing rate is right now) for however many years you own the property. Again, unlike a bank loan, you sell your property, and the new owner takes over the remaining solar payment. With a bank loan, you have to pay it off. With a lease, you have to get the contract transferred to the new owner. That may or may not be easy. Also, you don’t get all of the benefits that I mentioned above: RECs, rebate, tax credit.
Solar Fred
With a PPA you get:
Rebate – taken off price
Tax Credit – taken off price up-front (I would only recommend paying cash for a system if one’s income is in a high tax bracket).
Transfer or Buy/Sell any time – no pre payment penalties and you get to buy the system at Fair Market Value.
REC’s – are any residential customers getting paid REC’s in Cal?
Oh, and with a PPA, you get a new inverter when it crashes after 10 years.
Alas, going solar is almost always a better deal than not. Personally, I see no value in owning the panels myself (although that is my case), it’s not like I get to
sell them later.
Paul, the inverter is warrantied for 10 years, but typically lasts 12 to 15 years. Who knows how much the replacement cost will be in 10 years, but even it’s the same as today (I’m expecting prices to be lower) you’ll still come out ahead buying, even with the replacement cost.
TRECs/SRECs in California aren’t worth that much for the next two years, but the open market for them starts in 2013, and then look out. Remember that solar systems last 20 to 25 years, so when the market gets past its pilot phase, this is cash in the bank. Right now it’s only 50 bucks/SREC. However, look at New Jersey, where they’re currently worth around $700 per SREC. That’s a nice benefit.
The Fair Market Value of used solar panels should be 0. Think about it. Who’s going to buy used solar panels when new ones are getting cheaper every day. There is no market for used. However, I doubt the lease contract will let you get away with paying 0. Like a car lease they set up a residual value, which you have no way to negotiate. Also, and this may have changed, but last year the contracts from SunRun and Solar City had an end of term buy out price of $1/watt at the END of the term (15 to 18 years!). That means after all of your payments, plus the 1000 to 3000 up front payment, you’ve got to buy the system at another $5,000 for a 5kW system. Not inexpensive. You could of course let them go, but if you bought, you could still be benefiting from the solar savings.
I could go on. But let’s stop this back and fourth. Solar is good, anyway you finance it. To see if leasing, PPA’s, buying, or PACE is right for you, just get quotes for each and compare! I’ve analyzed them all, and if you can swing buying with home equity or PACE, that has the best long term return on investment. If you’re thinking short term, then yes, a lease or a PPA will save you money from day one (assuming your electric rates rise faster than 2.9% to 3.9% a year). But the savings will be much more if you buy in the long run. But like I said, don’t take my word for it. Compare them all and see for yourself.
This information has been so helpful to me. Thanks to everyone for all of the insight. I am sitting here with the CT Solar Lease lease documents in my hand waiting to hear if we’ve been approved for the state incentives and am debating the details of the contract/lease. Our estimated project cost is $55860 and our only costs will be the monthly fee of $131 which remains the same for 15 years. (In reviewing our monthly electric bills of the past year, this is considerably lower than what we pay monthly.) We will also be participating in the Renewable Energy Credits program. Since we could not afford the cost of buying the equipment outright, and really wanted to go solar, I think this is our best bet in CT at the moment.
GreenCT, you know something…. I should have made the CT solar lease as an exception to the above general leasing deals. CT Solar is actually a state sponsored program. There are income limits, depending on the area where you live for you to qualify.
Unlike most leasing programs, YOU take care of the maintenance, which isn’t a bad thing. You also get to split the SREC income. That’s unusual, in that most leasing and PPA programs capture the entire SCREC program. There was an NREL analysis done in 2008 that showed the CT solar lease program as being as cost effective as buying.
Once again, I’m sorry for not mentioning this program above, but it is indeed an exceptional program. Sadly, this program is no longer available, as of February 2010 because they ran out of funding. But it may come back. Check with this site for more information about the CT solar leasing program:
http://ctsolarlease.com/
Interesting points all around. I’ve looked at SolarCity’s lease product very closely, and it seems there are some misunderstandings in the article & comments. Take a look under the hood of their SolarLease, and you’ll see that it has as many benefits if not more to purchasing outright, PACE programs, SunRun, etc.
15 years of monitoring and services (including Performance Guarantee of system, full-coverage insurance, repairs, inverter replacement if necessary).
Gives people with little available cash to lock in low cost of electricity.
Work with one of the top (if not the top) solar integrator in the industry – adds peace of mind that it will be installed right.
Transfer (if necessary) should be easy – who is buying a house that doesn’t have a 700 FICO? Even if credit is an issue for the incoming buyer, pre-paying the remainder of the lease, and putting that amount into the sale of the house is a no brainer.
SolarCity’s lease does give homeowner the rebates and tax incentives, only it’s not a direct payment; instead those rebates are buying down the investment amount, making the overall savings fantastic with minimal up front investment.
Their pre-pay lease option let’s customer afford electricity around $.12-15/kwh for 15 years, which is where baseline is today.
If you can’t afford to buy a system in today’s economy, I suggest taking a closer look at SolarCity’s product. There is probably a reason that they have more solar customers than any other solar company in California.
Jeremy, that sounds like an advertisement for solar city, not genuine and transparent information for consumers.
I love solar and as I said, I don’t knock Solar City for charging more for a “let’s not think about it” product. They (you?) are taking the risk and capital investment, and deserve to profit more. But I think it’s an exaggeration to say that the rebates and all of the other tax incentives and RECs and everything else is fully “buying down the investment” whatever that means. It’s buying down Solar City’s investment, not the consumer’s
Honestly, I just think it’s best to be transparent. Customers will appreciate that so much more, and I urge all solar leasing companies and PPAs to change their communications strategy, not so much their product. As with this website, the information is out there and with a little bit of research, customers will discover the half truths and be upset. You want referrals, not angry customers feeling they’ve been taken advantage of by marketing.
Honestly wishing Solar City success,
Solar Fred.
Solar Fred my upfront pre-paid lease with solar city wss lower than any other offer I could get buying even with credits. I have the cash to buy outright or pre-pay lease and pre-pay lease was less including the tax credits you get when buying. It was about a $1 less a watt installed, $3 pre-paid lease compared to over $4 buying after credits. 20 year lease, no payments, after 20 years panels are mine if I am still here. Only down side is if RECs turn out to be worth more than $1 a watt at today’s money down the road? I will take that chance saving $6k now and no need to put out 30% Fed credit and wait to get back. Leasing companies benefit from depreciation, I don’t – win-win.
