Lease vs. Own

lease_vs_ownTalk about frequently asked questions! One we hear a lot these days is, “Is it better to lease or purchase my solar energy system?”

The short answer is that it depends upon your circumstances.

There are two ways to get solar energy – own the panels on your building yourself or let a finance company own the panels on your roof.  If the finance company owns the panels, it will lease them to you at a monthly rate that allows you to save money on your electric bill.  The finance company option is called “solar leasing”.

 

Advantages of Ownership

Own the Solar You MakeProperty owners with the ability to make a modest up-front investment often prefer to own their solar energy system.

The primary reason for their desire to own, of course, is that they get an outstanding financial return on their solar investment, better than what they get from leasing their solar energy system from a finance company. When the property owners use the solar tax credits themselves, there is no diminution of tax credit value from discounting the credits to a finance company.  In other words, we find that where the property owners can make a modest up-front investment and use the tax credits, the financial return from owning a solar energy system is greater when compared to leasing.

Many property owners prefer to have the flexibility and freedom of owning their solar energy system outright instead of being involved in a contract with a finance company that can last 20 years or longer. Some states, such as New York, allow property owners to add a valuable solar energy system without increasing their property tax assessment.

Further, if property owners with solar ever sell their property, they can expect to receive a big bump in the sale price when the buyer factors in the lower utility costs of the property. Studies have shown that properties with solar sell noticeably faster as well.

By owning a solar energy system, property owners lock in a very low expenditure for their future solar electricity. Solar leases often involve formulas that increase the property owners’ payments to the third-party finance company over time.

Property owners who want to purchase their solar system but avoid any out-of-pocket payment have many options. Attractive, zero up-front payment plans are available for property owners with an acceptable credit rating.  These plans allow them to pay for their solar energy system with their solar savings.  And in New York, an on-bill payment plan allows many property owners to purchase solar on their utility bill at 3.5 percent interest, as long as their utility bills do not increase as a result.

 

Advantages of Leasing

Hedge Your Bets With SolarWith a solar lease, the property owner does not own the solar energy system. The system is owned by a third-party finance company that leases it to the property owner at a monthly lease payment that is more than offset by the savings from a lower utility bill. This method of financing solar has become quite popular over the last few years.

Another version of solar leasing is known as a “power purchase agreement,” or PPA. In this variation, a third-party finance company owns the solar energy system and sells the system’s electricity to the property owner, usually at a discount to the utility rate.

The first question property owners should ask is whether solar leasing is legal in their state. Many states still ban solar leasing or the resale of energy. Fortunately, the three states that SunUp services, New York, Connecticut and New Jersey, have progressive energy policies that permit solar leasing.

The most common reason that property owners lease a solar energy system is to avoid any out-of-pocket cost of the investment in solar whatsoever, regardless of how good the return on their money would be.  Some property owners simply don’t have the cash on hand. Understandably, these property owners don’t want to wait to start making money with solar, so they choose to lease with little or no up-front investment. Most leasing contracts offer the property owners a discounted purchase price for the system after 20 years or so.

A solar lease may also be appropriate when the property owners can’t utilize the substantial tax credits that accompany solar ownership. For example, a retired couple might have little or no taxable income and be unable to benefit from tax credits. The same is true for nonprofit organizations, such as museums or schools. In these situations, the solar energy system can be owned by a third-party finance company that will utilize the tax credits and enter into a solar leasing contract with the property owner.

When a solar energy system is leased, the finance company that owns the system arranges for any upkeep of the system. Solar has no moving parts (except electrons), so there is little upkeep to be done.

One of our Energy Consultants would be pleased to discuss leasing vs. purchasing as it applies to your unique property and circumstances.

This is SunUp Solar’s standard disclaimer about the need for a careful evaluation of each unique property to determine if and how to best adapt solar to that property. Like any other kind of property improvement, solar requires an inspection by a professional to take site conditions into account. In the case of solar, these include roof size, pitch and orientation, shading issues, the status of the property’s electrical system and the property’s electrical billing history. This is routine for us and it is absolutely necessary to provide an accurate proposal for property owners. We use satellite photos, such as Google Earth, to get a general idea of your property’s situation. Unlike some companies, we will not provide a firm quote until one of our Energy Consultants has visited the property, done the proper analysis, and discussed the project thoroughly with the property owners. We stand behind our work and must have customers that are pleased with every aspect of their solar project.