If you’ve decided that your roof or property is perfect for generating solar energy, but the price of a system looks to be too steep of an investment right now, then leasing solar panels may be a great option. Leasing solar panels is a relatively new concept, but that has not stopped hundreds of thousands of home and business owners from renting their renewable energy.
Shop Solar Kits is a leading resource for all things DIY, providing the information and parts to help empower our customer’s lives with small-scale solar energy. While we do not rent any of our equipment or merchandise, we certainly see the value in leasing solar panels.
For home and business owners alike, we’ve developed this comprehensive guide to the pros and cons of leasing solar panels. Throughout this article, we will explore the benefits and drawbacks of leasing solar panels in comparison to both traditional utility power and independent solar panel system ownership.
Why Lease Solar Panels?
On paper, leasing solar panels can be a great idea and worthwhile pursuit for any property owner. Immediately, solar panel leases can help reduce a home or building’s energy costs with a renewable source of emission-free electricity generated on site.
Instant and Long Term Savings
For most people, the number one attraction to leasing solar panels is saving money on their monthly electricity expenses. Although solar panel leases can be variable in structure, most providers design systems and agreements so that property owners will pay less for their electricity each month with minimal upfront costs.
Depending on the project timeline, a solar panel lease may be able to start saving homeowners money as soon as the provider is able to properly install the equipment on the property. If you have elected to use an off-site solar lease (also known as a virtual PPA), then it may be possible to immediately “rent” solar panels that are already producing electricity on a shared solar farm.
100% Renewable Energy
Of course, money should not be the only reason to lease solar panels. In an effort to be a part of the green revolution, many property owners gravitate towards the environmental benefits of solar for its emission-free, renewable electricity produced by rooftop PV arrays.
Leased solar panels instantly lower the carbon footprint of a property, which may be able to help you rest easy at night as an environmentally-minded homeowner.
For small and large businesses, renewable energy adoption can help win over new customers, supply chain partners, and shareholders while pivoting an organization to meet impressive green energy benchmarks. In fact, leased solar panels are one of the easiest ways for large property owners to meet local environmental, sustainability, and corporate governance standards, goals, and requirements.
Low Maintenance and Easy Process
Finally, a leased solar panel system typically requires very little maintenance, time or effort required from the home or property owner. In most instances, a leasing solar company will completely monitor all system performance and also provide any maintenance that may become necessary as the panels and parts age.
Although it will likely take several weeks for large property owners, most residential solar installations are completed in one or two days of construction to limit the overall impact on the homeowner’s life. At the end of the lease, companies will typically remove the equipment without any additional fees applied.
How do Solar Panel Leases Work?
Around the country and globe, solar panel leases can be structured in a few different ways. Primarily, “solar panel leases” are either “true” solar leases or established with a “purchase power agreement” (PPA) payment structure.
True Solar Leases
In traditional solar leases, the green energy equipment is rented for a fixed amount of money each month over a predetermined period of time. Here, the idea is that the homeowner can expect steady payments for their equipment while the solar panels produce enough electricity to cover the household demand.
Once the home’s electricity demand is met, any excess production from the solar panels is sent back to the grid. In most cases, the leasing solar company will be credited with any additional solar production.
Purchase Power Agreement (PPA)
Second, Purchase Power Agreements are similar to solar leases in that panels can be installed with little to no money down. The distinction here is that PPAs are structured so that property owners pay a reduced rate for electricity produced by the panels, rather than paying a flat monthly rate (in a lease) or continuing to purchase utility power.
PPAs are most popular among large companies rather than homeowners, and programs may be limited in areas without many local providers. In a PPA, the monthly cost of your solar lease will continue to reflect your energy usage habits, typically yielding a slightly lower, but still variable monthly electricity payment.
The Cost of Leasing Solar Panels
Whenever you lease solar panels, you are actually renting much more equipment than the photovoltaic plates up on your roof alone. Typical modern solar electric systems include solar panels, a solar power inverter, wiring, and occasionally even solar energy storage.
