What Is A Solar Lease

Do you know there is what is called a solar lease in the solar industry? You do hear your residential neighbors saying they installed solar panels for free.

That is done via a solar lease company. It is not free but through leasing. Therefore, you may be looking forward to purchasing a solar panel and, at the same time, hoping to cut down your cost.

In the essence, a solar lease is what you need to curtail the excess flow of electricity generated by your solar panel. That is to say, by purchasing a solar lease, you are reducing the consumption of light your home equipment uses.

Before now, installing solar panels on the rooftop was difficult for some people because they couldn’t afford the funds. Hence, the solar industries embarked on the journey to make life more flexible and easy to live on.

Thereby inventing more solar technics such as the era of a solar lease.

However, in this article, I will not only tell you what the solar lease means but also let you understand how it works. More so, there will be an explanation of the most important things you need to know about a solar lease.

Meanwhile, when you read to know to find out more about the solar lease, I will begin by explaining what a solar lease is below this.

Just hang on and continue reading.

Explanation Of Solar Lease

Explanation Of Solar Lease

Once you purchase a solar panel, the installer who works with the solar lease company comes with a solar lease agreement form. However, this will guarantee that you will get access to solar through solar leasing.

Solar leasing is going to be a one-time installation that will cut down your electricity bills.

Furthermore, the solar lease is a financing option whereby you reach an agreement with a solar panel distributor. You agree on the payment because you want to reduce the expense of paying electricity bills.

To be more specific, a solar lease is a financing model through which you pay a monthly stipend to a solar company to use solar energy without owning it. By so doing, you are not going to own the solar panel but will always have access to using the electricity.

This helps to minimize the excess use of electricity in your homes. But, again, it should be an agreement between you and your solar provider.

In other words, it is in the form of a budget option that stands as a contract between you and the solar provider. It may be an agreement between the installer and the solar provider.

For that reason, I will let you know how it works in the next paragraph. You don’t need to stress yourself about how to go about it.

Solar Lease; How Does It Work

Once the solar provider installs the solar panel, you will get to use the power it produces without extra charges. Remember, you will not own the panel; the idea is for you to make use of solar energy without buying the solar panel itself.

For instance, just like you lease cars from one company reaching an agreement for a specific period. But, again, it is in the form of renting a car that you can’t own.

Additionally, on reaching the agreement with the solar company, you are not going to pay any maintenance fees or taxes. Instead, the company will be in charge of the expenses while you use the solar energy at your own convenient time.

Eventually, if you consider buying a solar panel, ensure you go for a solar lease. It will help minimize the electricity charging of your equipment.

Not only is it going to reduce the electricity consumption, but it also helps you get your installation done without any extra charges.

Moving on, the commitment period lasts between 20 and 25 years, and you will have the chance to use the power generated from the solar panel. So agreeing to pay means you have to wait for that long before the agreement expires.

Similarly, it provides you with the benefits of cutting down your utility bills. That is, it offers net metering to you and your home users.

Charges may occur, but it will not affect you because the solar provider is responsible for taking control of everything concerning the solar. Your duty is to pay the solar lease payment and benefit from the solar grid once the primary grid is off.

At this juncture, I will cut short your reading by introducing what is involved in the solar lease.

Common Terms About Solar Lease

A solar lease isn’t just a place you can run off to and claim a solar panel. There are specific terms included in the solar panel usage you want to lease.

Lifespan

Here is talking about the time frame in which your solar leasing expires. It is the term length that lasts for about 20 -25 years.

That period is usually the time the solar panel expires. So be aware of what you are going for.

Monitoring

In this aspect, the solar leasing company usually tracks down your solar system’s performance. This could be done online with your smartphone or tablet.

The reason is so that the solar leasing company can monitor the solar panel’s performance. Not just that, they will also take charge once they notice any fault from the solar panel.

The charges will be on them, so you have nothing to worry about. They take responsibility for ensuring the solar panel is working well, and they repair it if there is an issue.

Price Escalator

This has to do with the monthly payment statistics. This may occur due to an increase in electricity, depending on how you use it.

You will pay a monthly rate that usually increases between 1% and 5%.

Release to another user

If, at some point, you want to sell your property or your home to other users, the solar leasing company will allow you to lease it to the new user. However, in most cases, the new home user who is to buy off the solar lease agreement may not be willing to do so.

