Solar system lease agreement. Transfer of the solar lease

Solar Lease Contract PPA – Should I Sign?

Do you want to know how to get out of a solar PPA or solar lease contract? In most cases, solar companies who provide solar leases and solar PPA (power purchase agreement) tie to the home’s title, making it nearly impossible for 15 to 20 years. You are going to be paying for the solar power system in the long run, and maybe even with your electric bill because of solar PPA and leases. Even if you inherited a solar lease or solar PPAs from a home purchase, can you get out of it? How is this different from a solar loan? We are going to unpack your financing options in this article.

• Your solar provider must give you time to read The California Solar Consumer Protection Guide before you sign the contract. If they did not, you could report them to the Contractors State License Board (CSLB) at 800-321-CSLB.
• You have the right to a full copy of the solar contract and financing agreement in your language.
• The solar company must also provide you with a complete Solar Energy System Disclosure Document created by the Contractors State License Board(CSLB). This document shows the total cost of the solar energy system, like a receipt.
• You have the right to a 3-day Cancellation Period after signing a solar contract or agreement. That’s three business days to change your mind and cancel the solar contract.

So, if you’re lucky enough to have just signed your contract less than three days ago, canceling the solar contract should be easy!

Should I Sign The Home Solar PPA or Lease?

Let’s quickly go through the Home solar PPA and lease:

• Solar Power Purchase Agreement (PPA):

• Financial Implications: With a PPA, you’ll be tied to a long-term agreement, often spanning a decade or more. This means you’ll have to purchase the electricity generated by the solar panels at a predetermined rate.
• Cost Stability: While PPAs may offer a fixed electricity rate, it’s worth noting that these rates are often set by the solar company (they also increase each year or based on the usage term) and might not always guarantee long-term savings. If the solar power system is not generating your actual usage, you will still pay an electric bill.
• Responsibility: The convenience of having the solar company handle maintenance and repairs comes at a cost. You’ll be dependent on their responsiveness and may not have control over the system’s maintenance schedule or quality of service.
• Ownership: Remember, with a PPA, you won’t own the solar panel system. This means you won’t have the freedom to make changes like adding a better or upgrades to the system as you see fit.

• Upfront Costs: Leasing solar panels may appear attractive due to lower or even zero upfront costs, but keep in mind that you’ll be making regular lease payments to the solar company instead of investing in a system you can truly own.
• Maintenance and Repairs: Similar to a PPA, the solar company will mostly take care of maintenance, repairs, and insurance. However, this can limit your control over the system and leave you dependent on their response times and quality of work.
• Ownership: With a lease, you won’t have ownership of the panels, which means you won’t benefit from any potential long-term financial gains or the ability to customize the system to suit your changing needs.
• Flexibility: While leasing might offer short-term flexibility, keep in mind that lease agreements typically span several years. Terminating or modifying the agreement might come with limitations and additional costs.

After a quick explanation above, you can easily tell the benefits of owning your home solar panel system.

Owning your own solar panel system offers distinct advantages over solar PPAs and leases due to the long-term financial benefits, complete ownership and control over the system, potential for increased property value, and significant long-term savings on electricity bills.

Can I Get Out of a Solar Lease Contract and Why Solar Leases Are Bad for home solar?

In most cases, the only way out is to spend more money. Yeah, that’s probably not what you wanted to hear.

Sadly, large companies like SunRun and other solar companies with leasing write solar lease contracts to be a long-term agreement between you and them, and they don’t want homeowners like you to end your contract early.

The three typical ways to get out of a solar lease are to:

• Solar lease buyout – Buy out the remaining part of the solar lease or keep making monthly payments. (You need to refer to the buy-out options and directly in the contract)
• Purchase the solar PV system in its entirety at market price
• Transfer your solar lease agreement

The buyout method requires you to prepay the balance of what you owe on the solar lease. You can then remove the solar panels or use the system independently. Most solar companies that lease do include a buyout price and period in your contract, so at least they won’t be making the number up on the fly.

You know what you are getting into before you undertake the financial burden of a buyout. However, buyouts usually aren’t an option until year five or seven of your lease. If you just got into the agreement, check your contract, but you may be in the lease for a while.

Your contract may allow for market-value purchasing. This way is a little slipperier than the buyout. Usually, the solar company brings in an appraiser to assess your system’s value.