Jeremy,
Solar Fred is right on, that sure did sound a like big advertisement, not subtle at all
Solar City sure brags about all these customers and even if it’s true that they sell a large amount of these leased systems, that still does not make it a a great service.
I will echo a quote used by Rob Moody in the previous post (about energy efficiency efforts that don’t work) – “Empirical evidence is absolutely necessary to support universal truths. Without the knowledge of that evidence, untruths can be repeated so much by so many people that they become “fact.”
*************************ATTENTION:
This article contains COMICALLY bad information. Tadas, you sure are a lout. Where to begin?
You seem to object to the fact that “Wall Street” stands to gain from these solar financing deals. Ignorant populist. You are right that firms like US Bancorp are heavily leveraged in companies like SunRun and SolarCity. Would you rather have “Wall Street” make a profit off of solar electricity or PG&E make a profit selling electricity from a coal-burning plant (not to mention the coal mining profit as well as the freight profit)? Your low-brow critique of this very rudimentary and sound solar financing arrangement really demonstrates your lack of knowledge for the market society we all live in.
Think of a solar lease as a house mortgage. Before mortgages (another basic financing arrangement intended to HELP people even though “Wall Street” stands to profit), you could either rent or pay cash for a place to live. Right now, most people “rent” their electricity. If you think it is a sound idea to rent electricity then look up the history of PG&E’s rates. As for paying cash, most people just can’t come up with that kind of dough.
It also seems like you have some sort of visceral objection to not “owning” the system. The advantage to this is the homeowner doesn’t have liability if the system breaks. Not a bad idea considering that these panels sit on one’s rooftop.
Here’s the bottom line: Anyone with a high enough electric bill (roughly $110 to $150 per month) will have saved considerably over the term doing a solar lease or a PPA than if they continued to buy electricity from their local utility.
Richard, have you ever noticed when people get angry and start being offensive? It’s only when they feel weak or have some archaic belief to defend. Insightful comments are always welcome and your input is appreciated. Heck, I even enjoyed it.
I just doubt you will get far by going to blogs, offending the community and then presenting your own opinion. Till that changes, it’s not even worth engaging in a meaningful conversation with you. Take care.
I offer solar leases and we guarantee a 20% savings and fixed payment. Our energy cost is extremely low so a 10kw system is only $50 per/mo. You can also buy the system for around $6 watt installed. A 10KW system would cost $60,000 the local incentive is $2 watt or $20,000 and your federal incentive would be 30% of $40,000 or $12,000 for an investment of $28,000. So how many $50 payments does it take to equal $28,000. Thats right 560 payments or 46 years and by that time you will be happy to avoid the cost of having them removed yourself. Some solar leasing is less advantageous. We are not driven by wall street or sesame street, we are driven by making america green for our future.
Steve,
You’ve peaked my interest. A 10kw for $50 mo. Gotta admit though, sounds too good to be true!
Paul,
I agree it does sound to good to be true. The reality is that companies can account several factors that homeowners cant by owning the system. We are a national company so we can average the payments over the whole country. system payments depend on local utility rates our goal is to create an initial 20% savings. We then pass the savings on to the homeowner without any annual increases or hidden costs.
You’re missing one part of the equation Tadas. Money saved = money saved. If someone can’t finance, (and in this environment – who can?), this this seems like the logical choice.
When you finance a car and add up the payments you’re paying more than the price you agreed to. When you finance your house for $300,000 @ 5% you end up paying nearly $600,000!!
Yes your home appreciates, but so does your big evil PG&E bill. By your logic you probably avoid financing anything because your mortgage and auto company would “screw” you too. Come’on, this is just another financing tool like anything else. The numbers make sense when you factor in your PG&E bill, every year for the past 6 years I’ve paid more for the same electricity. And if Prop 16 passes I can see myself paying even more.
I work for a large bank and with perfect credit you’re still looking at 11% to 16% for an unsecured loan. Maybe if the economy weren’t in the toilet and people could find another way leasing wouldn’t make sense.
Too bad I have too many trees for solar but I’ve looked the programs from the companies you mentioned and they’re great and help people save the money they want. Now if I could only hit the fast forward button and get a BloomBox! That is unless PG&E just buys them out and hides the technology in their vault of no return.
Hi Jack, thanks for some interesting points. A few thoughts:
>>”If someone can’t finance, (and in this environment – who can?), this seems like the logical choice.”
This was exactly the reasoning many folks adopted when they bought their homes with sub-prime mortgages. It’s inherently short sighted and has proven to cause much financial anxiety down the road.”
>>”When you finance your house for $300,000 @ 5% you end up paying nearly $600,000!!”
That’s right Jack, that it is why its better to buy the system straight out but if one can’t, one should finance it and own it when it’s paid off.
>>” By your logic you probably avoid financing anything because your mortgage and auto company would “screw” you too. Come’on, this is just another financing tool like anything else.”
Spoken like a true banker Jack. “Finance everything! Why not! Why save and wait when you can buy and enjoy today!?” I know you’re paid to think this way so you’re forgiven…
)) There is a reason the Western world is facing a debt crisis and people are a consuming a record number of alcohol and anti depressants. Taking out unnecessary debt produces nothing else but short term gratification and long term suffering. It’s time we learn from mistakes and adopt a broader perspective. 
Cheers, Tadas
I am a solar lease customer, that said…
My decision was driven by a consistent known savings lease+PG&E vs just PG&E. The ability to walk away after 15 years, purchase, negotiate a new lease for the existing or new equipment. That the lessor owns and maintains the equipment. There are several purchase opportunities
contained within the lease. I particularly liked the turnkey, zero out
of pocket, cash flow positive from day 1 lease. Whatever it takes to get more solar roofs shouldn’t be disparaged, lease, outright purchase, power purchase agreement its all good.
A solar lease program is designed to make the solar conversion to clean energy a simple and affordable way for the masses to participate in a solution to help minimize the environmental destruction, and dependence on fossil fuel driven power plants. In this economy most homeowners are just trying to get by, they want to do something to change our carbon footprint, but the investment of $25,000 and even after all the rebates and write offs they may only pay about $11,000 for the system. Then factor in the maintance and repair cost of a system, the purchase option to a new solar customer may seem a bit of a stretch. A new solar customer should have the option to test drive the technology before investing and a solar lease offers just that. Technology changes so fast these days, many of the systems being purchased today may be obsolete in 10 years, remember all of those giant cable satellite dishes, or the block sized cell phones, and I can go on and on, the point is sometimes it is better to find a way to enjoy the technology during its ‘evolution stage without having to invest the farm. The main mission is to bring the clean energy of solar to the masses with a program that will work for them now, not wait until they can afford to purchase and who cares if a homeowner buys or leases? What we desire is a clean environment, and the reduction the BP oils spills and the coal mining accidents. Ohhh, by the way there is a solar lease program that you can lease with the option to buy in six years, they have two of the best leasing programs in the nation, you can get a free solar quote and compare before you decide. Read about it: http://www.2rentsolar.com Either you are part of the problem, or part of the solution.