Simply because the property isn’t yours, and not everybody would want to take over from your already lease agreement.

Therefore, if you opt to go for a solar lease, always have in mind the terms.

Talking about the terms involved in buying a solar lease, you can quickly read through the pros and cons below. However, I believe with the advantages, you will have nothing to worry about.

Pros

With the way the solar industry is evolving, it won’t be surprising to find this solar lease more beneficial than you did expect. Hence, the pros will be a stepping guide for making the right choice.

User Maintenance Free

I mentioned earlier that you would not be responsible for any damage or repair of the solar panel if you are on a lease agreement. The solar lease company takes charge of every possible fault found in the solar panel.

That sounds impressive, right? But remember, the solar system itself hardly develops fault so easily except on the wiring or inverter problem.

Moreover, the installer or the manufacturer always takes precautions for the wiring or inverter problem. So it won’t be a regular issue. Instead, it may be once a year.

However, you are covered in any form of damage that occurs in the solar panel because of the solar lease insurance.

Predictable

You can always predict your monthly solar lease fees because it is always stated on your contract. So with that, you are aware of the expenses you are going to make in a month.

Energy bill reduction

Your monthly electricity bill is reduced once you are under the umbrella of a solar lease. It saves electricity bills, though it depends on how you use the electricity.

Even so, the solar lease is made to be lesser than your monthly electricity payment.

No Upfront Cost

During installation, you don’t need to pay a higher amount of money for you to be able to install solar panels on your roof. Hence, the need for a solar lease helps in the reduction of payment.

Maybe when you read about the disadvantages, you may want to withdraw from engaging in the contract. So let’s find out about the disadvantages.

Cons

Not everyone would want to take the risk of going after a solar lease as it comes with certain terms and conditions.

Tax benefit is withdrawn

Since you are not the solar panel owner, you are not entitled to the benefit that comes from the federal credit. Therefore, the solar leasing company mostly takes the percentage from the tax credit.

Property value

As someone who would be owning a property, remember you will not add the solar panel as one of the properties you have. You don’t own it; the solar belongs to the leasing company.

Unless the payment agreement elapses and you decide to own instead of renewing the contract. Therefore, in the meantime, you are still under the company contract; the property is not yours.

Transfer of ownership is difficult

It is not always easy in most cases where you want to hand over your property to another home user. The reason is that not everybody will want to continue with the agreement.

Again, the solar provider may decide that it is only a creditworthy person will be eligible to take over. So finding such a person may not be easy, except you pay off the bill.

Environmental barrier

Here, where you live guarantees how your solar panel generates power from the sun. If you are staying in an environment where winter occurs more than the summer days, charging becomes an issue.

Thus, you have to look for other sources of energy to support your solar panel’s electricity.

Not cost-effective

Even though solar leasing is somehow cheaper compare to buying the solar panel itself, it is not pocket-friendly. You may be spending up to &14,000 to $16,000 (somewhere in the U.S) after the federal tax charge.

That is not pocket-friendly, even if you decide to take a loan to sponsor it.

That is that. Let’s move on to other subheadings.

Are there any other ways to go about solar than a solar lease in a solar panel company? Yes, there is, and below is the difference between a solar lease and other options.

Difference Between Solar Lease And Other Options

There are numerous ways to go on solar if you don’t want to buy the solar panel and own it. Here, I will be telling you how the solar lease is different from other options.

Those options are; Solar PPA and solar ownership.

Solar Lease Versus Power Purchase Agreement (PPA)

Solar Lease Versus Power Purchase Agreement (PPA) (1)

Fast forward to talking about their differences

Solar leasing and solar PPA are used interchangeably, but they are not the same. They mean a different thing altogether.

The former (lease) means a financing model to lease a solar panel without the home user owning it, while the latter (PPA) stands for power purchase agreement – meaning that you can only pay a certain amount per kilowatt in an hour.

Therefore, when you lease a solar, you are going to pay a fixed amount of money monthly. This is determined by the company in charge of the leasing within the stipulated time of the contract.

Meanwhile, you agree to pay a particular amount per hour in kilowatts on PPA. For instance, if you spend $150 per month on leasing, your PPA should be $0.15 per hour.