The assessment considers your system’s age and current comparable options available on the market. Still, you may end up paying more than if you just finished your contract or were financed in the beginning. Your home solar PV system is an appreciating asset.

You may be thinking that transferring your solar lease will save the day. You were going to sell your home anyway, now may be the time. Good thought, and solar does improve the value of your home. Win-win, right?

Well, according to the National Renewable Energy Laboratory (NREL), homes with solar panels sell 20% faster and for higher values than comparable non-solar homes, but a new buyer may not want to take over your lease agreement.

They would rather own the system, and you may become a valuable asset. Now, you might have to revert to the buyout option.

Solar leases make getting out a lot harder than getting in.

Related Articles:

Can I Cancel My Solar Lease Contract After Installation?

After installation, you may notice that your lease payment is more than your original utility bill. That could be due to improper sizing or the solar lease “escalator clause” that allows the company to raise your payment by 3-5% annually.

Unfortunately, the only time you can is before installation, normally. There may be some unique stipulations in your contract, cancellation penalties, etc., but you can typically cancel your solar lease if:

• System installation hasn’t occurred yet.
• Cancel within the pre-installation time period stated on the contract. This time frame may be different from one leasing company to another, but you can expect it to be around 30 days after signing a contract.
• Some “unexpected and unforeseen additional expenses” become apparent, like replacing or repairing your roof. Look under your contract’s “unexpected and unforeseen additional expenses” clause.

Most people only figure they want out of their solar lease after all three of these scenarios have passed. Therefore, you are looking at paying more money to escape your contract.

What is a Solar Lease?

Leasing solar panels works the same way as using a vehicle in a contract, or a cell phone contract. The solar company relieves the burden of buying a solar panel system.

Solar leases work by paying an agreed amount to a solar installer for the solar power system but you don’t own the solar system. You are supplied with solar energy from the solar panel at an approximately 20% cheaper rate than electricity from the grid.

The contract lasts for years, and there is no initial payment, but the company is still responsible for offering solar energy.

It is like third-party ownership, but you get all the benefits of a solar system, including free maintenance.

Let us dive into how a solar lease works!

How Does a Solar Lease Work?

Before settling for a solar lease, it is ideal for a homeowner to know how solar leases work.

Many homeowners are constantly torn between buying and leasing solar panels because they don’t know how solar leases work.

Immediately after the solar energy system panels are installed, you will automatically receive the power supply from the solar panels.

It replaces your grid electricity supply, and your home will supply itself with the energy from solar panels, thus reducing the electricity bill.

You can eliminate your electric bill completely if the solar panels generate enough electricity to suit all your energy usage. The good thing is that it is a fixed price.

However, you must still pay for your solar lease payment, although it will be cheaper than your utility bill before installing the solar power.

Finally, you should bear in mind that this new, green power supply might not be able to cover all the electricity bills since its effectiveness depends on the weather.

How do Solar Panel Leases work?

Solar panel leases work so that you just make your monthly payment for the leases, but you don’t own the panels. The leased solar panels harvest solar energy directly to your house without buying a home solar system.

A solar provider deals with the installation. They either lease the solar panels at a fixed monthly amount or sell to you the electricity the panel generates at a fixed price per kilowatt-hour.

The maintenance cost and watching over the solar panels are also shifted to the leasing company. They will carefully watch over your system hardware and performance until the signed contract ends.

Solar panel leases typically last for approximately 20-25 years. over, some companies like SunRun allow you to renew the contract and buy the installed solar system from them.

What are the Terms of Solar Lease?

The basic terms of a leasing contract are always almost the same despite the type of the contract. A solar lease normally operates between 20-25 years.

The solar company is also responsible for keeping track of how your solar panels work; in case of anything, the developer is responsible for repairs at their own cost.

Just because you don’t own the panels doesn’t mean you can’t see what they bring to the table. Most solar companies have a tracking program you can access on your computer or a phone app so that you can keep an eye on how your solar panels are performing.

A price escalator is included in the lease contract to reflect the rise in your electricity price. Therefore, your lease payment will appreciate annually. The solar lease escalator runs between 1%.5%.

