You want solar but don’t have the money for the up front cost – what are your options?

What’s the Diff? Solar Lease vs. Solar PPA
Published on June 5, 2009 by Tor a.k.a. “Solar Fred”.

Here are the basics:
PPA stands for “Power Purchase Agreement.”

  • PPA gives you a low ($1000 or more) up front cost.
  • You’re locked in for 15 to 18 years to this agreement, which is transferable to a new owner or home.
  • They charge you a set electrical rate that is sometimes flat, and sometimes calculated to rise over the term of your agreement. So instead of paying for coal fired electricity rates, you’re paying for PPA rates generated through your solar panels.
  • The PPA company takes care of the maintenance and any needed repairs and monitors your system.
  • You don’t get any tax benefits or State rebates or Renewable Energy Credits (RECs).
  • You usually have some kind of option to buy later or at the end of the agreement for a set price per watt. Sometimes this is negotiable (and you should at least try since used solar panels aren’t worth much.)
  • You need to have an excellent credit rating to qualify.
  • You’re always tied to the grid, so any residual electricity needs that your solar panels don’t produce is covered by your utility.

Now for a Lease:

  • There is usually no down payment, so 0 down.
  • You’re locked into 15 years or more years, which is transferable to a new owner or home.
  • Unlike a PPA, you do NOT pay for any power that your solar panels generate.
  • Instead, you pay a lease payment plus any extra power you need buy from your electric company. So, solar panel power is technically free, but you have a set lease payment that rises 3 to 4% a year. That’s typically less than the 5% rate increases by your electric company. Some programs, like the CT Solar Lease program, is a flat rate, so no yearly increases.
  • Like a PPA, they may take care of maintenance and repairs and monitor your system, but that’s not always the case.
  • Similarly, you don’t get tax benefits or rebates or Renewable Energy Credits (RECs).
  • Like PPA’s, you have an option to buy later or at the end of your term for a set residual price. You should try to negotiate the Fair Market Value (FMV) at the end of the lease, as used panels ain’t worth much more than the cost of taking them off your roof.
  • You need to have a good to excellent credit rating also, depending on the program.
  • Also like a PPA, you’re always tied to the grid, so any residual electricity needs are covered by your utility.

So, bottom line:
PPA, you pay for power generated by solar panels with some money down and flat or yearly increases on your PPA electric rate. You also benefit from tiered rates.

Lease, you have no money down (typically) and pay a flat leasing fee that rises every year by a certain percent, plus left over utility bill. You also benefit from tiered rates.

While both these options are good for low cost financing, in the long term, you’re better off financially using a home equity loan to buy your panels.  Also, most often than not the PPA and Lease are not always open to residential solar here in Tennessee.  


Original Article

comment:  Leasing and the PPA are on the cusp of options available to businesses and large tract owners. TSEA is asking for more information from the companies that are operating in Tennessee or are planning on entering the Tennessee market. Contact us at: info@tnsolarenergy.org

2 comments

  1. Marla Stair-Wood says:

    Please explain exactly why solar leasing options are not available in Tennessee. Thank you.

    • SLevy says:

      The reason is two-fold. First, the income from the TVA feed-in tariff is low and secondly, the restriction that the site cannot produce more energy than it uses in one year defeats solar leasing. The only remaining option that makes sense is to refinance your home. My experience is that I refinanced my home and got 3% rate plus cash equity that could be used to improve the home or to add solar or both. Let us say that you use the energy produced by a five kilowatt solar array on your roof. It will cost you about $4.50 per watt installed. So you generate enough energy to pay for your electricity bill. But you also get a feed-in tariff which is extra money for the solar energy you generate. Let us say, for example, that TVA will have a feed-in tariff of 9 cents per kilowatt hour. That is income to pay down the mortgage. If you are in the right income bracket, you can take advantage of the 30% tax credit on your income tax.

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