Solar panels are becoming more and more popular in the US due to the obvious advantages of renewable energy sources. Today, the United States is one of the largest users of solar energy: data from the National Renewable Energy Laboratory (NREL) indicates the capacity of community solar installations has grown rapidly since 2016 (not taking into account industrial solar panel installations). In 2021, over 2 GWac were installed, the greatest annual installation amount to date. As a result, in 2022, 45% of the newly added capacity for producing power came from solar energy.
Why is that? First of all, there is the constant growth of the electricity rates in the US: the average price for the kilowatt rose from 13.15 cents in 2020 to 15.12 cents in 2022 – almost 15% growth in two years!
Source: Statista
Secondly, local governments provide tax refunds and other financial incentives to install solar panels. And combined with a stable financial and banking system we have this prominent result – 3.6 million solar panel installations in 2022.
At the same time, for many households, the start-up costs ranging from $16,000 to $41,000 (before the federal tax credit) may be an obstacle. Here’s where solar leasing becomes important. Solar panel companies install solar panels on homes, and homeowners can start going green by leasing solar panels. Let’s take a closer look at the pros and cons of leasing solar panels.
So, let’s go through how solar leases work.
Source: EcoWatch
In general, leasing solar panels is a financial instrument that allows you to get the solar panels without immediately emptying your bank account. The solar company installs and maintains the solar panels, and in return, the homeowner pays a fixed monthly lease of $50-250 for a specified lease term, usually ranging from 15 to 25 years. After the installation, you can use the energy you produced for your living or store it in the backup battery.
What does leasing solar panels make different from the loan? The main difference is that the homeowner who buys the solar panels with the loan becomes the owner of the panels. Meanwhile, with solar leasing, the solar provider keeps ownership of the panels during the lease term. However, some lease agreements may offer the option to purchase the system at the end of the solar lease period.
Below, we are going through several types of solar lease plans.
There are different types of solar leases. Here, we will discuss three major ones with different leasing rates and diverse costs of leasing solar panels.
This type of solar panel lease focuses on short-term benefits with the option to upgrade technology. Unlike a loan or a Power Purchase Agreement (PPA) (see below), where there is a focus on eventual ownership, operating solar lease is more short-term and often offer flexibility for the solar panel lessee.
Key features of operating leases for solar panels:
Here is a rough calculation of the solar lease plan given the price of the 6kWp solar panel system, which costs $ 17,700, the operating solar lease term is 10 years, and the annual interest rate is 5%.
Lease term | Annual interest rate | Monthly lease | Final leasing cost |
10 years | 5% | $198.26 | $23,791 |
This is almost like a loan that lets homeowners own the solar panel system after a set period. If the homeowner wants to own the solar panel system at the end of the solar lease term, they choose a capital solar lease. The monthly lease payment also includes both interest and principal, with the goal of transferring ownership to the lessee at the end of the solar lease term.
Key features of capital solar lease for solar panels:
Check this rough calculation rough calculation how much is a solar lease per month and what the final lease solar panels cost, considering a 5% annual interest rate.
Solar lease term | Annual interest rate | Monthly lease | Final leasing cost |
15years | 5% | $149.52 | $26 906 |
It’s like the electrical company would bring a small power plant into every house and sell electricity directly to the customer. How does that work? Read the next paragraph.
Source: Energy theory
Be honest – every month, you think about how to jump off the electrical grid and become truly independent. And that could be with solar panel leasing.
With Power Purchase Agreement (PPA) any household can pay the solar company not for the solar panels, but for the electricity.
How it works?
In this way, a PPA can significantly reduce electricity bills and decrease dependence on grid-supplied power during daylight hours. So, instead of owning the solar panels, the customer enters into a long-term agreement to buy the electricity generated by the panels. The rates are often fixed or may have predetermined increases, providing some stability in energy costs.
It sounds like an escape from the traditional electricity bills, and PPA can reduce dependence on the grid during daylight hours. But it doesn’t typically replace the grid entirely. Here are a few reasons why:
Generally speaking, while a Power Purchase Agreement significantly reduces reliance on the electrical grid and can provide substantial cost savings, it typically complements the grid rather than serving as a complete substitute. Homeowners or businesses looking for more autonomy may explore integrated solutions that include solar panels, energy storage and solar batteries, and backup generation systems.
An average solar panel system installed in the US has a 6.0 kWp and costs about $17,700 (before federal tax credit).
Here is the rough calculation of how much a solar lease is per month and the final leasing solar panels cost, considering a 5% annual interest rate.
Lease plan | Annual interest rate | Monthly lease | Final leasing cost |
20 years | 5% | $123.48 | $29,635 |
15 years | 5% | $145.37 | $26,167 |
As you can see, the shorter the lease period, the lower your final leasing cost is.
The average house in the US uses about 11,703 kWh of energy per year, and the average electricity price in 2022 was 15.12 cents per kW. So, the annual electricity costs are $1769, which equals $35 380 in 20 years (if the electricity cost will be fixed during these years).
So, to make the lease deal efficient, the solar panel system has to cover more than 70% of the household’s energy consumption. Is that technically possible? Yes, if you are ready to spend extra money on solar batteries.
Stuff happens during your lifetime, and you may want to sell a house. And how does the solar lease influence you? Here are several things you need to consider before sealing the solar lease deal.
Source: Berkley Lab
So, you already know how solar leases work, what the types of solar leases are, how big the monthly lease rates are, what the solar panels cost is, and what the final cost of leasing solar panels is. Let’s sum up all the information into the pros and cons of leasing solar panels
Source: ISG
To put it simply, solar leasing may be compared to an inexpensive ticket to the renewable energy celebration. For those who want to become green without having to shell out a ton of money upfront, it’s a great alternative. Well, things aren’t always sunshine and rainbows. The transfer of your solar lease may seem like a conundrum when it comes time to sell your home. While some purchasers could throw caution to the wind, others might go all in.
Solar leasing does, however, come with advantages. Updated with the newest solar technology? Check. Not a single maintenance headache? Check again. You also get to preserve the planet without having to buy the whole solar system. Win-win, isn’t that right?
But make sure you read the agreement before getting started with the solar leasing. It’s all in the details, people. Consider what would happen if you decided to relocate and wanted to save those panels in the event that you have to bail early. There is plenty to think about.
Ultimately, it is up to you. Solar leasing can be your best option if you’re all about protecting the environment and your money at the same time. However, that’s a different story if you’re hoping to get completely off the grid and possess your own solar system. Make sure you are happy with the conditions of the lease by speaking with the solar specialists before making your decision. Happy solar vibes to you! 🌞
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