The 7 Hidden Costs of Leasing Solar Panels in Massachusetts


Earlier this month I went to a local meeting of a grassroots environmental group.  One of the people I met there had just got solar panels installed, just like me, and we quickly bonded.  We both have 5 kW systems that supply a little more than half our electricity needs.  And like me, he was very proud of his solar panels and the money he was saving every month off his electricity bill.  But whereas I took out a loan to purchase my system, he leased his and, to put it bluntly, he got ripped off. 

Both of us originally had received a postcard from Sungevity out of California extolling the benefits of installing solar panels and both of us excitedly called to request an estimate.  But whereas he signed a lease with them without a lot of research, I investigated further into the true costs and benefits of leasing versus buying.

Here are 7 of the hidden costs of leasing solar panels that I discovered:

1)      Double the cost of electricity.  When you lease your solar panels, your lease “payment” is explained this way by the leasing company: a 5 kW system will generate about $80 of electricity per month.  The leasing company will “sell” you this electricity for only $40 per month.  So you’re saving $40 a month, right?  But where does the other $40 go?  You guessed it – into the leasing company’s bottom line.

2)      Missing out on the rebates.  Massachusetts has devised several incentives to make solar panels an affordable investment and one of those is the Commonwealth Solar Rebate.  This rebate is currently worth about $2,000 off your standard 5 kW system, doubling to $4,000 for moderate home size or income.  When you lease your panels, this taxpayer-financed money goes directly to the leasing company and lowers their costs instead of your own.

3)      Missing out of the tax credits.  There are both federal and state tax credits available for renewable energy purchases and those include solar panels.  While the state tax credit is capped at $1,000, the federal tax credit is quite generous at 30%.  Together they combine for about $7,500 in savings when you purchase a 5 kW solar panel system.

4)      It is all about the SRECs.  If you were able to see the leasing company’s business plan, you would see the biggest source of their income is from selling the SRECs generated by your solar panels.  If it were not for the SRECs, the leasing companies would not be in business.  Each MWh your system generates is worth 1 SREC.  A 5 kW system should generate between 5 and 6 MWh annually and those SRECs can be sold for between $300 and $600. Conservatively, this is worth $20,000 over the next 10 years.

5)      Increased home value.  Any home improvement you make that decreases your energy costs will increase the value of your home by an amount equal to how much it saves you over a 20-year period.  Since a 5 kW solar panel system will save your about $1,000 annually, it should boost your home’s resale value by about $20,000.

6)      Long-term leasing agreements.  What happens to the solar panels if you want to sell your house before the end of the lease?  While some companies allow you to terminate the lease in such a situation, others require you to transfer it to the new owners.  And while some potential buyers would not mind inheriting a questionable lease, I think many would look elsewhere.

7)      Maintenance costs.  Part of the leasing company’s explanation for the monthly leasing fee is coverage for all maintenance for the term of the lease.  What they do not tell you is that solar panels require no maintenance.  They have no moving parts to wear out and need nothing more than an occasional squirt with a hose.  Plus, all the hardware has 20-year warranties, so even in the unlikely event you do have problems, everything is covered.

The state of Massachusetts has gone to great lengths to make solar energy a profitable investment for its residents.  But the big California-based solar leasing companies are advertising heavily and before you can say “no money down” are scooping up all that incentive money.  Please investigate your options and don’t lock yourself into a long-term lease offering you only a small fraction of the money you could be earning, a mistake my friend will be regretting for years to come.

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22 thoughts on “The 7 Hidden Costs of Leasing Solar Panels in Massachusetts

  1. Well done. There’s money to be made with solar in MA. If the lessee is not making it then the lessor is. Who would give up their whole roof for a 20 year period to save $120 a year (average net savings between electric bill savings and added cost of a lease payment) and provide a tool to allow the leasing company to make an exorbitant amount of money. They don’t just make money off of the lessee’s SRECs, Lease Payments, Tax Credits, Rebates and 3% lease payment increase but also on Depreciation or Section 179 tax deductions. Very excessive. Purchase outright. You’ll be thankful that you did.

  2. There’s money to be made with solar in MA. If the lessee is not making it then the lessor is.

    Nicely put John. I don’t think people realize just how much money they can be making and settle for the miniscule amount the leasing companies give them.

  3. Okay, but . . . .

    #1 doesn’t always apply. You are talking about one particular kind of lease, I believe a PPA. There are several ways that leases can be structured. My with my lease, I am paying the total cost upfront (<$2,000 for a 9.6 kW system). No more fees ever (unless I need to move the system for roof repairs, etc.) So, no finance charges associated with taking out a loan. If I decide to move, since I owe nothing, it is simple to transfer the lease. And if for some reason the buyer doesn't want nearly 0 electric bills, the lease can be terminated for a fixed cost (depending on how many years after install).

