YOURENERGY.colostate.edu

Close Icon
   
Energy Questions Answered

Solar Lease Considerations   arrow

Residential Solar Lease Basics

A residential solar lease is a contractual agreement between a homeowner and a solar provider in which the homeowner leases solar photovoltaic (PV) panels from the provider for generating electricity. Under the terms of the lease, the homeowner is typically responsible for making monthly payments to the solar provider in exchange for the installation of and electricity generated by the panels and the insurance and necessary repairs of the PV system. The PV system is tied into the utility grid in order for the solar provider (and ultimately the homeowner) to take full advantage of financial incentives.

Down Payment

One of the most attractive features of a solar lease is that a homeowner can put as little as zero money down on the system. On the other hand, purchasing a system with a bank loan usually requires at least some down payment. Some homeowners are adverse to or unable to get a bank loan for this purpose. In addition, a 10-year bank loan can result in relatively high monthly payments for a system that lasts 20 years or more. Purchasing a solar PV system with cash can require upwards of $10,000. Recently, “solar loans” offered by many of the same companies that offer leases also offer a zero money down option. These products also allow for system ownership so may be attractive to some homeowners.

Maintenance

Another attractive feature of a solar lease is that the contract usually holds the solar provider responsible for performing any required maintenance on the system including replacing inverters. The solar provider has an incentive to make sure the system is operating well because they guarantee a minimum annual level of electricity generation and pay the homeowner a pre-determined price for every kilowatt-hour below that minimum should it not be reached. The solar provider also covers insurance for the system, although insurance against hail damage may be considered “force majeure” so would need to be acquired through an existing home insurance policy.

Transferring A Lease

Considering the status of the lease should the homeowner sell the home, a few options exist. One option is to simply transfer the lease to the incoming homeowner assuming that homeowner meets the credit requirements of the solar provider. A common second option is to prepay all remaining lease payments and add the value of the system to the asking price of the home. Some solar providers may even let you move the system to your new home, assuming you pay all associated costs. Another option offered by some solar providers is for the new buyer to purchase the system. Most solar leases do not place a lien on the home, which is a common misconception.

End Of The Lease

Even if the house isn’t for sale, many solar providers allow homeowners to purchase the system at the end of the lease (some will also allow for purchase of the system before the end of the lease term). Other options once the end of the lease term is reached include having the solar provider remove the system at no cost or extending the term of the lease.

Amendments

It is also important to know whether the contract can be amended and if so in what way(s). There have been cases of solar providers amending the contract to raise rates, leaving the homeowners with no recourse and financial instability.

Last updated: February 15, 2018 at 13:03 pm