Five Reasons Solar Leases Fell Out of Favor

When solar leases first arrived on the scene, they were an exciting new way for people to go solar without the usual upfront cost. In fact, they were so popular that according to a report by GTM Research, 72% of residential solar systems in the U.S. in 2014 were owned by a third party. Like leasing a car, solar leases allowed homeowners to get their hands on the gear without a big initial outlay of cash and without any burdensome commitment to maintaining gear. In recent years, however, the popularity of the solar lease has been declining in favor of other methods. Here’s why:

  • Dropping costs. As the price of solar systems has dropped precipitously over the years, owning a solar system just became a more approachable prospect for more homeowners — particularly in states where incentives and rebates mean systems can pay for themselves in a shorter period of time. As little as five to ten years ago, owning a rooftop solar system used to cost as much as a luxury car in some states, but in many areas systems are now more in the price range of an economy car. When you consider that unlike a car, solar actually starts to pay for itself  t a certain point, the appeal gets even greater.
  • Selling a house becomes more complicated. Prospective buyers are often delighted to find that a home for sale comes with an already bought-and-paid-for solar system, both because the savings are instant and because it adds value to the home. If the panels are leased, however, it can actually encumber the real estate selling process to some degree because prospective buyers may find either that the equipment is obsolete or the terms from the provider just aren’t attractive enough. While homes with purchased solar systems tend to sell faster, those with leased systems do not.
  • It’s not really energy independence. When you go solar through a leasing model, the company leasing you the equipment is the one who owns all that power your rooftop is generating, so although you do typically see a reduction in your monthly power bill, you still have to pay anywhere between 70 to 80 percent of your current electricity bill to the solar leasing company. Basically, the leasing company becomes your utility provider. They’re in control of the terms, the panels… everything.

  • The rise of the PPA. The PPA or “Power Purchase Agreement” is a way of going solar that was once only available to commercial entities, but is now becoming more widely available to homeowners in many states as well. The appeal of the PPA is that instead of purchasing panels, you’re actually buying the energy those panels generate, but you’re buying that power at today’s rates. The company that forms the PPA with you maintains the panels, so this is kind of a “best of both worlds” model. You avoid work of maintaining a system while locking in a low price for power for the life of the system.
  • Banks have warmed up to solar. As a home improvement that both pays for itself and adds to the overall value of the home, banks have developed solar loan programs over the last ten to fifteen years that make it easier for homeowners to purchase systems outright versus leasing them. Basically, banks saw how popular solar leasing had become and decided to compete directly with those companies for the payments homeowners were making. Homeowners win because the terms are often more favorable at banks, owing to the financial institution’s more diverse revenue streams and deeper finance roots.

Of course, there is no one-size-fits-all for people looking to go solar, and solar leasing can still be a viable way to do it. We recommend looking at several different models when you’re making the decision and evaluating how each method would affect the financials, both short term and long term. If you have questions or need help, please feel free to call 1-650-999-9900 and one of our PowerScout Concierges can help you.