    My power production is guaranteed and should give me about a 1 year break even. Any maintenance or repairs needed for the 20 years is covered.

    Now, don't get me wrong, I am not saying this is the best route for everyone. I think buying makes sense in some cases. #2,3, & 4 are part of what make leasing so affordable. #5 still applies even for leasing. Agree that in some cases #6 could be an issue, but less so if the lease cost is paid upfront. Agree almost completely on #7, my equipment is covered by the manufacturer for 25 years. But, I am in no hurry to climb up on my 45 degree roof 3 stories above the ground to replace a panel.

    • Thanx for commenting Brian! Yeah, my negatives are directed primarily at PPA leases. It sounds like by only paying $2,000 up front you’re saving a lot compared to a PPA, which would cost about $70 monthly for a system your size.

      But it sounds like you’re still leaving a lot of money on the table. Let’s run some numbers.

      You should be producing about $150 monthly in electricity, right? So after 13 months or so, you’ll be paid off and will save about $1,800 annually, more as the cost of electricity rises with inflation. By year 10, you’re up about $16,000 (not counting the aforementioned inflation), which is nice!

      Now contrast that with purchasing. A system of your size would cost about $49,000 before tax credits and rebates and about $30,000 afterwards. You should produce about 11 SRECs each year which should conservatively net you $4,400 annually. Now add your $1,800 for an annual income of $6,200. The system will take about 5 years to payoff (some of our installers offers 0% loans) and by year 10, you would be up about $32,000, twice as much as leasing.

      The home value increase estimates for a prepaid lease like your own are tricky since the leasing company is going to come and remove the panels after 20 years. So by year 10, while purchased panels are worth $36,000, leased ones have used up half their value and are only worth $18,000.

      After 10 years, leased panels have net you $34,000 while purchased panels have net you twice as much at $68,000. And that ratio is only going to increase with time as the leased panels continue to lose their value and purchased panels continue generating SREC income.

      That said, I can completely understand if you don’t want to tie up your credit on such a system. But, if you can swing it financially, buying wins out over leasing.

      Thanx again for the comment Brian!

      • Gary – Agree, in the long run a homeowner should make/save more money by buying. But, that is all assuming that SRECs continue to exist and be worth something. By doing a lease, I am leaving any risk in the hands of the leasing company. I pay my money and am guaranteed to save X per year. We don’t necessarily plan to be in our house in 20 years. My thought is that many buyers might see the no worries aspect of a solar lease as a benefit.

        In the end, I just wanted to offer up a different viewpoint since I don’t think the buy/lease decision is quite as one-sided as the article made it seem.


        • That’s true. Massachusetts has only guaranteed the SRECs will be worth at least $285 for the next 10 years. Who knows what’s going to happen beyond that?

          BTW, I also meant to compare your lease with a PPA, which would show a monthly savings of only $80 for the life of the lease. So that would net about $1,000 annually and a total of about $10,000 after 10 years with an increased home value on year 10 of another $10,000 for a net of $20,000. Clearly this is the worst option.

          I understand where you’re coming from but my beef is with the big solar leasing companies’ emphasis on the intangibles, such as maintenance, insurance, repairs, monitoring, licensing, permits, rebates paperwork, etc. when in reality, none of these issue exist. My installer took care of all the setup requirements, the inverters have built-in monitoring, and there is only nominal maintenance. The only thing I had to do was send a letter to my insurance company letting them know I installed solar panels. Easy-peasy.

          I feel their approach is to scare uneducated customers into thinking that all this minor stuff amounts to something that is worth paying for, when in reality it isn’t.

          Thanx again for your viewpoint Brian! I appreciate it.

    • Brian F said “My with my lease, I am paying the total cost upfront (<$2,000 for a 9.6 kW system)."

      Unfortunately <$2,000 was absolutely not your "total cost upfront". You fell for the same gimmick that all solar lease victims fall for and that is that you also paid about $15,000 to $17,000 in the form of the 30% federal tax credit. That money would have gone into your pocket had you purchased your system at the solar leasing company's inflated prices instead. If you're in MA then you also paid about $4,000 in the form of the MA rebate. That money also would have gone into your pocket had you purchased a system instead. So what are we up to now? $2,000 + $15,000 + $4,000 = $21,000. Oh, and if you are in MA, I haven't even mentioned the SRECs yet. That's where you gave away a ton of money. And you don't even own an asset that will increase your home's value. In fact, just the opposite is true. Don't take my word for it. Search the Internet for the keywords "solar lease home sale" or anything like it and you'll find a growing number of people who are now complaining that they are having difficulty selling their homes with a solar lease attached to it. You would have been far better off with a $0 down, no fees, no collateral needed Lightstream solar loan that offers an interest rate as low as 4.99% or a $0 down FHA, no equity needed solar loan that offers tax deductible interest.

