By George Harvey
There are reasons to support each side on the question of buying versus leasing solar systems. Different people have very different points of view.
There is a temptation for many people to lease simply because it is made very easy by some companies. While others take the attitude that any solar power is better than no solar power, leasing has a strong tendency to mask details. So it is best to check the facts and read the fine print!
Perhaps the best way to start on any renewable energy project is to establish firmly what your intention is. Do you want to save the planet? Are you motivated by saving money? Perhaps the ability to weather a storm appeals to you most – or, all of the above? If your real goals are clearly stated, it will simplify your decision making.
In the final analysis, if you are going
to put a solar system at your home,
buying for cash is more cost-effective
than financing, and financing is
more cost-effective than leasing.
The next step is to review available programs. There are many incentives, both from the federal government and from the states. Among them, net-metering is probably the most important for grid-tied systems, and different states have different policies. Want the details? Check the Database of State Incentives for Renewables and Efficiency (DSIRE) www.dsireusa.org.
You should understand Renewable Energy Certificates (RECs). Each REC is proof that a megawatt-hour of electricity was produced using renewable sources and put on the grid. If your system can produce RECs, you can sell them. The problem is that they can then be used by utilities to increase the percentage of renewable power they can take credit for so they can keep old fossil-fuel plants running. If you care about the planet and create RECs, you should consider retiring them instead of selling them.
A long-term power purchase agreement (PPA) might be another option, even for a small system. If you puchase power under a PPA, however, you might pay less per kilowatt-hour than your current utility bill and not have to spend any money up front.
Leases differ from one another. They come from different sources, including the manufacturer, the installer, or a finance organization. Each provides different options, and each has its own advantages and disadvantages.
If you lease a system, you have the advantage of not having to worry so much about it. Such details as maintenance, insurance, and warranties are usually (but not always) the responsibility of the entity that leased you the system. You should find out what happens in regard to net-metering and RECs under the terms of the lease. Many leases would have them go to the owner, not the leasee, but a financial institution may see this differently than a solar manufacturer would.
One thing you do have to know, before you sign a lease, is what happens if you sell the house or property where the system is installed. Another concern is what happens at the end of the lease period; what sort of option to buy do you have?
Leases usually give the lowest rate of returns on long-term capital expenses. On the other hand, a lease can be had with little or no cash down and few worries.
If you purchase your own system, you will have to take responsibility for it, including its maintenance, insurance, and warranties. As the owner, you would probably get the RECs, if there are any to be had. There are different ways to buy, including outright cash purchase, financing through a bank or other commercial organization, and financing through a non-profit organization, some of which are state-run.
The greatest financial return on a home solar installation is usually from a cash purchase, without financing. Nevertheless, financing is usually more cost-effective than leasing.
Financing can be had at very low rates in some cases, and this is especially true if it comes through a non-profit organization. There have been grants that allow people with low income to finance systems with little or no down payment or, at interest rates that are low to zero. It is always worth finding out what is available, and it is worth recommending DSIRE again as a resource, www.dsireusa.org.
There are a number of tools available online to help with the decision-making process. One is provided by the Institute for Local Self Reliance. ilsr.org/ultimate-solar-calculator
Another web page that might be of use, with its own set of tools is EnergySage: energysage.com/solar/financing/leasing-companies.