Do not lease a solar system or sign a Power Purchase Agreement (PPA)

As SolarAcademy, we recommend homeowners and property owners to stay away from solar leases or power purchase agreements (PPAs). Instead we encourage homeowners to purchase (with financing if needed) their solar systems outright.

Unfortunately, in the early boom years of residential solar in the US (2010-2014) solar lease and and power purchase agreement solutions have gained tremendous market share from about 20% of the market to about 80% of the market. Only recently, thanks to increasing consumer awareness, in the second half of 2015, Leases and PPAs started losing market share to straight purchases or financed-purchases.

A typical solar lease or solar power purchase agreement pitch goes like this:

“Hey Mrs. Homeowner,

Want to go solar at no cost to you and save some money? We can help you with that. We will put up a solar system system on your roof (which we will own for the next 20-30) and you will pay us for the electricity it generates. We will make sure you save about 20-40% on your electric bill.  And you won’t have to worry about its complex technology or maintaining it.”

What they conveniently do not tell you is this:

  • You can save up to 85% of your electric bill (in the same 20-30 year period) if you purchased the system versus signing a lease.
  • This is because when you own the system you save an additional 30% on the price of your system thanks to the Federal Investment Tax Credit. Furthermore, you will not be paying for hefty financing fees or the annual escalators built into the PPA agreements.
  • The technology behing a solar panel is quite simple and there is really not too much to be scared of in owning a solar system. A  PV solar system is not that much more complicated than your HVAC system or your hot water heater boiler.
  • Most solar systems run with no or little maintenance for up to 30-40 years.
  • Any solar installer by law already provides a 10-year workmanship warranty by default.
  • Almost all of the solar equipment sold these days come with 25-30 year warranties.
  • The one exception to that is the inverter. Most inverters come with a 10 or 15 year warranty. A typical inverter replacement (which likely will happen at year 12-15) will cost you not more than $1,000 – $2,000.  In another ten years, the cost of an inverter will likely be much cheaper.

For these very reasons, we recommend home owners to stay away from solar leases and PPAs and instead look into owning their own systems.

You might be thinking, “But what if I don’t have the cash to buy a whole system”.  If that is the case, we recommend purchasing the system and financing it via your mortgage, home equity line or various other solar financing options that are available in the market today.