Solar leasing is very flexible. If you wish to move house, most solar leasing companies like Sunpower will permit you to transfer the lease to your new home. If you also want to terminate the contract, you are also allowed to break the lease and remove the solar panels.

over, at the end of the contract, you can purchase solar panels at a discounted price as stated in the agreement, or rather you can either have the contract renewed or the solar panels removed. You can opt for solar PPA if you wish to buy the solar panels at the end of the lease contract.

Some solar companies don’t have the option of selling the solar panels at the end of the contract – make sure you check the fine print with each company if you think you might want to own your panels after a while.

In-Depth: How a Solar Lease Works

You wouldn’t lease a car without knowing how the car and the financing work; the same should be true for leasing solar panels. Here’s what you need to know about the process.

You’re already on the right track by reading this guide. A lease is a long-term agreement, so treat it just as you would any high-value contract on your home or your vehicle.

Once you have decided that a lease is a good idea, it’s time to talk to the experts. Request that the leasing companies operating in your area come to your home and do a site review, then go over the details of the proposed contracts. Some leasing companies are open to negotiations, so be prepared with the terms you would really like to see in the contract.

Once the agreement is hashed out, take some time to think it over. Give yourself at least a few days to read through it all and do further research on anything you don’t understand. Don’t hesitate to call the salesperson to get more details. You could also consider taking the documents to an attorney for a quick review before you sign everything.

Is it all good to go? Sit down with the salesperson and sign on all those dotted lines. At this point you might be asked to provide a down payment (assuming that’s in your contract) or make a first monthly payment.

This should happen relatively quickly. Expect to see expert installers show up to do the work. Watch as the magic happens – it’s really rather fascinating. If anything looks strange, don’t hesitate to stop the work and ask what they are doing and why. They should be able to give you a clear answer.

Now that the solar array is up and running, your responsibility lies in writing the checks as promised. Make your monthly payments on time, every time, to avoid any penalties or fees.

Your leasing company is responsible for everything, including the maintenance on the solar array. They should have a regular maintenance schedule; however, you will still need to keep an eye on the solar panels. If there are any problems – for instance, if there is some damage to a panel after a storm – get in touch with the leasing company immediately.

Wait impatiently for your next electric bill, which should reflect a nice bit of savings. The bottom line should be pleasantly lower than what you were paying before the solar panels were installed.

Most solar lease contracts are for at least 15 years. Once that period is up, it’s time to decide what to do. At this point you can enter into a new solar lease (and get new equipment) or you can choose to buy out the original panels at a very good price.

Pros and Cons of Solar Lease

As with any other type of financing, there are upsides and downsides. Understanding each of these can help you choose your stance on whether solar leasing is the right call. Here are the pros and cons you need to know to make an informed decision.

You will never have to worry about getting up on your roof to deal with maintenance of your solar panels. That’s the job of the company that leased them to you.

There are no up-front costs.

One of the biggest draws of a solar lease is the ability to get things started without paying a dime. Though some contracts might require the first monthly payment upon signing, that amount is much less than the costs that would come from a purchase or loan closing costs.

Electricity immediately becomes cheaper.

By purchasing power through the leasing company instead of the local utility, homeowners can bet on rates that are often lower than market level. Most leases will allow you to lock in those good rates for a certain number of years, thus guaranteeing the savings.

Because the equipment is owned by the leasing company, upgrades will likely be available on a regular basis. As solar panels become more efficient, look into whether your panels can be upgraded or a nominal fee or updated contract terms. This could help ensure you don’t have outdated equipment at the end of the lease.

Typical solar lease contracts have an escalator clause, which means that the costs can go up, sometimes by as much as 3.5 percent per year, according to the National Renewable Energy Laboratory. This means that by the end of the term, your lease payments might negate your energy savings.

Selling your house can get tricky.

When you lease solar panels, you are responsible for the contract. But what if you move? The new buyers must be willing and able to take over the lease from you – assuming they qualify. If they do not, you must buy out the remainder of the agreement, which might be a substantial lump-sum payment.

The solar provider gets the rebates and credits.

By leasing, you are giving up that 30 percent tax credit. “All tax incentives, credits and rebates are reserved for those who purchase a solar system and not lease,” said Chahine Bourdouane of Green Solar Technologies.

You’re locked in for at least 15 years.

Most lease agreements are for an extensive period of time; the most common is 15 to 20 years. A lot can happen in two decades, including cheaper electricity rates that could leave you actually paying more than your neighbors without solar.