  4. Well with the recent decline in the value of SRECs, ownership is not so clear cut. In fact, the trend predicted for SRECs looks kind of bleak. ROI now can take up to 10 years…

    • While I agree that the recent plummet in Massachusetts SREC values is discouraging, my calculations are still showing a 5-year payback. The chart on my home page has been updated using the minimum SREC value of $285 guaranteed in the last chance auction and that still yields an annual income of $1,700 from a 5 kW system.

  5. I have two houses with solar panels, one is owned and the other is a PPA. Maintenance on the owned system would have been thousands of dollars in the second year except that the installer did me a favor when a squirrel ate the wires under two panels and shorted out two converters in the process. Animal damage isn’t covered under the warranty, but the installer “forgot” to tell the manufacturer that the problem was caused by a squirrel. One panel was repairable, the other was replaced at cost, and the converters were covered under warranty. Otherwise it could have been as much as $15,000! As a real estate agent I can tell you that in New Jersey, where we have A LOT more installations than MA, there is still NO value established for solar panels as of this time because there are so few “comps” of sold houses to base any value on, so to say that they increase home values by any amount can not be supported by the facts. In fact, my “owned” house was not given any additional value by two appraisers. I strongly disagree with not giving any value for solar panels, I think it should be valued like an income apartment would be, but the appraisers don’t see it that way. It WILL make a home more saleable, but not more valuable. So you can get a quicker sale, but not more money. No lease company in their right mind will EVER take the panels off the roof unless you ask them to. They have virtually no value to anyone due to advances in technology which makes them outdated as soon as they go up. There is NO secondary market for used panels either, so there is no one to sell them to even if a company was crazy enough to spend the money to remove them. Lastly, SRECs have been going down in value (in NJ they were as high as $600 and as low as $80) currently (as of Nov 2013) they are about $130 in NJ and average about $210 in MA so SREC income can’t be counted on. Additionally, you don’t take into account the time value of money. If I give the solar company $25,000 for an install, then I can’t use that money to generate income, but if I get a lease that doesn’t require any money out of pocket, (in exchange for just the savings on the monthly electric bill) I can invest that $25,000 and I average 20% per year ROI (or $5,000) and I still have the money if I need it for anything. I’m not saying any particular way is best in all cases, but it is a little more complicated than you show it to be. Personally, I got back all of my investment in my owned system in the first 5 years, then sold the house 2 years later with no added value for the panels, but I’m fine with that. In my PPA house, due mostly to the drop in SREC values, I should break even in about 9 years. All in all, I think you have a great site, with excellent information and I am grateful for your information since things in MA are different than in NJ. I think anyone who is interested should use your site to see what the options are, and then talk to their accountant if they can’t figure it out on their own as to what is best for them.

    • Hey Reggie,

      I’m glad you like the site. And I’m also glad NJ could pave the way for solar in MA!

      You cover a lot of points and for the most part, I agree with them. I just had a couple clarifications.

      Regarding the home value, I refinanced over the summer and found that my appraiser gave zero additional value for my solar panels. There is a precedent for giving additional value, but you must use an appraiser that knows how to determine that value. And those appraisers are still a rare breed. However, I am hopeful that as solar becomes more widespread that this type of appraiser will become more in demand and more prevalent. Especially when the realtors realize that extra home value means extra money in their pocket when they make the sale.

      And luckily, the SREC market in MA is much more stable than NJ’s. They’ve built a price floor into the MA model and while the spot price can drop as low as $200, if you are patient you can sell them at or near the $285 floor.

      In any case, it’s always nice to hear someone else’s opinion, especially from other states that have more mature solar programs than ours.

      Thanx Reggie!


  6. As noted previously, not all companies financing options are similar. The nothing down PPA lease, as pointed out, is not going to save/make you much money over the lease term. It is a good option for those that don’t have the funds and want to reduce their carbon foot print, but for a money saving measure it’s not the best.

