For Whom Does Solar Leasing Make Sense?

Solar Leasing
Solar leasing can make sense for certain consumers.

In my last article, I may have seemed unwaveringly against solar leasing and ppa’s, but nothing could be further from the truth. Like other financing tools solar leasing has its place in the home improvement industry along with ‘same as cash’ financing, HELOCs (home equity lines of credit), and collateralized seconds. My contention is that solar leasing companies, driven by shareholder returns and fast growth, have made solar leasing the ‘go to’ financing program for their sales teams. The decision to lead with leases is due to a certain ‘salability’ that results in faster transaction times. This industry trend has also created an information bias that emphasizes one side of the story – the benefits of solar leases.

Click here to read my blog 12 Things Solar Leasing Companies Won’t Tell You to learn more about potential downstream risks associated with solar leasing programs.

The purpose of this piece is to clarify who benefits the most (other than the solar leasing companies) from participating in these financial instruments.

Those who benefit most from solar leasing include:

  1. Homeowners who plan to be in their homes at least five years
  2. Those who do not qualify for the federal tax credit but have other financing sources available that allow them to pre-pay the solar lease in a lump sum.
  3. Individuals on fixed or low incomes who don’t pay enough in federal income taxes to qualify for the tax credit AND who plan to be in their homes a long time.
  4. Foreign Nationals who have the ability to ‘pre-pay’ their leases in a lump sum to get around FICO requirements (these folks won’t qualify for a monthly payment).
  5. Consumers who read their solar lease contract fully and carefully and are able to confirm that what the solar salesman sold them is true and accurate.
  6. Consumers who cannot monetize the Federal Tax Credit – low income, fixed income, foreign nationals
  7. Homeowners who plan to be in their homes for the rest of their lives – or at least six years
  8. Homeowners who will never need to add on to their solar energy systems
  9. Homeowners who lock in a fixed payment (no escalators, at or below today’s Tier 2 pricing) and also meet the criteria above

Consider solar leasing carefully if:

  1. You believe your electricity consumption habits might change in the future. Some examples of common consumption enhancers are:
  2. You think Tesla’s new home battery system is super cool and would like to get one someday
  3. You are a serial mover and like to bounce from house to house
  4. You have to sell your home due to health, advanced age, or other issues
  5. You pay lots of federal income taxes – why not keep this benefit for yourself?
  6. There’s a chance you may be relocated for a job within the next five years that may force a home sale
  7. An aging parent may be moving in with you (or out)
  8. An adult children moving back in with you after college (or out after High School)
  9. You’re building a home addition, in ground pool, etc
  10. You’re buying an electric car (Tesla, Leaf, Chevy Volt, etc)
  11. You’re installing a kiln in your garage
  12. You’re completing energy efficiency upgrades (which should always be completed prior to going solar, but often occur later)
  13. You may suffer from ‘we have solar’ syndrome, and you:
  • Stop turning off unused lights and electronics
  • Run your air conditioner 24/7 all summer long
  • Take up arc welding as a weekend hobby because of all your ‘free electricity from the sun’

To conclude, solar leasing and ppa’s are not inherently bad financing options for homeowners, but they do require significantly more research and consideration than most homeowners are willing to invest. This makes uneducated homeowners easy marks for solar telemarketers and door knockers.

If you’ve done your homework and proceeded with a solar lease, great! It’ll likely work out very well for you over the years to come. If you’ve signed a lease with someone over the phone who you’ve never met in person because it ‘sounded good’, you could be in for some unpleasant surprises in the future.

Like all long term contracts, solar leases require due diligence on the part of homeowners. Know what you’re signing up for. Today, there are literally dozens of ways to finance solar panels with little or no money out of pocket. Look around and consider all your options before rushing into a 20 year contract with any company regardless of the product, service, or savings they are promising.

Best of luck with financing your solar system.

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