Solar Lease Opinions
Hello. We are considering a solar lease, as a purchase may not be feasible at this time. We understand that we would not get the tax credit. The solar company would therefore install and maintain the panels. We would have the option of buying the system at year 6 at fair market value, basically never having to pay for installation, and we would still get to use utilize NEM compensation. The sticking point right now is that the lease involves a 25-year agreement, with the rate increasing 2.99% per year. We did the math, and by year 25 the rate would still be competitive. But we just don't like the idea of being beholden to the company for 25 years if we don't purchase the system. Has anyone else done this? Is it really not that big of a deal? We would love to hear others' experiences. Thank you!
Parent Replies
There are very few situations under California's current net metering where a solar lease makes any sense, in my opinion. Even a loan is hard to make pencil out right now, and there you would at least get the tax credit. What you are talking about sounds like a solar power purchase agreement (PPA), where you pay a set rate per kWh produced whether you use that power or not, and that rate increases by a percentage each year (often 2.99%). In the winter months in the Bay Area, you likely won't produce enough power to cover your usage, so you'll still need to buy power from PG&E. In the summer months, you may well be producing more than you need, so you'll be paying the solar company for power you didn't use. Under the state's current net metering, you don't get to bank that power for future use as you did under the NEM 2.0 system--instead, it just goes back to the grid and PG&E pays you for that power at wholesale rates, which are a fraction of what you had to pay the solar company for the same power. This assumes you do have a sizable battery so are capturing as much of that power as possible for use in the evenings, but there's a limit to how much you can store. Make sure you really do your research before signing on to something like this--and don't be afraid to ask for more (for instance, you can ask for a lower starting cost per kWh and a 0% escalator instead of 2.99%). Also be aware that the state is set to approve a plan soon that will add a fixed rate to all bills and reduce the cost per kWh to implement an assembly bill passed a couple of years ago that requires fixed income-based electricity fees. The proposal from the CPUC is a fixed fee of $24/month with discounted rates available for low-income households, and lower per kWh electricity costs for all households. This will change the math on solar leases and loans as well. In your shoes, I would wait until you're in a position to purchase the system--unless you're building a new home or doing a renovation that requires solar, there's no rush.
OP here: Thank you for that information! I probably should have mentioned that we have an approved NEM 2.0 application from last year, so we'd still get that, but time is of the essence because the solar company won't wait much longer to install, and thus we'd lose our NEM2.0 if they cancelled the contract. A battery is not part of our current contract. Would these facts change your view at all?
We bought a system directly for our old house and loved it. We moved to a house with a leased system a couple of years ago and do not love it. We had to have the roof redone and coordinating the process with the solar leasing company was a huge pain in the neck and it was expensive. Also, we cannot upgrade the system for our needs as we convert the house slowly to electrical appliances, or add on a battery system. I do not recommend leasing. If you can, purchase the system outright.
Previous poster here—yes, if you have an approved NEM 2.0 application, I do think it makes sense to move forward with solar if you can...although still not necessarily with a lease. The math is definitely better if you can bank your NEM credits, but some of the pitfalls are still the same, especially if there's a possibility that the system will produce more than you use. PG&E allows you to transfer your NEM 2.0 application to another installer and it is 100% worth getting some additional quotes if you're at all close to being able to buy outright or with financing--should be quick because you can't modify the approved application materially, so you're basically just asking them to quote you for the same system size. The cost per watt has come down enormously since the NEM 2.0 rush last year. You don't need a battery under NEM 2.0 (and you can always add one later). Depending on your finances, you might also consider a loan if you think you might be able to pay it off sooner rather than later. If you do want to consider transferring your application, definitely reach out to the PG&E solar hotline. Unlike some of the other arms of PG&E, the staff there are actually quite helpful and you usually get a live person. They can talk you through your options. Good luck!