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.