What Solar Companies Don't Tell You

Solar leasing has become a popular option for consumers over the last several years with tens of thousands of homeowners responding to ‘$0 down solar’ and ‘free installation’ offers. What’s not to like? It’s free and it saves you money, but have you ever wondered what solar companies don't tell you? Solar leasing sales pitches generally expound upon several virtues:

  1. Production guarantees get you paid for an under-producing system.
  2. Free maintenance – it’s the leasing company’s solar system so it’s their problem if anything happens, not matter what “we got you covered”
  3. “Easy Transfer” in the event you sell your home. “Everyone loves solar!”
  4. Guaranteed savings – We charge less than the utility so you’re guaranteed to save money
  5. Lock in your rate – Save even more as time goes on because rates always go up
  6. ‘Switch and Save’ – We’re your new utility and our goal is to charge you less
  7. The solar equipment you’re getting ‘doesn’t matter’ since we own it, it’s our problem
  8. Walk away at the end of the term

here is our guide about what solar companies don't tell youDoes solar leasing make financial sense?

But are there risks to leasing solar panels? If so, what are they? Before you enter into a twenty year agreement with someone that knocks on your door, solicits you at a home improvement store, or ‘robo’ dials you nonstop for weeks on end, wouldn’t you like to know of any downstream risks associated with your decision to lease a solar system?

What if highly motivated and well compensated salespeople will share these risks with you? Will they still be around three years from now if you encounter a problem? What has your experience been with home improvement salespeople in the past?

With that, here are 10 things solar leasing companies won’t tell you in their sales pitch:

10 solar leasing company pitches

  1. Their production guarantee may require some participation on your part (like cleaning your own solar panels or keeping your solar monitoring hooked up) or it’s null and void. Read this portion of your contract carefully or you may be in for a rude awakening if your solar panels underperform over time.
  2. “Free maintenance” items may be specifically excluded (like panel cleaning or routine check-ups) and may require you to contact the leasing company if maintenance is needed.
  3. In MOST cases, solar roof warranties do not last the length of the agreement. Some solar roof warranties are as little as 1 year (and within three inches of the roof penetration). Read and understand what happens (and who’s responsible) if your roof starts leaking five years from now. THIS IS PROBABLY THE MOST IMPORTANT ITEM ON THIS LIST.
  4. Transferring your solar lease may not be as easy as represented by your salesman. What if, for example, you’ve received a cash offer from a foreign national (say from Canada or China) who does not have a FICO score? This would likely require you to buy out the remaining lease in order to sell your home. What if the buyer of your home is averse to leasing and won’t even consider leasing an automobile? How might this effect your home sale? What other complications might exist down the road if you need to sell your home?
  5. What if the person buying your home has a different energy profile than you? Let’s say you are a huge consumer of energy (electric car, three kids, love AC, etc) and the buyer of your home isn’t (a single guy who travels for work all the time and is rarely home). There’s a very high likelihood that this guy won’t eagerly assume the $300 solar lease payment on your grossly oversized (from his perspective) solar system. Different story if the solar just ‘comes with the house’. He’ll probably rush out and buy a Model S P85.
  6. No guaranteed savings. Production is. Please, read that again. What this means is that if your consumption habits change (and they often do) so will any presumed savings. Also, what if your local utility restructures their rates like the rates proposed in California? Have you signed up for a lease payment and escalator that may put you on the wrong side of this restructuring? In my experience, this is rarely the case with ownership since you’re not sharing the benefits of solar with a middleman.
  7. Locking in your rate isn’t always as attractive as the salesman makes it sound. Here are some questions you must ask when offered a ‘locked in’ solar lease payment:
    1. Is there an annual escalator on my monthly payment?
    2. If so, what is it?
    3. What does may payment look like in 5, 10, 20 years?
    4. Is there a residual ‘balloon’ payment lying in wait at the end of the term? Has this artificially lowered my payments in the short term? Remember the mortgage crisis?
    5. What happens after the solar lease term ends? What is the system's value?
    6. Did utility rate structures change? Could I end up ‘upside down’ in my solar lease?
  8. We’re your new utility! Let me ask you, when you embarked upon your mission to save money on your electric bill, were you looking for another utility bill to pay or did you wish to become your own utility? Is it better to deal with one utility or two? Becoming your own utility gives you larger savings and increased flexibility now and in the years ahead. All of the solar benefits accrue to you when you own the solar panels.
  9. Why do you care which solar panels and inverters are selected for your home? This one is easy, it’s a sales ploy. Neutralizing the equipment discussion eliminates a boatload of selling and speeds the sales process. Solar leasing salespeople are taught to ‘focus on savings not equipment’ since this leads to more 'one call' closes. I’ll put it simply – you should care, an awful lot, because someday you or a future buyer of your home will own this equipment. Quality of product and bankability of the manufacturer over the long term (25 years+) matters! Don’t make this common mistake.
  10. When you sell a home with a solar system you own or financed traditionally, the real estate transaction is not needlessly complicated by the solar panels. They’re just another home improvement that adds value. When you introduce a solar lease into the mix, you are rolling the dice. If there’s a loser in the deal, it’s quite likely to be the seller. Don’t let this be you. If you don't believe me, ask a realtor friend about her feelings concerning solar leases.
  11. Check your lease documents carefully to see if you are able to add solar panels to the system later or incorporate new technology (like Tesla’s home battery packs). Some lease documents do not allow these improvements to be added later. Which, potentially leads to the list technology obsolescence as another risk factor to consider.
  12. Lastly, read what Fannie Mae and Freddie Mac, as well as, The National Association of Real Estate Appraisers have to say about how solar leases impact the value of your home or your ability to refinance your mortgage. No spoilers, here. This homework assignment is for you alone.

Become a solar lease expert

While this blog may seem unfair to solar leases, I’ve written it because the way in which these financial instruments are being represented in the marketplace is biased toward the benefits alone and there are a number of items solar companies don't tell you. Let me be clear, leasing solar panels (or employing its first cousin – the PPA) to reduce your electric bills does make sense for some people. I’ll cover who leasing makes sense for in my next blog.

The purpose of this article is to provide the reader with perspective on some of the downsides to leasing home improvements, such as solar panels, over the long term. After all, you’re entering into a marriage with the solar leasing company – one that could last 20 years or longer – and before you put ink to paper, you need to be able to answer this simple question: After the honeymoon is over, who’s left holding the bag? I hope that this guide helps you to do just that and encourages you to explore all of your options.