Finally….. a post that brings light to this scam. What happened to the $1 a watt promise that came with this technology?? The middleman is making the prices, and you end up paying the same $4 watt. What a scam.
I am so p.o. that the general public has not been allowed to purchase these panels outright for ourselves for the $1 per watt promise!
Thanks for the article. I was beginning to think I was the only one out there that was seeing this for what it is. So what…. you are not paying the utility company…. INSTEAD pay on a lease to someone else???? Wake up folks.
I think the real trajedy here is that the company SolarCity looks to be buying the panels for $1 per watt from FIRST SOLAR. So a 4kw system would cost SolarCity roughly $5000. Then SolarCity charges the customer $30,000.00 THEN collects a rebate from our government for 30% of the $30,000.00 (or $9,000.00) this is way more than the cost of the system. THEN charges the customers a 15 year lease?!! This seems almost illegal if you do the math. SolarCity is collecting more than double the cost of the system from our government in rebates, AND then charging the customer on top. How can they get away with this? And the rebate money is on a first come first serve basis…. so many legitimate homeowners may not ever get a rebate if a big company like this takes all the funds hand over fist like this. It seems this should be stopped?
If I purchased the panels at the $1 per watt as the technology promised. A 15kw system could run my entire house (3000 square feet), and only cost me $15,000 before rebates. So like $10,000 after rebates. Instead SolarCity would charge me $117,000.00 for the same system! If we could control corporations from raping us… the entire country could afford to have their homes completely run by Solar. Not kidding. Do the math. This just does not seem right. To think I could build a home off grid and only pay $10,000.00 to have all the electricity I can use and then some… but instead I have to bow down to a scam like this…. man….
Solar panels are only one part of the price equation. You need to also account for installation (typically $1/W, and the inverter ($.55/W), racking ($.45/W), and the balance of system – wiring, conduit, disconnects, meters ($.25/W), as well as any overhead, warranty reserve, and profit for the installer ($1/W).
So even if you have $1/W solar panels (which don’t exist yet for the residential market because thin film modules are very inefficient and need much more roof square footage to produce the same amount of power as more efficient crystalline panels) you are still looking at a minimum of $3.25 / W in fixed costs for the rest of the system.
It would be helpful if everyone did a little bit of research before they started shouting on message boards.
Reality is….. China will come to us with the same technology, and then these guys will be put out of business. Unfortunately they deserve it. But what about all the lost jobs. It makes you sick.
When China comes to us with the thin sheet panels at under $1 per watt, then we will finally be able to have electricity for our homes without paying a utility company (or put ourselves into a rediculous lease agreement-far worse). But why should it have to be that way. There are now 2 company’s here in the US with this $1 per watt technology that I know of…. and yet we only have access through a chosen corporation, who want to rape us. What a mess.
@ Cybordolphin – Your math and your understanding of financed solar is way off. Please do your homework and get your facts straight before confusing people on an informational blog/discussion about an important new option for speeding up the adoption of clean energy. You clearly have no understanding of how SolarCity structures these projects. For starters, try looking at the median cost across the top companies of an installed solar energy system – it’s typically $6-$7/watt in CA for 2010.
Determining the true cost of installing solar is MUCH more than panels (inverter, copper wire, racking materials, engineering, permits, labor for installation, rebate paperwork, paying the humans who do all this work a livable wage, etc.). If someone is able to install solar themselves, I say “go for it”, truly! Solar finance options just make it easier for others to go forward, and overall, it will save people money (as a general rule, your electric bill in PG&E territory needs to be over about $120/month to save money from day 1).
Yes, prices for solar are coming down, but the rebates in CA and other states are also dropping in step. Now’s as good as any time to get into solar and significantly lower one’s carbon/environmental impact AND save money.
You must be in the business Jeremy….. no doubt. And I did my homework. I also have been in a similar business in the past so I know exactly how it works.
And it is a scam plain and simple. And it was back when I did it as well.
Blow the BS with regard to the cost. You know as well as anyone that if the cost to produce the panels has dropped from $3 per watt to $1 per watt, and the retail has not dropped, then folks are getting ripped off. The cost per watt to produce has gone down over 70% and yet the end user is still paying the same price they did 10 years ago. And above is exactly why.
The problem is the end user CAN’T install the new technology themselves. Nor can the have an ethical installer do it for them either. That’s because there is ONLY ONE retailer being allowed to sell this new technology to the end user.
Yes… the cost to have a system installed is $6-$7 per watt. That is based on the OLDER more expensive products that were on the market. BUT our point is that NOW there is a cheaper produced product out and WE ARE STILL PAYING THE $6-$7 per watt.
Prices for Solar are NOT coming down. The cost to MANUFACTURE solar is. And that is the problem. The end user should be seeing some of that drop in cost. But they are not. AGAIN it is because ONLY ONE RETAILER is being allowed to sell the new technology that cost 1/3 the cost (instead of $3 per watt to manufacture the new technology cost less than $1 to manufacture). But the price is being held high through the lease game. The gentleman who put out this article is spot on. The only thing he did NOT touch on…. is the retail price being charged (even for cash), of the new technology being offered is the same as the old technology even though it is costing 1/3 less to produce.
Why don’t you do your homework….. and stop looking at it from the other side of the fence.
This company can pull the plug on your business any time. All they have to do is lose their lease game…. and cut the price of their product to HALF of what you can sell (they have the profit margin to do it), and take away all of your customers. Right now they don’t have to cut their prices… heck they can get your customers away from you just with their “ZERO DOWN…. and no cost to the customer” game. They got you either way. Good luck!
If you want to see adoption of Solar, and “speed” up the process. Try not allowing ONE company to sell the new cheaper to produce solar, and allow the end user to purchase the cheaper technology themselves. Instead of paying $150.00 per month on a lease, OR paying a huge mark up on the product due to not having anywhere else to go…. let the consumer REALLY take advantage of the cheaper to produce technology (let them purchase from other sources). And let THEM get their rebate. YOU do the math. If I could purchase the product for a fair price of $2 per watt (installed), then I could have a 15kw system for near $10,000.00 after rebates and pay off in 4-5 years without paying more than my current electric bill to do so. NOT the $68,000.00 the above company wants to charge me, and THAT is going to get solar on a lot more homes than this BS. And you know it.