Tips to Decoding a Solar Lease Contract

Any legal contract can be quite confusing; a solar lease contract is no different. Though it is important to read through the entire contract and understand all of it, there are some specific points that homeowners should remember when looking for the key clauses in the contract.

Some contracts include escalators. That means that each year, the amount owed on the lease goes up by a certain percentage. Over time, the increasing monthly payment might cut deeply into the energy savings. The ideal contract for a homeowner is one that has no payment escalators.

No matter what a salesperson tells you, it doesn’t matter – what matters is what is in black and white in that contract. Any special arrangements made in phone calls, emails, text messages, or in person will not hold up; only the legally binding assurances in your contract will.

“Key factors to seek when financing solar are the shortest term and lowest interest rate which will allow you to own the system outright as soon as possible (and ideally no longer pay for powering your home),” Bourdouane said. A payout clause will allow you to pay one lump sum and get out of your contract before the term is up, which can save a great deal in interest payments.

Some advertisements for leased panels are based on one particular size, which might not be right for your home. Ask for a thorough site evaluation to determine what size array you need, where the best placement will be, and what your bottom line will be in terms of monthly payment obligations.

Does your homeowner’s association allow the installation of a solar array on your home? Many HOAs have very strict rules about changes to your property, and those rules might prohibit solar panels on the roof. Look over your HOA contract before considering a solar array, and if it is allowed, look for any specific points that might prohibit leasing.

SRECs are created for every mega-watt hour of electricity created by the solar system. Electric generation companies will buy these SRECs to meet federal requirements. Depending upon the state, each of these could be worth hundreds of dollars, and a residential system can produce several in a year. Does the homeowner profit from this, or does it go back to the leasing company?

Solar companies will allow homeowners to buy their equipment at fair market value at the end of the lease term. But what if buying the equipment isn’t the right move? Ask what the fees might be for removing the panels from the home, as well as how extending your lease might work.

One of the issues with leasing is that the leasing company will be the one to monitor the solar panels – not the homeowner. That can lead to questions of what the performance is on those panels. Ensure that you have some way to monitor the panels yourself, and look for a clause that explains what will happen if the equipment is underperforming.

When an offer uses urgent language – “Hurry, these deals will be gone!” or “Offer good only if you call right now” – that might be a red flag. If you do take advantage of a promotion, make sure you aren’t rushed into making a choice, and that you get all the promotion’s benefits spelled out in the contract.

The nature of solar panels requires that holes be drilled into your roof and the roof joists. The contract should state that any damage resulting from the solar panel installation is their responsibility. If you choose to have the solar array removed, the company should also be responsible for ensuring your roof is in sound, safe condition with no leaks after the final repairs.

Seeing a few samples of a standard solar lease contract can help homeowners understand if their particular contract is on the up-and-up. Sample contracts from the National Renewable Energy Laboratory can give homeowners a head start on figuring out their solar lease contract.

Differences Between Leasing And Buying Solar Panels

The owner of the solar system impacts a variety of factors.

Upfront Cost

The hefty upfront expense of installing solar panels could be a compelling reason to lease instead of buy. However, many banks, credit unions, and solar installers offer financing. In some cases, the homeowner can get solar panels for zero down. Also, if the loan is a home equity loan, the interest may be tax deductible.

Long-Term Costs

Often, the maintenance and repair costs are lower when leasing a solar panel system, but this does depend on the solar warranties. When buying, the solar system comes with warranties, but these vary significantly between solar panel installation companies. Solar equipment, like the panels and inverters, also have warranties from the manufacturer for up to 25 years, but they don’t usually cover labor.

In addition, the solar company usually offers a labor and service warranty for a certain number of years. Occasionally, some solar installers offer warranties for 25 years, but this is somewhat rare. Labor and service warranties between 2 and 10 years are more common.

With solar leases, the leasing company is responsible for all repairs. However, if a homeowner buys a solar power system with long warranties, they will have similar coverage.

Ownership Of The Panels

Another huge difference is PV panel ownership. When leasing the system, the homeowner only owns the power generated. When buying, they own the panels and solar power. However, that also means that it is the homeowner’s responsibility to insure them, which could cause a slight increase in their insurance premiums.

