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.
Here's how to build a solar panel for under $200!
And if you’re strapped on cash, can not afford a down payment and that “0% down” sounds so appealing then it may be a good idea to avoid this dismal deal altogether. We’ve seen this bank trap before, haven’t we?
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 [...]
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 +.