Deciding to go solar is the easy part! Even environmentally-minded people ask: “How will I pay for it?” A soon-to-end (2016) Federal Tax Credit reduces the cost, but with leasing, that benefit goes to the financing entity – not you. In most cases, it’s better to own, paying for the investment with a line of credit or loan for a PV system. Leasing options may work for people who don’t have access to funds, but companies that promote leases are the real winners. They own the system, and take advantage of the tax incentive. Plus, transferring a solar lease when selling your home is an added hassle.
NPR recently aired “The Great Solar Panel Debate: To Lease Or To Buy?” on its morning edition of Your Money with Jeff Brady that was helpful in that it compares two neighbors in similar situations who made different choices.
The NPR article mentions Renewable Energy Certificates (RECs), which are not common in California, a cleaner energy state. The way RECs work, industries that primarily use polluting or “dirty” energy can offset their use by buying credits from clean energy producers. When renewable, clean energy (such as solar) goes into the grid, it mixes with the existing energy pool, so the RECs claim the generation of that clean energy amount, not the energy itself.
Locally, there’s an affordable and easy option for folks who don’t have access to ready cash. Sonoma County Energy Independence Program (SCEIP) is a great way to pay for solar over time via assessments on property taxes.
Owning rather than leasing a solar electric system is nearly always the best option, saving you twice as much in most cases and giving you more control. Below is a comparison of buying and leasing to help you decide which option is right for you.
|Solar Lease or PPA option if…||Own or Finance option if…|
|Savings||Less concerned about maximizing financial benefits of a PV solar system||Interested in maximizing financial benefits of a PV solar system|
|Cashflow||Do not wish to make a cash investment||Have cash or can borrow to invest|
|Cost||Little or no money down||Little or no money down. Loan can be absorbed into the long-term mortgage at lower rates, or folded into tax bill with the PACE program.|
|Maintenance||A third party owns and maintains system||Systems require little or no maintenance|
|Terms||20 years||5-20-year loans, range from 4-8 %|
|Offsets||You do not qualify for any tax credits, depreciation, rebates or incentives||You qualify for tax credits, depreciation, rebates and/or incentives|
|ROI||You typically save 10-20% on your electric costs||10-30% annual ROI (return on investment)Free electricity for 25-40 years|
|Selling Home||Buyer will need to accept and qualify to take over the lease. If this is not possible you will have to buy out the lease.||Planning to sell in a few years and want to increase its value quickly. Smooth process.|
|Value||You put no money down but you will typically pay 2-3 times the cost of the system over the term of the lease.||When you own, you receive the best return on investment, increase the value of your home and get free electricity.|
The graph below is an example of the savings with a 5kW system and a pre-installation utility bill of $175/month.
In addition, John Farrell, from the Institute for Local Self-Reliance in Minneapolis, interviewed by NPR for the segment on buying or leasing a solar electric system, has developed a solar calculator that can be adapted to your region and realities.
If the paperwork for either of the options concerns you, no worries. Solar Works handles it all for you.
If you’re considering solar for your home, business or community property, please call (707) 829-8282 or email firstname.lastname@example.org. Solar Works has been helping people connect to the sun for 30 years. We make solar easy and hassle-free, providing information, support, quality and long-term service to give you the best return on your investment.