Long-Term Savings

If you compare the total energy savings with the utility company over the life of the solar system, solar homeowners will almost always save more money if they own the panels instead of leasing them. This is because monthly lease payments can last for around 20 – 25 years, but the payback period of a solar system is usually 6 – 10 years.

FAQs About Solar Panel Leases

Let’s look at some common questions your customers may have about solar leases.

Solar Lease Vs. Purchase Power Agreement?

With a solar lease, the homeowner is leasing the equipment and the payments are fixed. With a solar power purchase agreement (PPA), they payments are based on the solar power production and there is a cost per kilowatt hour of power. Therefore, the homeowner will often pay more in the summer if solar electricity production is greater and less in the winter.

Are There Solar Lease Requirements?

Yes, solar leasing companies have requirements for homeowners. Typically, they must own the home and have a certain minimum credit score. There may also be requirements for having a minimum monthly electric bill.

Which Is Right For Your Clients?

Whether it is better to lease or own a solar system depends on your client’s situation.

Consider Buying If …

The homeowner can take advantage of the federal tax credit and possibly other incentives

They qualify for financing or have enough cash for purchasing solar

They want to increase their home value

The homeowner wants to maximize their long-term energy savings

Consider Leasing If …

The homeowner can’t take advantage of the solar tax credit

They don’t want to be responsible for solar system maintenance and repairs

They do not qualify for a solar loan with low interest rates and don’t have enough cash to purchase the system

Regardless of whether you offer leases or solar PPAs, it’s helpful to be able to answer questions for your customers. Many of them will have questions regarding solar lease terms, so it’s helpful to understand how they work, even if you don’t offer them.

GreenLancer can help provide permit design and engineering no matter how they’re financed. For more info on the financing options available. read more on our blog.

Pros of solar leasing

The most obvious benefit of going the solar leasing route is avoiding high energy bills; however, the initial installation cost is often relatively high. According to ConsumerAffairs, the cost of installing solar panels in a regular household is between 12,000 and 40,000, depending on that particular household’s size and energy needs. No doubt this cost is high, but you get to save a lot of money down the line. Solar leasing allows you to cut down on your regular electric bills without worrying about the initial installation cost. All you have to do is pay a reasonable monthly premium that is quite lower than your regular monthly energy bills.

Another advantage of solar leasing is getting a warranty for repairs and maintenance that the unit might require down the line. Just like any other system, solar facilities are not perfect. Fixr also mentions that homeowners spend between 120 to 3,000 for solar repairs depending on the level of damage and number of panels. Getting a good solar leasing program should cover the cost of such unexpected expenses. A less serious issue like cleanup is a no-brainer; a simple wipe-down should do the trick for you.

Cons of solar leasing

As much as solar leasing sounds appealing on paper, it has its fair share of disadvantages that you should be aware of. First off, the major drawback of going the solar leasing route is that you miss a lot of tax credits and incentives that homeowners who choose a renewable energy source are entitled to. According to the Office of Energy Efficiency and Renewable Energy, solar installations done before 2019 are eligible for a 30% federal tax credit, 26% tax credit for installation done between 2020 to 2022, and a 22% tax credit for installations done in 2023.

Another disadvantage often understated when choosing a solar lease is that it is expensive in the long run. Buying and getting ownership right from the beginning might be costly but will save you a lot of money in the fullness of time. Think about it: The lease agreement runs throughout the lifetime of the solar panels, which is between 20 to 25 years. If it takes you 15 years to pay off the solar ownership, you have the rest of your life to enjoy free electricity.

Is a solar lease ideal for you?

From the outside looking in, a solar lease can seem like getting free solar panels; however, you should realize that even roses have thorns. There are a few isolated cases where getting a solar lease would be a good idea. The only reasonable instance in which you should consider a solar lease is only when you don’t qualify for any federal credits or have no access to a loan to finance ownership of one. Other than that, it would be difficult to make a reasonable financial case why you need to lease solar for your home.

According to SolarReviews, the best way of getting a solar system installed in your home is through cash. It not only offers the best reward for investment but also guarantees you ownership of the entire solar facility. However, if you don’t have access to large sums at the moment, the second best option is going for a solar loan. You still get the benefits of not paying the upfront charges but at the same time get to enjoy a better return on investment as compared to choosing the solar lease option. But if you decide to get a solar lease, one rule of thumb to remember is to do your due diligence to get the best terms for your agreement.