Some more math for you Jeremy…. The manufacture cost of the solar (less than $1 per watt now), is supposed to account for less than 1/2 of the total installation cost. Wrap your head around that. Even at $3 per watt installed…. the end user would be far ahead of the game written about in this article. And $3 per watt installed is quite possible. That you also know if you are in the industry. The consumer is getting scr*wed and you know it.
Let the customer have the option of buying for cash at an acceptable markup ($3 per watt installed), and get their OWN rebate. That will get solar on everyone’s xmas list. And solar would REALLY take off. America could have solar on every home. And lead the world in rollout of solar. But like with this plan…. it cannot happen. It is STILL strapping the consumer to a monthly payment (15 YEARS!), and for no reason…… other than greed.
People are not all stupid. Granted enough are to make it work for the above company. But not forever.
The new technology being sold above is a sub $1 per watt to manufacture technology. This is fantastic, and never acheived before. It acheives the GRID PARITY. The problem is the end user is not able to appreciate/take advantage of the breakthrough. And again the article explains why.
CyborDolphin, it’s really a shame that you have to confuse your ideas and wishes and hopes for the solar industry with a bunch of inaccurate assumptions and misnomers. I’m not quite sure what your angle here is, as it seems that you’re trying to dissuade people from going solar – interesting perspective for a solar blog/discussion.
At any rate, anyone who looks at the cost of solar from 2005-2010 will see a 40% reduction in the cost to the consumer. Yup, there is one solar company who can manufacture solar at $1/watt, and yup, they too mark up the cost to all of the installers/integrators who sell that product.
I’m not going to take your math apart step-by-step, b/c I’m going to go to work and help people save money over the utility cost of electricity. Yes, I work in the solar industry, and it’s because of my years of dedicated work that I understand the details and misdirections you are feeding people. I encourage the readers here to look under the hood of your assumptions and see the mistakes/omissions you are making.
I wish a new house cost $100,000 in the Bay Area, and I wish that the new electric cars coming out would start at $10,000. I wish solar was affordable for everyone by now. The truth is, that technology is driven by many things including people, materials, and yes profit. Most people in the solar industry are barely making a living. Most solar companies are struggling to stay in business with today’s prices at $6/watt installed-residential-solar. The solar companies are not abusive to customers, and solar leases are not venomous like you make them out to be. Get your facts straight. Learn more about how business works and what’s really behind a construction project like solar. It’s not all cupcakes and party hats and hand over fist profits in the solar industry like you seem to paint it out to be.
thank you Jeremy! I see a lease, in my hand now, that is viable savings for many homeowners.of particular interest to seniors who would not benefit from investing in purchasing the panels outright, and the lease payments never increases. i see some commentary no longer relevant due to new products (leases) available.
Does anyone else think the math in the article is skewed? With all due respect “Tadas” you are not accounting for the time value of money. You must adjust the total lifetime adjustment back to “year zero” to really compare a lump-sum upfront payment to the total cost of leasing over the 15 year life. Only then can you really relate the 2 costs. If there is a difference between the numbers, that’s when you can analyze which option is more cost effective.
Jeremy….
Are you seriously saying that the method the above company is bringing solar to a home is ethical?
Please simply respond. It will quickly answer my questioning of your motive.
If you honestly wanted to see solar on every home in America…. without creating a hidden burden for American’s, you cannot back the above solution of entering millions of homeowner’s into a 15 year lease to do so.
Shame on you for attacking my math or my integrity here. Those truly interested in Solar becoming mainstream to the US, can see this is not the way. This way is simply lininig a companies pocket (a greedy company at that).
SolarCity quotes $30,000.00 for a 4 kw system. My example of a 15kw system would be roughly 4x that on the outside. So give them some credit…. and go with my lower figure. Bottom line is if I had access to the technology other than going through the above company…. I could realistically install the 15kw system for roughly $10,000.00 after I collected my OWN rebates. And I could realistically pay the 10,000.00 over 5 years paying the same amount as my current electric bill.
To overinflate the price of a new technology, then collect rebates on those inflated prices, and then turn around and strap American homeowner’s with a 15 year lease…. is outrageous. Clearly.
There is no real good reason the general public should not be able to use the new technology (being afforded only to Solar City), and install solar on their home for $3 per watt. And you know that.
And yes….. in this case Solar City is wearing party hats.
YOU of all people being in the industry (unless you work for SolarCity), should be quaking in your boots. This company could put you out of business in a heartbeat if you think this through. All that has to happen is they lose their lease program…. or rebates go away (they lose their cash cow), and their prices will be slashed to put you right out of business. You can’t compete. I certainly hope you get that.
If you are in the industry. And you truly are in it for the right reasons. You cannot support the above as being a real solution that truly benefits the consumer.
Let a company like you have the technology. Let a company like you install the technology at a fair price (you could install the new technology for $3 per watt and maintain the same profits you maintain currently). Remember…. First Solar is now able to produce the product for 70% less than just a few years ago. So instead of costing $3 per watt to manufacture, it is only costing them UNDER $1 per watt now to manufacture this new technology. If you maintain business as usual you can then install a system for half of your quoted $6/watt installed-residential-solar ($3 per watt). Certainly you would not/cannot argue this.
Why would you support Solar being offered to the public in such a cost burdening manner as above. Folks cannot afford their utilities as it is. Nor can they afford to pay a 15 year lease saving a mere $10 per month doing so. It is a pathetic program designed to keep profit as high as possible for the company offering it. And that you know to be true.
While you can support the free market and a company making profit. It should not be at the expense of collecting rebates on an installation inflated just to the point of being under the wire of unacceptable, strapping a homeowner into a 15 year lease, or charging for a technology double because “you can”. Further you cannot be in support of ONE retailer being allowed to roll out a new technology. If the time comes the company loses their lease program, and then slashes the price of this new technology to half of their current pricing (the price the technology SHOULD be offered at in the first place), some would refer to this as a monopoly. And that certainly you cannot support. Especially if you are “in the business”. You should have access to the technology that has attained “Grid Parity”, just like the company offering the 15 year lease program.
The above offering simply is holding the price of this new technology high. And doing it by playing on poor judgement (human nature to some), by hiding it in a 15 year lease NO MONEY DOWN, ZERO OUT OF POCKET, AND SAVE!
There is a middle option between purchasing and leasing solar that never gets discussed (unless I missed it) in the endless bashing of $0 down leases: a prepaid lease. Both SolarCity and Sungevity offer a prepaid leases that costs significantly less that both purchasing and a no down lease.
