These days, you can buy into solar power much like you buy your way into a new car. Either buy up front or lease for a set term at a monthly rate. The concept of leasing home solar power systems is the brainchild of two brothers, Peter and Lyndon Rive. In 2006, they founded SolarCity, which includes a groundbreaking solar leasing program that they’ve dubbed SolarLease.
The Rive brothers understood that the biggest barrier to home solar power was up front costs, even now when government incentives are better than ever. Homeowners must come up with the vast majority of up front costs for equipment and installation on their own. By leasing a solar power system, however, homeowners put zero cash down while doing their part for the environment and saving on electricity bills.
But that doesn’t mean leasing residential solar panels is always the best choice.
SolarCity is providing a valuable service to homeowners and the solar industry. Their months-long waiting list will attest to that. And in just three years, the company has grown considerably. They’ve already expanded their service area from California into Oregon and Arizona. But even SolarCity is quick to point out that leasing is not always the best option.
If You Want to Own, Don’t Lease
In a recent sit-down with dwell.com, SolarCity CEO Lyndon Rive and spokesperson Jonathan Bass laid down the trump card for deciding whether to lease or own. “If you want to own a system, buy it up front,” said Bass. “But if you want to maximize up front savings and immediately lower your electricity bills, lease.”
On average, a SolarLease system will save 15 percent on annual electricity bills. Rates are based on the size of the system, complexity of installation, available rebates and incentives and other factors. In other words, just like the cost of buying a residential solar system, lease rates are variable and unique to each situation.
Still, the lease programs are designed to save money and include permits, installation, maintenance, web monitoring and guaranteed production. But again, it all comes back to whether or not you want to someday own a system. In that case, it’s best to find a loan or some other way of financing the system.
With SolarCity, lessees do have the option of purchasing their system when the lease expires (typically after 15 years). However, noted Bass, this is rarely cost-effective. The value of the system is determined by the amount of electricity it creates. So systems become more expensive over time as the cost of electricity increases.
The question of whether to lease or own your residential solar power system boils down to a few big factors. First of all, if you have the cash to put down up front, then buying is always the better option. You may not see immediate savings, but after your payback period is complete, you will enjoy free electricity for the life of the system.
However, if up front costs are the only thing holding you back, then a lease is an excellent way to go. You put no money down, enjoy immediate and consistent savings and get all the hassle taken care of for you. There is always the option of renewing the lease at the end of its term as well.