Although it is not very common in lease agreements, it may still be possible to add solar energy storage to create an off-grid or grid-tied hybrid renewable energy system. Solar batteries can be expensive, but they are entirely necessary to help properties achieve grid independence for continued cost-shaving and access to electricity during blackout periods.
Almost always, leasing solar panels begins with absolutely no upfront costs. While there may be “processing” fees, taxes, or other hidden expenses, a lack of upfront costs is almost always the most attractive aspect of entering into a solar panel lease.
In some cases (most commonly in purchase power agreements), solar panel leasing agencies may accept upfront payment for a fixed amount of solar energy production (typically measured in kilowatts). With this, homeowners or businesses can pay a flat rate for energy upfront, rather than receiving a devastating bill at the end of the month.
In a traditional solar panel lease, a monthly payment will be structured to fit the budget of the property owner. Although rates vary all across the country, solar panel lease payments will almost always be lower than ordinary utility costs.
Typically, solar leases lower monthly energy bills by 10% to 30%, with the actual monthly savings varying depending on the lease terms, electricity use, and solar production. Most lease payments are set to remain as a low fixed amount, however, some agreements may also include raised rates each year to accommodate for rising electricity prices and inflation.
Maintenance and Ongoing Costs
Almost always, solar leases are provided with minimal maintenance and ongoing costs. In most agreements, homeowners will never have to pay anything besides their fixed monthly payments, while any part malfunctions, damages, or cleanings are taken care of by the solar leasing company.
If you choose to terminate your solar lease early, there may be additional costs associated with the unforeseen cancellation. It may also be possible to physically move your leased solar panels to a new property if you decide to move your home or headquarters. Obviously, this is also likely to incur additional expenses.
What happens when you move during a solar panel lease?
If you move away from your home during your solar panel lease, then the contract will either need to be terminated or transferred to the new property owner. As typical contracts may have lengths of anywhere between 10 to 25 years, it is important to consider whether or not you may move (and what would happen if you did) before entering into a solar panel lease.
Leasing Solar Panels vs Outright Purchases
The pros and cons of leasing solar panels are best understood in the context against outright system purchases. With full ownership, solar panels and related equipment can be purchased for a large lump sum, much like in the difference between purchasing and leasing an automobile.
When purchasing solar panels, most residential and commercial installations are made possible with special solar financing programs, as most people do not have tens of thousands of dollars lying around to pay for parts, labor, and company premiums. For smaller, DIY installations (that can still generate a ton of renewable electricity), solar panel kits are great affordable options for small homes, cabins, workshops, RVs, and more.
Buying Solar Panels Pros
Unless you are paying for convenience, ownership is almost always a wiser overall investment decision than leasing assets of any kind. If you have the capital or there are favorable financing options, purchasing in a solar power system is typically the best way to maximize your return on investment.
This is especially true today, as federal and locally available renewable energy incentives and rebates may be available to help reduce the cost of a purchased solar panel system. In solar leases, these perks are typically given to the developer.
Beyond dollars and cents, purchasing solar panels also makes the resale process easier if you are planning to move away from your home. With a purchased system, solar panels become a part of the house (just like your furnace and dishwasher) and will continue to generate renewable electricity for new homeowners and occupants. Not a bad selling point, right?
Buying Solar Panels Cons
On the other hand, solar panels are not always the best option for homes with minimal electricity demand or have unsuitable property space for harnessing the sun’s energy. An investment in solar energy may also be too risky and even unattainable for those without the credit or capital to do so.
When purchasing solar panels, a considerable amount of effort must be put into properly vetting installation companies, financing providers, and complicated contract agreements.
Without the right local provider, solar panel purchases from developers with poor warranties and customer service may end up costing homeowners more money than anticipated, which can quickly dig into the overall return on investment.
Leasing Solar Panels Pros
Above all, solar panel leases are advantageous above outright solar purchases because there are almost always little to no upfront costs. Home and property owners can still save money in long-term electricity expenses without the financial and cognitive weight of a hefty solar loan.
In a solar panel lease, the homeowner has significantly fewer risks with the parts, maintenance, and performance of the system as those considerations are typically handled by the leasing company with no additional costs.