In our situation, we’ll make one upfront payment and we’re done. The payment will cost roughly third of what it would be to buy a system outright or lease it for $0 down. This also removes any uncertainties if we were to sell the house. Over the 20-year lease we’ll save about $15,000. Sure, we could save more about $23,000 (according to one estimate we received) if we purchased the system. But purchasing would be many years away for us. We can prepay now. Why put off the possibility of saving $23,000 sometime in the unknown future, when we could start saving $15,000 now?
Maybe it’s not completely ideal, but it’s the best we can do. And certainly seems better than doing nothing.
According to one of the sales people we talked to, about 20% of their customers prepay. So, some people are figuring this out.
I find it interesting that you fail to mention that these customers already have an infinite power purchase agreement with PG&E. The only difference is that one never knows what PG&E is going to charge from year to year. Historically, PG&E’s escalators have been much higher than 3% since their filing bankruptcy in 2001. You paint a idealistic picture that obtaining a loan from a bank to purchase solar panels is easy these days. Most homes don’t even have the equity in them to secure a loan with a bank. Sure there are some banks offering solar loans but they average a 7.5% interest rate. This interest easily offsets any sort of savings realized by the solar panels. Finally, you also fail to mention the cost savings benefit realized by the customer by not having to maintain, insure, or monitor their system. The output is even guaranteed. These programs make it possible for customers to have an alternative to PG&E. These companies are just like utility providers except you actually know what your bill is going to be every year for the next 15 years +.
Very good point. Also ,, leasing option is ideal for “older” homeowners, who dont want to put out the cash up front, be involved with maintenance issues
STAY AWAY from these clowns.. I know,,,,,What mantainance? You are getting ripped off,,,, WAIT 2 years,,,,,a system will cost you for 2kw about 14K installed,,, AND youl own it!
This is the letter sent to SureTempManufacturing in Fort Myers Florida for our proposed lease.
My wife & I reviewed the lease, very eye opening to say the least
My home is very efficient. Our new A/C’s and Solar Water Heaters, have taken us from 100 to 65 kwh per day. New Energy efficient Kitchen Appliances & CFL lighting can reduce this further
Our bills have dramatically decreased from averaging $300 to this august being $215.35 Total
Our goal has been from the beginning to reduce our costs. PV CAN do that.
A starting cost of $259 a month in year 1, ends up to be $442.50 in year 15 for a total of $62,771.20 That seems exorbitant for a system that still is not ours.
Then if I did buy it would I get the tax credit? No. You get the 30% tax credit & your company will probably make extra money by selling emissions allowances to fossil-fuel industry that the PV system will offset. I know I would.
$259 a month for a perfect scenario 35 kwh per day still leaves me with a 50% FPL bill at .085 cents a KWH to pay.
That equates to $259 STM + 95.50 FPL = $354.50 or a monthly overpayment of $139.15 based on August(Hot Month) $215.35 bill. This overpayment would continue to increase with your 3.9% annual increase & FPL’s 7.8% annual increase. Where is the value in this system? I have reviewed contracts from California, Arizona & Texas these past 2 days and am shocked as to what is available in price & performance guarantees that STM does not address. And now with the social media addressing these issues the truth is there for all to see.
Your website examples show the consumer saving money. How am I saving money?
I for one suffered during 3 hurricanes just as you did with Charlie. Florida Plunder & Loot FPL was not prepared
Seeing FPL not maintain the infrastructure, accessing a storm charge to please stockholders and the lies they perpetuate about supporting alternative energy sources makes me even more interested in a PV system to offset their false claims. Your website and this contract contradict themselves. I hope this isn’t a last ditch effort (home run) to help Evergreen Solar in Massachusetts stay alive by selling their products. Penny stock & wasting government subsidies are becoming all too common with Evergreen.
Mr Griffin, Now that you know my thoughts, is there a system that will save me money on my electric bill and earn you money to support your business. I hope so for all our sakes.
Thank you for your time
DONT BE FOOLED BY THEse scum companies! Solar city , states on thier site that they have recieved Millions of dollars from PG+E, and chase banks to fund their little bs scheem…. HOW DARE YOU CALL YOURSELFS ECO FRIENDLY solar city!!!!!!!! You are the scum of the world,,,, DIRTY DIRTY MONEY!! lets see pg+e is a quality green company… NOT
chase is so much better NOT… so get over it solar city!!!!! YOU SUCK; YOU ARE NOT A ECO COMPANY AT ALL…, Just trying to make a quick buck while the fire is hot… And by taking this dirty money to stay affloat, Then what,, sell out to PG+E? YEP.. sound familiar doesnt it california… ANd the employes they have are CLUELESS about this scheem!!! Grow up kids,,, Your not green, Just dirty,,,, I say,, GO AWAY,, you are just as bad as WHOLE FOODS, and there pro gmo foods donations,,,, SCUM!!
The sales personel at solar city are clueless about ECO green SOLUTIONS..They are a bunch of kids, who are clueless about the the company they work for.They get payed VERY low wages, and make there real money off of sales comp…SOLAR CITY IS NOT GREEN, JUST GREEDY!, and will do anything so they can build there company for a quick sale in the next 10 years to???? PGE???? Chase bank????? So you see,,, this funded company by US the taxpayers bailout money is scamming its customers… The price of systems has dropped 30% in 1 year here in california.. Just wait ,, In 5 years solar WILL be VERY affordable to all who want it for CHEAP, while these stupid folks who are stuck in a 15 year lease,, are screwed!!Just wait… Remember when computers were REAL expensive?your 2500 system is now worth 10 dollars, in scrap,,,,, SO AVOID AVOID AVOID,,,,, CALIFORNIANS AGAINST SOLAR CITY… GET OUT OF CALI… you are not eco,,, Just Greedy!
Unfortunately Dr. Scott Levy…. we will likely never actually see systems priced WAY below todays prices…. although the system prices should indeed be slashed. This is due to as you noted…. GREED. A sham will be explored and implemented to keep the prices high. Just as the above “zero out of pocket” scheme above.
The cost to manufacture 1 watt of solar power is now down to around $.20 per watt. Thats right folks. $.20 per watt (20 cents per watt). This means that the price of a system should be affordable for just about EVERY homeowner, without a 15 year lease or ANY lease.
The cost of the unit would be FAR less than even a current monthly electric bill.
Everyone needs to ask the quesion and look into this as I have.
“WHY AM I STILL BEING GOUGED INTO PAYING OLD TECHNOLOGY PRICES”?