    My story is somewhat different than the ones, I have previously read here. I started my solar PV search in March 2012 after seeing a display in Home Depot. After receiving a quote with Ownership and PPA options from that vendor, I decided to contact numerous vendors and solicit bids. At that time I was really thinking ownership. But by the time I was done I received ~6 bids and lots of education on the different solar systems and the variety of financing options. The vendors ran from local solar installers to national companies.

    One bid stood out, both for their system configuration, US made panels with microinverters (some seasonal shade issues) and their bid price. For a 7.2kw 30 panel system the ownership option was $32,500 Gross. After Federal 30% ($9,750) and MA State incentives ($4,000 rebate/ $1000 income tax) the Net was $17,750. But more interesting I found that their upfront lease was $14,300 or $3,450 less and I would receive all the SREC proceeds.

    While I was planning on the ownership route, my curiosity was now focused on the lease. What were the PROs and CONs between ownership for this particular up front lease.

    Lease Pros vs. Ownership
    - $3450 less Net vs. waiting 6-12 months for rebates.
    - Wouldn’t have to liquidate $32,500 in equities and pay associated income tax.
    - SREC income remains like ownership.
    - Maintenance included for 20 years vs. 5-10 years.
    - No Homeowners Insurance policy increase vs. $175/year as quoted by my agent.
    - No Production reporting – Lease company completes.

    Lease Risks and there are some.
    - Lease company goes bankrupt and I would could lose the system or maybe required to pay my own maintenance – not likely- lease holder is a >$15BN annual revenues company. After 5-10 years the risk would be the same as ownership. And at 4 years I would have all my original costs back. So as long as it makes it to 5 ears I figured the gamble would be worth it.
    - Issues/fees related to home sales – Live on Cape Cod, don’t ever plan on selling/moving.
    - Deinstall after 20 years – while not in the contract. The company de-installing all these 20 years old leased systems at their labor and repair cost is unlikely.

    In the first year the system made 8800 kwh and due to some tree trimming it will more than likely be 9100+ for year 2. At current pace, breakeven is at just under 4 years with SREC conservatively at $250/kwh for 10 years. My current ROI is currently at 26%, excluding opportunity costs. But as electrical rates go up so to will the ROI.

    Before I realize why they could provide the lease for $3,450 less than the net ownership I definitely put this in the “to good to be true” category, but in learning as a business the lease company takes the depreciation on the $32,500 over 5 years, 50% in year 1 and the remaining in the next 4. Prior to 2012 companies could 100% depreciate the 20 year system in year 1. Which is unheard of for most capital assets. Conversely, claiming depreciation for a residential system is not available to a homeowner. This was the main reason they can offer at the reduce cost.

    So hopefully, I have provided enough detail to show that for some an upfront lease can provide as good if not better financial return as ownership depending on the details of the lease. Not all leases are the same. More importantly not all states are close to the same in the incentives that are available. While I did not personally receive the federal and state incentives this does directly impact the lease price. So in state with no incentives and very cheap electricity the payback will over 8-10 years in many cases, so solar on a financial basis is not very compelling. Solar is always compelling on an environmental basis.

    • That sounds like a great deal. How much are you paying/saving on your electricity bill? You’re buying your electricity from the leasing company, right?


  7. It’s a prepaid upfront lease not a PPA. I don’t and won’t have any additional payments to the lease company or an electric bill to the lease company. Haven’t had a balance due with the electric company since they went on the roof.

    I could have probably got away with a smaller system, but with the SRECs it did not make sense to me. For year 1 the PV system produced 139% of my usage. Year 2 is currently running at 125%, but that will go up shorty, seeing how with a 42 degree roof, Mar/April/May are my strongest months, I usually produce a surplus every month with the exception Dec/Jan, which dip into the credit balance. I am now looking at either getting a high efficiency Daikin mini-split AC/heating unit or an electric car to use the surplus. Offsetting any fuel costs is my next money saver not to mention the cost is locked in. No inflation or seasonal price swings. One I hit payback breakeven all the electricity is free.

    Additionally, in the last 2 years I have significantly reduced my consumption. In conjunction with having solar installed I had an energy audit, as required to receive the state grants the lease company ensured I did it, and it identified some high energy items. The items all people can look at to reduce energy consumption are refrigerator, dehumidifier, TV, desktop computer, water coolers. Most of these items that are over 5 years old are using 1.5 to 5 times the electricity of currently available Energy Star models. For example, you can get a 70″ TV that uses 80-100watts vs. and old 60″ projection that used 350-500watts. Because of this the new 70″ isn’t as expensive as you may think. An 80w TV costs $35/yr vs.$220yr for 500w, based on 6hr/day @ $.20/kwh. Compare products energy consumption, not all energy star produce are created equally. Other items such as the water cooler, I just eliminated. The added convenience was not worth the power it consumed. I keep the water in the fridge.

