The latest things in the market are solar leases and power purchase agreements. Until recently you’d have to spend 45-60k for a system that would meet your power needs and you were looking at a 20yr payback period which requires you to pour to a ton of money you might not have. Then is was basically a wash financially since you don’t know what you’ll be doing in 20yrs when it’s finally paid for.
The beauty of leases and PPAs is that you pay little or nothing out of pocket and you get solar on your roof. Typically the companies also guarantee the systems and perform all maintenance and repairs needed over a 20yr period. Finally, you save some money because they sell you the electricity that the system produces at a reduced and locked in rate. Sounds too good to be true! Well, it is to good to be true so let me explain how these companies are making a killing on you.
1. In the last two years the costs to implement a solar system have dropped to about half what they were. The solar lease companies are still selling you a system for 50-60K and that is the debt you are taking on, no matter how they word it.
2. At the same time the federal government has passed a law that give you 30% of the system install cost back on your taxes. Instead of you getting that money, the installing company gets it on their inflated install cost. While it may only cost them 30k to install your system they can show paperwork you sign that it’s worth 60k so they get 30% or about 20k from the federal government.
3. Some state governments have created one time per watt incentives that can be anywhere from 2k-20k. In these states the company again collects this money so that in many cases they are ahead of the game before you begin paying off the 50-60k “loan” they gave you.
4. Some states have also created Solar Renewable Energy Credit programs. These SREC programs pay the solar owner from $40-$600 for each megawatt generated according to complex formulas that vary from state to state. For a typical 8KW installation in the northeast this generates 8 SRECs a year and these are often worth more than the electricity generated. Guess who gets these payments, the solar lease company.
5. But, what about their warranty to maintain the panels for 20 years? All solar panels and inverters, the main elements of the solar array, are warrantied by the manufacturer for 25 years. So they aren’t giving you much there, perhaps peace of mind that you only need to make one call to get it fixed.
6. The average American moves every 5 years. What happens when you still have 15 yrs on your solar lease or PPA and you want to move? Well, you have the saddle the new buyer with it, what do you think this is gonna do to the value of your house?
So, if you don’t have the money then maybe this makes sense. But, if you do have the money or can get a home equity loan for the money then you’ll make out a lot better in the long run financing it yourself.