We should all be able to have a new system installed for $3 per watt or less. Without putting the industry (installers) out of business.
We alread are. and I believe you are wrong,,,,MArk my word,,5 years from now,,,, 3 kw system,,, uninstalled 5 k,,,, I know,,,
TonyStewart…
There actually is a system that would save you money. Lots of money.
Look up “thin film solar technology”. Don’t be misslead by the old technology being called “thin film”. It is not the same.
There is now a product only being sold to the government, Germany and the BIG utility companies. This product is actually “printed” onto a special film. This film can be applied directly onto roof shingles, etc.. The applications are almost limitless.
However… again the product is only being released to government, BIG utility companies, and ONE single residential retailer here in America. This is wrong. Very wrong. This is exactly why we are not able to take advantage of the new technology being manufactured at only .20 per watt (almost unbelievable).
Research carefully folks…. and start demanding answers.
There is NO reason everyone should not have affordable solar made available to them. And it should not be from ONE retailer and tied to a rediculous lease program.
My neighbor installed 3 kw system for 10K,, It works perfectly,,, And he is now saving up for the New wet batteries comming out,, for here in nor cal, pge as per sb32, does NOT ,,,, I repeat,, DOES NOT have to by law give a penny BAck to systems under 1 Mw…. GO AWAY SOLAR CITY!! You are not eco friendly,, JUST GREEDY, with your 1 billion dollar of WALL street investors…. YUK!!!!
Interesting discussion if a bit vitriolic. I’m currently looking at solar PV for my home in Phoenix. I have no pre-conceived notions regarding the various means of financing so have an open mind in that respect. Here in Phoenix, I can get a decent quality residential system installed on my flat roof for maybe $5/watt before incentives. For a 7.76 KW system that’s about $38.8K. Currently, my utility, APS, provides a $1/watt rebate so net cost is $31.0K. Federal tax credit of 30% is another $9.3K bringing the cost down to $21.7K. Arizona has its own tax credit of $1K so after all is said and done the system costs me about $20.7K.
Now what about leasing? Well, I do have some funds available to put into this up front so I don’t need to do the zero down leasing approach. What I have more seriously looked into is a “prepaid lease” where your upfront payment is enough such that you have no monthly payments to the leasing company. All three of the vendors I’ve got quotes from offer everything from zero down through partial prepay through full prepay. So what would full prepay look like for the 7.76KW system? I’ll go with SolarCity since they have borne the brunt of the attacks here. For a prepaid 20 year lease, I would have to pay upfront $11,687. That includes 20 years of monitoring, 20 years of covering any repair including inverter, insurance against damage or theft and a performance guarantee. Of course, at the end of 20 years, I still don’t own the system. But I will have the choice of upgrading the system at additional cost, removal of the system at no cost to me, a lease renewal, or possibly a purchase of the system for some nominal fee. In the latter instance, I should be able to drive a pretty good bargain as 1) they won’t want to pay to have it removed and 2) a 20 year old solar system is bound to be virtually worthless for resale.
Am I likely to be in the house at that time? Maybe not. But the lease is transferable to a new owner, and because there are no monthly lease payments, the new owner will be happy to have a dramatically reduced electric bill at no cost to him for the remainder of the lease and that should enhance the value of my home.
So pay an extra $9K up front for the privilege of eventually owning a twenty year old solar PV system? Explain to me again why I should buy.
Ian… the thing is… that your $5 per watt system should only run you around $7000 installed. Not $38,000. And the installer here in the US is the one collecting your rebate. Not you. So they reap (wanted to use another word). The installer is collecting a rebate from our government based on a highly inflated cost. In otherwords, after the rebate is paid to this company…. based on the overinflated cost….. the company is making pure profit. They are making far more than the actual cost of the system BEFORE the lease game even begins! The cost for the new thin film technology (THIS IS NOT THIN PANEL TECHNOLOGY), is down to around .25 per watt (25 cents). What you SHOULD be buying IS NOT the system you have looked into. What you SHOULD be buying/able to buy is the NEW technology “THIN FILM”. This is available (but only to the government, lare utility companies, and ONE (1) retailer here in the US. You unfortunately are not being offered the newest technology. And the answer would be “YES” you SHOULD buy (or be able to) a COMPLETE supply solar system for your home for $7,000 or less. Not a penny more and with no lease game. The battery technology is also here to do so without having a HUGE bank of batteries to store the energy.
Where do I sign up Cyberdolphin? I’m serious: please tell me the company in Phoenix who will install a turnkey 7.76 kW system for $7000 after rebate/tax credits. I’ll call them Monday.
Ian….depending on your roof, we can install systems in the high $3 range right now. Sharp, SMA….you name it. That put you $2.60-$2.80 per watt OOP with APS. We would be close to $10k.
I get soooo tired of everyone blaming the problems of the world on “bankers”, and it seems solar power is another place to bash. In case you people forgot, the terrorists tried and succeeded in killing many bankers (along with hosts of other people on 9/11), so I
suggest you join up with them and do some real good in the world, they seem to have figured out along with you that killing bankers is the only way to go.
In all seriousness, the solar lease is just one of many options. Of course financing anything is more expensive than buying it outright, that should be obvious. The solar lease drives a lower cost of financing by transferring the tax benefits and credits of solar installation to an investor who can use the benefits. And remember folks its not just the 30% tax credit they get, they also are allowed to take 5 Yr MACRS depreciation plus bonus depreciation (which you can not use if you buy the panels) as well as any interest expense deduction on debt used to finance the panels (which you can use too if you finance the panels using a home equity line of credit and itemized deductions). If you are a cash strapped consumer and want to go solar the first choice would probably be the home equity line, but the closing costs, high rates, limited equity and even more limited availability of the product make this a not so viable option right now. Which is why the lease makes sense.
In any scenario your actual savings are minimal, even if you own the panels (ie $20-$40 a month on avg). Solar power is not economically feasible, the only reason it sort of works is the huge incentives that the government allows (which are available to both individual consumers and corporations).
The fact that you can go solar and be cash flow positive (either buy, borrow or lease) is significant for folks that just want to do some good (this has not historically been the case). I am looking to install panels on my roof and I am going to explore all the options, but I can tell you I’m not doing it to get rich, I just want to be “greener”.
And as always your other option is to do nothing, and between leasing and nothing I think I’ll take leasing.
From the beginning of the article, even before the pros and cons were listed, I felt very dubious about this kind of scheme. I think the thing that got me was the 15 year loan. That’s a really long time to be “locked in” to a certain amount of monthly payments. Then, when I found out you don’t get to keep them, unless you buy them at the end of the 15 years, it made me think “what a waste of money!” I think someone else in the comments also brought up the question of what happens if new, better technology comes up? This is a really important consideration – in the world of technology, 15 years is a long time.
