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Solar Energy Leasing Explained

Solar Leases & PPAs – Solar leases and Power Purchase Agreements – also known as PPAs – allow you to take advantage of the financial and environmental benefits of solar without owning your solar panel system.

Both options are similar to renting. With a solar lease, you pay a monthly fee for the system and get to use all the electricity the solar panels produce – for free. With a PPA you agree to purchase the electricity the system generates at prices that are lower than what you would pay your utility.

Most leases and PPAs have $0 down options so you won’t pay anything upfront. Your monthly payments for a lease or PPA is usually less than your current electric bill so you begin saving right away. A solar lease or PPA will help you to save 10%-50% over your utility’s electricity bills, without making any upfront investment.

And, over time, as electricity prices continue to rise, your savings will continue to grow. Although solar panel systems require little to no maintenance, if something were to happen, the lease or PPA company would be responsible for any repairs since it is the owner of the system.

Securing a lease takes less time and effort than securing a loan. Generally, you sign a 20 year contract with the leasing company and they will install the panels at your home. You will need to have a credit score of more than 700 to qualify for a solar lease or PPA.

Today, these options are only available in a limited number of states. Where they are not available, you always have the option to get a solar loan. Since the leasing company owns the solar panel system, many of its financial benefits – things like rebates, tax credits and incentives – would go to them.

So if you are looking to maximize your investment in solar, lease and PPAs aren’t the best choice. They are a great option though if you’re looking for a simple solution – one that provides you with the environmental benefits without responsibility for maintenance.

They are also a good option if your tax bill is less than the tax credit you would receive. If you decide to sell your home before the end of the contract period, you can do one of two things. Option 1: You can work with the new buyer and the lease or PPA company to have him or her assume the remainder of the contract.

In this instance, the company would verify the buyer’s credit worthiness, but this is generally not an issue since they already needed to qualify for the mortgage used to purchase the home. Option 2: you can buy the system from the lease company at fair market value and then include it in the price of your home at the time of sale.

Now that you understand your options, you’ll need to choose the one that’s best for you.