Furthermore, a solar panel produces more electricity during the summer than it does on the winter days. However, if you are with PPA, know you are going to save more bills and have higher solar bills.

Overall, both the solar lease and the PPA are the same savings over the year. Therefore, what you will pay per kilowatt-hour over the year on a PPA contract is going to correspond to what you pay on a solar lease contract if calculated.

Comparatively, both of them are flexible and affordable to use. Meaning you will spend less daily or monthly.

In addition, you will only pay for the power, not for the solar panel. Therefore, you will have nothing to worry about in terms of maintenance.

That is to say; the solar leasing company is giving you the opportunity to enjoy the power. Hence, leaving the monitoring and maintenance for them to handle.

Still, on the differences, I will go ahead to discuss solar ownership.

Solar Ownership

On the other hand, solar ownership means that you will be responsible for everything, including the incentives, tax credit, maintenance, monitoring, and repair of the solar system.

Plainly, you are going to pay the complete upfront cost as the owner and take charge of everything. By doing so, you are going to enjoy the incentives of a 26% tax credit that usually comes from federal tax.

Similarly, you will eliminate the high cost of electricity bills and as well repair the system once the warranty period is over.

Some of the advantages of solar ownership are; that your electricity bill will reduce and increase your property. Fortunately, you will get the incentive credits that come from renewable solar credits (SRECs) or other government grants.

But one thing is for sure; nothing goes for nothing. This implies that you have to earn a lot of capital before doing this due to upfront investment.

Again, your property will increase, which means you will also secure property insurance coverage. Either by increasing it if you have before or by purchasing it.

Negatively, at the end of the year, you will have to take charge of repairing the system once the warranty year is over.

Unlike the solar lease contract, you will not have anything to do with the maintenance, and there will be no upfront cost.

Finally, even though you would want to own a solar panel, a solar lease is still very much dependable as it will reduce the cost of your energy bill at the end of the year.

Frequently Ask Question

Frequently Asked Questions

1. What Will Happen At The End Of The Contract?

Firstly, the period of the agreement is between 20 and 25 years, exactly the life cycle of the solar panel. Secondly, if the time frame elapses, you will either renew the contract or buy off the solar panel so it will become yours.

2. Does Solar Lease Worth Considering?

Yes, for some reason. You will need solar leasing for someone who does not want to pay a large amount of money purchasing a solar panel because of the upfront cost.

The stress of paying the installer, the maintenance, or repair will make you go for leasing.

Then if you are the type who doesn’t like living in a particular place for more than 5 years, solar leasing will be beneficial to you. Anyway, that doesn’t mean there won’t be a downside, especially not being able to receive incentives.

3. Why Is It A Bad Idea To Go For A Solar Lease?

First and foremost, you will not benefit from the 26% federal credit tax. The monthly payment increases yearly because of the price escalator.

Again, you will be the one to take monitoring and maintenance responsibility. More so, you can’t own the property because you are not the owner, and leasing up the solar to new users will not be easy.

In the absence of other subheadings, I will be wrapping up my discussion on this article. Again, answer most questions that you may be finding difficult to locate.

Solar Lease; My Wrap Up

Apparently, solar systems are one of the ranking industries today. Moreover, it is one of the best renewable energy options because you will have varieties of options to choose from.

For example, the solar lease, power purchasing agreement (PPA), and solar ownership.

If you partner with any solar company, you can be sure of leasing or owning a solar panel at an affordable price. Though not as cheap as you may think.

As long as you agree to the terms and work towards the times, you will have no problem using a solar panel. The decrease in your electricity bill is sure, and you will have no business with the solar problem.

Since the solar leasing company covers you on that, the only thing you have to do is to pay for the power yearly.

Reading this article will help you determine if you are going to go for it or not. Even though it cuts down your upfront, it is doesn’t necessitate the best way to go on solar.

Did you find this powerversity guide very helpful? Then “leave a reply” for us at the end of the page.

Lastly, visit our Electricity & Renewables page for more guides like this.

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Chinenye Mbam
Chinenye Mbam is a Content Writer for PowerVersity.com. She has a B.Sc in Mass Communication. Chinenye loves typing, movies, cooking, dancing, and she is open to learning new skills. Chinenye writes reviews, buying guides, and best pick articles for PowerVersity.com.

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