Unfortunately, the author of this article doesn’t have some of his facts straight. If you currently have service for your electricity with a provider and elect to have a PV system installed (lease or purchase), you’re not removing yourself from the utility grid. When the power goes off, your power will go off too.
With respect to HOA’s not allowing PV, I suggest you read the solar rights act.
And for all the negative comments about leases, it’s far better to lease than do nothing at all! You fail to mention the amount of carbon reduction benefits over the life of the system, let alone the reduction in blackout/brownout risk we all face when utility grids are strained.
Hi Peter, thanks for your insights. I suppose the way it was written it can sound as if one would be going “off the grid” with solar lease but it was more of a figurative speech. You are indeed correct, you’d still be hooked to the grid, in fact selling energy back to PG&E when you have a surplus.
When it comes to HOAs, yes indeed the Solar Rights Act, prohibits “restrictions relating to solar energy systems contained in the governing documents of a common interest development” but its easier said than done, especially when you share a roof with other neighbors. It’s an interesting issue though, I’ll have to do more digging.
I respectfully disagree with your last point though. It is NOT better to “lease than do nothing at all” because you’re better off financing the solar system of your own (if you can’t buy it with cash) or conserving energy in other fashion. In my mind, solar leases are only acquired by people who do not take time to do proper homework.
With all due respect, I think you need to revisit your antipathy towards leasing especially focusing on the prepaid variety. I have recently signed a contract for such a lease from Sunpower using Sunpower panels through one of their local distributors. I get a complete 6.9 kW installation all for one payment of ~$6.7K. I get all the benefit of the electricity produced for the full 20 years of the lease. They also will make any system repairs including inverter over that time period. There are no monthly payments, no escalator clauses. If I sell the house, the new owner can take over the lease or I can purchase the system for a pre-determined price. After 20 years, I can purchase the system for fair market value or instruct the lessor to remove the system and repair the roof penetrations at no cost to me. According to the contract, they have ten days in which to do so or else the ownership of the system passes in full to me.
There is one more important feature: in year 7, I have a one time contractual opportunity to purchase the system for $850. I then own it but no longer have the service/repairs. Manufacturers’ warranties would be transferred.
There is simply no way that I would be better off purchasing this system which would have an after-incentive/tax breaks cost of around $15K.
Hi Ian,
Thanks for your comment. This sounds like a better program than what the ones I had previously researched. Perhaps the advantages or disadvantages of a solar lease depends on the company providing the service.
Couple of questions. 1. What is the pre-determined price to purchase the system if you have to sell the house prior to the 20 year lease is over? 2. Did you really mean you can buy the system for $850 after 7 years? Sounds too good to be true.
Hi Tadas,
The predetermined price varies depending on the year. As I said, in year seven the price is lowest at $850. Also year seven is the only year you can opt to purchase the system without a house sale. Before and after year seven, if you sell your home AND the buyer does not want to agree to the lease terms (I don’t know why they wouldn’t with a prepaid lease), then you have a purchase price that varies by year. Year one the price is $27K which drops rapidly to the $850 in year seven. After year seven, the price increases on a fairly straight line to about $5800 in year 20. Presumably, they want to recoup their maintenance costs if you end the lease early. Now you certainly wouldn’t want to do the house sale with buyout during the first few years. So if there’s a chance you’d be moving in that timeframe, you might want to forgo the lease and probably even an outright purchase. In fact, that year seven is a real incentive to purchase and I think that’s the intent as the lessor has already made their profit and by getting rid of the system, eliminates the long term maintenance liability. After year 20, the question becomes what is the fair market value? Might it be around $6K (year 20 value)? Maybe, maybe not but you can always have them remove the system, something I’m sure they won’t really want to do. It might actually be a reasonable thing to do as there may be far better systems by that time not to mention that it may be an appropriate time for the roof to be replaced.
It may sound too good to be true until you realize that in addition to all the usual incentives that an individual purchaser gets, the lessor gets MACRS depreciation writeoff within a few years. That is based on the full purchase price of $30K and so can amount to perhaps $10K or more in the right tax circumstances.
As for me, I’m not sure what I’ll do come year seven but at least I have some time to think about it.
Who did you make this agreement with, Ian? I just got a quote for Sun Power panels from Sun Logic and the prepaid lease was $11253 for a 3220 kwh system. It sounds like you got a good deal.
Hi Carol. Not sure where you are located but a lot depends on what rebates and incentives there are. Here in Phoenix, my prepaid lease payment reflects an APS utility rebate of $6,900 and a state tax credit of $1,000. Then there is the federal incentive for the lessor of 30%. The latter ends at the end of December or at least changes into something a bit less generous. In any event, Perfect Power is the local firm I went with. They are one of two elite Sunpower dealers in the area.
I forgot to mention that APS has run out of rebate funds for this year. I suspect their rebates next year won’t be as generous. I may have hit the sweet spot in timing.
Wheeew!
I’d say there more anger and speculation here, than definitive answers. And while speculation is great, as it leads to a distillation of reasoning, it nevertheless lacks critical thinking on how to resolve the debate. That is, “how are we going to argue about the pros and cons of solar leases?
Although this blog debate is great for getting varied perspectives from many, I left feeling more confused than ever, but even more determined on how to “critically debate” the solar lease issue.
What seems to be missing from the debate are the opinions of impartial EXPERTS! That is, Energy Consultants who do nothing but scrutinize energy production and finance schemes; it’s their job! Yet, I could not detect a single commentary by an identified expert energy consultant or a certified accountant, except for one lone banker, who seemed to be the ONLY outside voice of reason in taking a subjective look at the debate from a macro view called simple accounting finance. Still, not a peep about cash-flow, internal rate of return, return on investment, or payback had been spoken. Folks, let’s settle this. It’s not rocket science; it’ called “math”. Is there third party verifier in the house?
Questions I’d Ask The Solar PV Universe About Vetting True Value:
Cash:
Can you make more with your money in an investment of any kind? Albeit, some people may see solar PV as in investment if it saves money off the monthly utility bill, but at what percent? For example, what if you have an astute investment adviser who can make your money 5%, 6%, 7% or more in a well managed investment? I have a friend who is a bond fund manager and he’s making his clients 10%, 15% to 20% in his investment vehicles. Don’t ask me his name. (wink).
Are you prepared to part with the lost opportunity of your cold hard cash to use for other things, including emergency living reserves? What is holding on to your cash reserves “intrinsically” worth to you?