    I will say I am a lot more aware of my energy consumption now. I don’t just shop price and features. The energy efficiency of an item is a determining factor. I am thinking more in terms of the total cost; purchase price and electricity. Also, I enabled auto hbernate for desktop PCs not in use and tend to use my laptop more than the desktop. Shut the lights off more. Speaking of light bulbs, when you think of the total cost of LED and CFL bulbs are not as expensive as one may think. I purchased smart power strips to reduce vampire loads. Most recently I pause when picking up replacement 4w nitelite bulbs and replaced it with a 0.2w LED night light. 20 times less power and I will never have to replace that bulb again. One may say I am spending more, but many of the efficiency improvement costs I fund with SREC money and really through their savings the new items pay for themselves.

    I am all about green products and solutions and while doing well for the environment is great and common sense, personally I hear green more in terms of efficiency, waste reduction, and green cash savings. And from a marketing plan perspective answering the question “what in it for me?” works better than guilt. Its a fact of life, greed usually always trumps guilt.

    Let me know if you have any additional questions.

  8. Nothing that I haven’t already point out.

    As I mentioned, I was originally in the ownership camp, but the lease contract I was presented financially had the best numbers at the time and the hardware I preferred for my environment.

    And as with most technology, after 6-12 months you will find a better price with more features and ive you a little bit of buyer remorse, but if your waiting for the best hardware and best deal you’ll be waiting forever.

    Paticularly with solar in Massachusetts, the incentives will not last forever… I don’t think we’ll see $545 SRECs again. I would put Solar PV in Mass as an exception to the “too good to be true” rule. And if you wait to long you’ll be in the “snooze you lose” group.

  9. I appreciate your information. You’ve obviously done a lot of research, but I have to say, I love my leased solar from NRG. Of course they’re making money by leasing this to me. I don’t think there’s anything wrong with that. What matters to me is that I’m saving money. And I’m going to save more money every year while everyone else’s electric bills go up and up.

    If I had $49K to buy my own system, sure it might have been a different story. I don’t know too many middle-class Americans with that kind of disposable income to invest in something with such a long pay-back time.

    My annual savings aren’t huge, but it certainly helps and it was an affordable way for me to cut back on my fossil fuel use.

    • Hey Bob!

      Yeah, I’ve met quite a few people that lease and they seem very happy with both their savings and being able to help the environment. Although a few of them have confessed that they wish they had visited my site before they decided to lease. I only paid $11K for my system after rebates and tax credits and it’s got a 4-year payback. Not nearly as painful as I would’ve thought!


  10. Question for the folks hear – I’m planning to retire in 4 years. I downsized a few years back and purchased a modest 1400 sq ft ranch for retirement and still carry a mortgage on my home, although otherwise debt free. I prefer to keep my financial assets intact due to retirement which is why I’m looking at leasing. I have a south facing roof over a 50×30 ranch home. There are no obstructive trees shading my roof. Because I have such clean access to the sun, solar is a no-brainer for me. I like the idea of reducing my electric costs but not by cashing out my meager retirement. I’m a single woman and expect to live 30+ years in my retirement home. I’m open for advice on lease arrangements anyone may know of that would work for me. I’ve read quite a bit, but feel I still need input/guidance before making the move to request quotes. I appreciate your comments…

    • Hey Shirley!

      Just make sure to compare some estimates for purchasing solar along with leasing. Many installers have low-interest financing so you don’t need to empty your nest egg to buy. Even the Commonwealth of Mass. is going to be releasing its own 3% solar financing program soon. I think you’ll find that you’ll come out much further ahead purchasing instead of leasing.


  11. We are in the process of getting solar with SolarCity where we have no money down, etc. lease? for 20 years. They offered a rate of 12 cents per killowatt hour with it increasing by 2.9% each year or a fixed rate of 15.02 cents per killowatt hour for the 20 years. Seems to me that the fixed rate makes the most sense as the variable rate will be around 21 cents at the end. The breakeven point to reach 15.02 is about 7 years. Which would you recommend going with? They expect the system to generate about 4700 killowatt hours a year and calculate we will be getting about 90% of our electric from solar. Any help in understanding the best way to go would be appreciated.

    • Don’t forget to account for inflation, which has averaged about 2.5% annually since 2000. Although for your best bang for your buck, purchasing solar with a low-interest loan will far out-perform leasing.


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