Leasing Solar Panels Cons
Unfortunately, with a solar panel lease, you never truly “own” your solar panels so it is more difficult to maximize the amount of money you save while using the free energy of the sun. In a solar panel lease, monthly energy expenses will still be present (and sometimes variable) without gaining any true equity.
Aside from this, solar panel leases on a property make it a bit more complicated when selling a home or building. Leases must be bought out or transferred to the new owner, which can raise complications and expenses for potential buyers uninterested in an additional monthly payment on top of their new mortgage.
Deciding Between a Solar Panel Lease or Purchase
If you are having trouble deciding between a solar panel lease and an outright purchase, it is important to remember that the goal is always going to be finding the right system for your property, energy use, and financial position. Environmental benefits are moot, as solar leases and system purchases help develop clean energy capacity.
When weighing the pros and cons of leasing solar panels, your decision should almost always be made by what makes the most sense financially.
As a property owner, it should not be difficult to recognize that the absolute best long-term savings can be accomplished with a good deal on an outright solar power system purchase. However, leasing solar panels may be a better option for homeowners and businesses looking for instant monthly savings with a quick and simple transition to green energy.
Finally, with less risk overall, solar panel leases take a lot of the guesswork away from homeowners who do not have the time and energy for solar panel ownership or a DIY installation. So in the end, the decision to lease or purchase solar panels can almost always be determined by personal preference.
How to Get Started Leasing Solar Panels
Occasionally, entering into a solar lease agreement may be as easy as answering your front door. As green energy canvassers can be seen in nearly all fifty states, door-to-door solicitation is just one of many methods that solar companies use to find new customers. While you may be quick to shoo away uninvited guests, solar lease agreements are typically mutually beneficial for both the provider and the homeowner.
Of course, if they have not contacted you already, you will need to go out and find a solar panel leasing company that can offer discounted electricity rates in exchange for your roof or property space. We strongly recommend entertaining quotes from multiple providers in order to land the best deal on your lease.
Finding the Right Installer
Although there are not a ton of financial risks for a solar panel lease, there are still some risks to your property if the solar panels are installed by a disreputable or unlicensed company. While solar panel installation standards are in place in some areas, there are still many parts of the country in which inexperienced solar amateurs can potentially damage a roof or property with a shoddy installation.
In a lease agreement, the most important question to ask is, “who will be installing my solar panels?” As leases may be offered by financiers or third parties, it is critical that the company that you end up working with either provides in-house installation or maintains a network of reputable contractors.
Entering into a Solar Panel Lease Agreement
To find the right solar leasing agreement, it is important to look at more than just the bottom line. Solar leases are designed to save you money, but unexpected costs and fine print could end up costing you more down the line in an unfavorable contract.
Although solar leases almost always include free maintenance, some providers may not be eager to admit that subcontracted labor or out-of-warranty parts are not covered by the agreement and could add expenses. Plus, some solar leases have “price adders” built into the agreement which slowly raise the rates as time progresses.
Although we are not saying that you should hire a lawyer, it is critical that you understand all of the language and terms outlined in your solar panel lease agreement before signing the paperwork. If a salesman seems overly pushy, be sure to hold your ground and also avoid gimmicks or agreements with intentionally complicated language.
Conclusion: Is Leasing Solar Panels Worth it?
For a quick way to get up and running with cost and planet-saving renewable energy, solar panel leases are a great way for homeowners and businesses to harness and use the free energy of the sun. The process of leasing solar panels is absolutely worth it for busy, environmentally-minded property owners looking to shave some money off of their monthly electricity costs.
If you are considering installing solar panels on your property, we highly recommend exploring your options and speaking with a professional to determine whether or not a solar lease is right for you.
For the absolute easiest way to adopt large amounts of solar energy, we recommend thinking about a solar generator to create your own small-scale and portable DIY renewable energy station.
Since you are interested in leasing, you might want to check qualifications for Free Solar Panels and Grants for Solar Panels for Nonprofit Organizations.
How long does it take for solar panels to pay for themselves might be helpful to calculate how long it will take to cover all your expenses.