However, cash may be the cheapest way to go when one considers that a “no money down” solar lease will cost money. But how do you estimate this? For example, what is the actual percentage a consumer is paying to lease the solar panels calculated over the lifetime of the lease? Is it 7%, 8%, 9%? Ask your accountant or an energy consultant to calculate the scenarios over the lifetime of the lease.
Lease:
A “pre-paid” lease will cost money as well, like a down payment on any durable good, but it will cost LESS, (percentage) than a no money down lease? As an aside, this is why auto leases, home leases, or any type of lease instrument is widely popular; people cannot afford to, or choose not to pay cash. It’s here, I’d like to think we’re all adult enough to understand that we live in a free market. As consumers, we will pay what the market asks until our behavior changes the current trend.
Conventional Loan or Balloon:
No matter from which lender you borrow the money, you’ll be on the hook to pay an interest rate and agree to a set of terms and conditions tied to that loan instrument. Additionally, you’ll have debt financing tied to your name, which may hinder your ability to make other investments that are of higher priority, now or later. So what interest rate can you obtain? Is the rate lower than what your solar equipment will save you on your monthly utility bill, including eventually owning the equipment to produce free energy once it’s paid off? Or, is the interest rate MORE than what you’ll save on your utility bill and what free energy you’ll produce after you pay for the equipment? What if you run into problems down the road, and you simply can’t pay for the solar loan? Do you have the credit score and the documented income to qualify for a loan?
PACE Program:
“Property Assessed Clean Energy” . Where available, this is a great way to finance a solar investment, with no documented income. But there’s no free lunch here either, as the average percentage to finance through a PACE-like program is 7%. And really, this is okay when you stop to think about it. I mean, do we really expect to get 0% financing on ANY of these funding schemes?
Your Personal Values:
When purchasing solar equipment, the good news is that it’s not MANDATORY; it’s FREE WILL. So until the market volunteers to lower prices through consumer behavior, research and development and perpetuated government subsidies, it looks as if we are all working of our own volition to buy, or cry, or stay with our current utility provider.
Energy Consultants and Accountants:
“An ounce of prevention is worth a pound of cure”. Avoid solar lease pitfalls. Smart buyers always get their major investments third party verified by an objective professional. Why anyone would go with what ONE equipment supplier or leasing company recommends; this kind of trust indicates a BIG red flag to the indifference of good old fashioned due diligence.
Bottom line…. leases are a “bad” thing. Notice as the rebates dry up….. we shall begin to see the manufacturers go bankrupt. Predicted precisely. Even after having received $500,000,000.00 from our beloved President last year. Shame on the fools of this country. It’s because of our gullibility that shams like this even exist. Those of you in the industry still trying to defend this shameful exploitation of ignorant folks….. shame on you. By the way…. since this post began…. check out the cost to manufacture “thin FILM” technology. Not to be mistaken for “thin PANEL” technology (seems those sales people in the industry continue to confuse the 2…. almost as if they are completely in the dark with the differences). Uber cheap…. but you and I STILL cannot purchase the technology for our own personal use. We are well below GRID PARITY now on cost…. Demand that the public is able to have access to the new technology. All homes could be using solar on the cheap. Really cheap. And certainly without a lease. The savings would pay for the solars within just a few years now.
PV technology is ancient. Thin film is the future. And manufactured at .10 – .20 per watt. Compare that to the old technology. Also factor in paying for the same cost of installation so the installation guys don’t starve…. and you are still looking at like $6,000 per home to have installed.
Short answer:
4.3 kW SolarCity system, 20 years, one time lease payment of $4,116 in Denver, CO.
Longer answer:
As an engineer I did like all good little engineers and put together a spreadsheet taking into account all manner of initial and future costs of buying vs. leasing for the available technologies. SolarCity won hands down. No one was more surprised / resistant than me. Even with a no interest loan lined up for a purchased system I still couldn’t make the math work for buying.
I’m also a licensed general contractor. The crew that installed my system was on time, professional, and had well above average workmanship (in spite of weather being less than perfect during the install). If these guys were my electricians, plumbers, etc I’d gladly hire them again. That’s actually saying something as I expect a lot from my subs, as I’m sure they’d gladly tell you.
Although we don’t plan on selling anytime soon I did try to consider what would happen if we did have to sell the house before the end of the lease. I came to the conclusion that no one in their right mind wouldn’t just assume this lease, and if they didn’t see the logic in it I would be very unlikely to enter into a contract with them anyway. This factor will most likely vary for people depending on what the typical buyer would be for the home.
For information’s sake, I would have gone with a bigger system but had limited available area.
So, for me, in February of 2011, in Denver, CO, SolarCity was the hands down winner for putting solar on my house.
Results will vary….
Hi Rick, thank you for your comment and insights, always good to hear from an engineer. Granted, however, how “happy” your comment is and the professional use of SEO techniques (use of keywords) I have to advise my readers here to take your enthusiasm with a tiny grain of sea salt.
As far as your reasoning about not entering into a contract with someone who does not want a lease… As a Realtor I would only add that you would be exponentially limiting your potential buyer base. Bay Area is a bit different than the rest of the country but generally speaking, in this market, a seller will be happy to get any offer, let a alone the one they are truly happy with.
I’d have to advise your readers to take your less than subtle calling of me a liar with a grain of salt. I have no ties to the solar industry other than the panels above my head. Would my Denver contractors license # or my company tax ID put your worries at ease?
And as far as my reasoning when it comes to real estate, I think I’m right on. I flip houses for a living. Which in my experience gives me a much better understanding of the average buyer than most real estate agents (which I’m sure we can agree is a profession thick with silly people). Please expand on why my no cost to the buyer leased solar panels would exponentially limit my potential buyer base?
PS: “Bay Area is a bit different than the rest of the country”? Seriously? I would counter that it’s vastly different than almost all of the the country in regards to real estate. I haven’t had any problems selling any projects over the last few years. Almost positive none of them went over 60 days on the market. Location, location, location…
Rick, I wrote a “grain of salt” (to accept it but to maintain a degree of skepticism about its truth), not a liar.
Given how enthusiastic your comment was, mentioning a city and a company name, perhaps you can see my suspicion was not unwarranted. As far as the buyer base, not everyone will want to take over a lease with the house. After all, a lease is a liability, not an asset. I meant Bay Area is different that the re-sale activity is better here because of the demand so you’d be more likely to find the right buyer for it. I still maintain that fundamentally, lease is by far an inferior option to simply buying the solar panels, or at least financing them.