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Solar: Lease or Own?

One of the most common obstacles to going green is upfront costs (though we all know the long-term savings are plentiful). Many new homes are built solar-ready, with intentions of installing panels once the construction loans are paid down. In April 2008, SolarCity, a Foster City, California-based solar energy company, launched SolarLease to offer residents a way to immediately capture savings from solar power.

  • Published on: 08/19/2009
SolarCity San Francisco Residence

SolarCity's eight-month waiting list is a clear indication that there are customers out there who understand the benefits of solar and feel ready to try it, but many more homeowners lack the information they may need in order to choose to use solar, and figure out what approach is best for them. I recently sat down with Solar City co-founder Lyndon Rive and spokesperson Jonathan Bass to get down to the nitty gritty about leasing verses owning.

The most important thing to know is that is you eventually want to own your own solar system, you should buy it in the beginning rather than entering a lease first. The SolarLease program is not a lease-to-own program, and SolarCity offers loans for purchasing the system. While leasers do have the option to purchase their system at the end of the lease, it's rarely cost effective: The value of the equipment is determined by the electricity the system produces and therefore the cost of the system tends to increase over time because the cost of electricity also increases as the clock ticks forward. "If you want to own a system, buy it upfront," Bass says. "But, if you want to maximize upfront savings and immediately lower your electricity bills, lease."

With the leasing plan (available to customers in California and Arizona), you can choose to skip making an initial payment and just pay the monthly leasing bill. Or, you can put money down to lower your month-to-month costs. Rates are based on the size of the solar system, complexity of the installations, and local rebates, among other factors. On the low end, the cost can be as little as $30 per month, but it can go up to several hundred dollars each month.

The cost probably still sounds unclear. Fortuantely, there's the SolarCity Solar Calculator. Before launching SolarCity in 2006, Rive and his brother and co-founder Peter Rvie founded the software company Everdream, which was acquired by Dell in 2007. Peter acted as the chief technology officer at Everdream, and the two brothers combined their computing talents to create the Solar Calculator for estimating actual lease costs. The online calculator asks a battery of questions about your home and its location as well as your current energy bills to help determine an estimate.

The state and age of your home and its location are two big factors that affect cost. Houses with older or flat roofs require more extensive installations, as do those with old electrical systems. In certain cities, you can receive rebates that are added on to the 30-percent federal tax credit for using a solar-energy system. In San Francisco, the GoSolarSF program offers a $4,000 rebate for approved installers. (For the SolarLease, these rebates and savings are incorporated into the lease to lower the monthly costs.)

What does this mean in terms of savings? On average, homeowners will save 15-percent with a SolarLease-financed system, meaning their lease payments plus their new electricity bills will be 15-percent less than their electricity bill before they had the solar system installed. Bass gives this example: "A typical three-bedroom home with a current electricity bill of $200 per month might lease a 4kW solar system. The new solar system will generate enough electricity to offset what the homeowner is currently paying to the utility company from $200 down to $60 per month. The SolarLease payment would be $0 down and $110 per month, amounting to a savings of $360 in the first year. The lease includes permit, installation, maintenance, a web monitoring system, and guaranteed production."

SolarCitySanRafaelResidence.jp

In almost all cities where the leasing program is offered, the lease length is 15 years, and thusfar, none of SolarCity's 1,600 leasers have broken their agreements. If a customer were to move, he'd have the choice of transferring the lease to the new homeowner, prepaying the lease and incorporating it into the cost of the sale of the home, or removing the system and transferring it to his new home. When their leases are up, Bass says the best options are to renew the lease or purchase a new system, as technology will have changed since the initial installation. But again, he advises purchasing at the beginning if you plan to one day own a system. "It doesn't mean writing a check for $30,000," he says. "You can get a loan and make payments over time."

The company's newest panels have a streamlined design to address another common concern of potential customers: aesthetics. Lyndon Rive argues that now there is now no reason not to go solar, whether its through a lease or if you choose to purchase the system. "It's affordable and looks great," he says. "Why not do it?"

 

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