An estimated 10.6 gigawatts of solar energy generating capacity were added to the U.S. energy mix in 2017 . In the residential rooftop category, solar leasing agreements were responsible for a high percentage of the new installations, as they have been for the last several years.
Solar leasing has established an indelible presence in the solar energy marketplace, and the growth of solar leasing arrangements is a major reason why solar has advanced so rapidly.
Quick Navigation for Leasing Solar Panels
1. An easy entrance into the solar marketplace
2. Elimination of upfront costs
3. No responsibility for repairs or maintenance
4. Possibility to buy your solar energy system
5. Your solar panels will be tied into the grid
6. Possibility to transfer your lease
1. Solar leasing companies claim the rebates
2. No net metering credits on utility bills
3. No guarantee of predictable electricity prices
4. Smaller saving
How does leasing solar panels work?
Is solar leasing the best option?
How does leasing solar panels work?
Solar leasing provides an economical entrance point for homeowners interested in making the switch to renewable energy.
Under solar leasing arrangements, a solar financing and installation company agrees to install solar panels on a homeowner’s rooftop, normally for no money down, and to make all the connections necessary to provide electrical power to the property.
In return, the homeowner agrees to pay a fee for the rights to use all the electricity the panels produce for a set period of time, usually between 15 and 25 years. Once this lease is over, the arrangement ends and the homeowner has no further financial liability.
Depending on the specifics of the lease, fees may be paid monthly, yearly, or in a lump sum. Monthly payments are the most common choice, which essentially recreates the traditional relationship between utility companies and consumers.
One alternative version of the solar lease as just described is called a Power Purchase Agreement (PPA) . When choosing a PPA, the person leasing the panels agrees to pay a set price for each kilowatt-hour of electricity they consume, meaning their monthly payments will fluctuate based on how much power they actually use.
While conventional solar leasing fees generally rise at a rate of between 2.9 percent and 3.5 annually, in Power Purchase Agreements the price per kilowatt-hour is often flat for the duration of the contract .
Further reading: Solar Leasing versus Power Purchase Agreements: Which Is Better?
Naturally, solar leasing schemes wouldn’t be attractive if the monthly fees for solar energy were equal to or higher than the fees for power obtained from the grid. But leasing fees are pegged to come in below the per kilowatt-hour costs of utility-produced power.
This allows the consumer to reduce their utility costs by 10-30 percent on a monthly basis, and that makes the arithmetic of solar leasing an unquestioned financial winner .
Advantages of leasing solar panels
If you’re interested in solar energy, you aren’t alone. From 2015 through 2017, homeowners in the United States installed 6,909 gigawatts worth of rooftop solar panels, which was double the amount added in the previous 10 years .
Solar leasing and PPAs account for over half of this total, and there are some excellent reasons why solar leasing has proven so popular.
Here are some of the advantages of solar leasing …
#1 A quick and easy entrance into the solar marketplace
Buying solar panels can be a complicated, drawn out affair. Product options must be compared and analyzed; multiple companies must be contacted; after a decision is made financing must be arranged; permits have to be obtained; and so on.
But solar leasing simplifies the process considerably. After the lease has been signed, installation can begin immediately.
#2 Elimination of upfront costs
While the costs of solar energy have come down, if you purchase rooftop PV panels you’ll still have to come up with the money from somewhere.
But zero-down solar leasing or PPA agreements require no initial investment. The equipment and the installation are both free, and all you’ll ever owe are your monthly fees.
#3 No responsibility for repairs or maintenance
If your photovoltaic panels have defects, operate at low efficiency, require cleaning, are damaged in a storm, get shaken loose during an earthquake or require an expensive new inverter, you won’t have to worry about any of it.
The solar leasing company and their contractors must take full responsibility for repairs and maintenance.
#4 You can buy your solar energy system at the end of the lease
You’ll always have the option of purchasing your solar panels after your solar lease is up, at fair market value adjusted for their age and current level of productivity.
Then again, if you want to have them removed from your home the solar leasing company will arrange it at no charge.
#5 Your solar panels will be tied into the grid
Solar energy can at times be intermittent, depending on the weather conditions, and that can create supply problems.
But solar panels that are leased will be tied into the grid, which means you can still receive electricity from your utility company if and when you need it .
#6 If you sell your home, you can transfer your lease to the buyer
The terms under which you can do this will be spelled out in your lease.
To qualify for a transfer, the buyer will need a good FICO score, or have paid for your home in cash, or agree to pay an extra fee to the leasing company .
But as long as you follow the guidelines set up by the leasing company, you should be good to go—assuming the buyer wants the solar panels, of course, given their impact on electricity costs.
Further reading: Buying or Selling a House with Solar Panels: A Comprehensive Guide
Disadvantages of leasing solar panels
Solar leasing may be more quick and convenient than purchasing solar panels, but there are many reasons why buying a solar energy system might be a more sensible choice.
The disadvantages of solar leasing include:
#1 Solar leasing companies get to claim the tax credits, rebates and SRECs
If you purchase solar panels in 2018 or 2019, you’ll be able to deduct 30 percent of your costs (including installation) from your federal taxes .
You’ll also likely be eligible for state tax credits, manufacturer’s rebates and special benefits called Solar Renewable Energy Certificates (SRECs), which can be sold to utility companies for a profit .
Needless to say, these financial perks will cut your solar energy costs substantially. But if you lease solar panels, all of these benefits will belong to the solar leasing company.
#2 No net metering credits on utility bills
When you install a grid-tied solar energy system, you can sell any excess power your panels produce back to the utility company for credits, which will appear on future utility bills.
This will come in handy on cloudy days, or extremely cold days, when your solar panels aren’t producing enough energy and you need to purchase electricity from the grid.
The practice of selling solar power to a utility company is called net metering, and you can only participate if you own your solar panels . If you lease, your solar leasing company will get the net metering benefits.
#3 There are no guarantees that your utility company will raise electricity prices as much as predicted
Over time trends change, and there’s no guarantee that utility companies will continue to increase prices by four or five percent on average each year.
Utility-scale renewable energy projects may reduce the costs of energy production as solar and wind technology improve, and if that happens you’ll be locked into solar leasing or PPA fees that may be non-competitive.
#4 Your savings from solar leasing will pale in comparison to your savings if you purchase your solar equipment
This is the trump card, the biggest factor that tilts the playing field toward solar purchasing.
Over the terms of a 20-year solar lease, you can expect to save about $5,000 on energy costs, compared to what you’d pay if you were getting all of your power from the grid .
But if you own your solar panels, the savings are far greater.
If you pay for your solar energy system with a solar loan, you can expect to save as much as $35,000 in energy costs over a 20-year period, and those savings will rise to $40,000 if you pay for the whole system upfront in cash .
Leasing vs. Buying: Is Solar Leasing the Best Option for You?
The cost of a new rooftop solar energy system has fallen considerably over the past few years, and if your home is typical in size you can probably have solar panels installed for approximately $15,000—$18,000, including the price of equipment and labor .
Factoring in tax credits and rebates, estimates are that a rooftop solar panel energy system can pay for itself through energy savings in as little as three-to-five years, and that is a remarkable development that helps explain why residential solar purchases were more common in 2016 than new solar leasing arrangements, for the first time in many years .
As of 2016, the average home was using 10,766 kilowatt-hours of electricity per year . At an average price of 12.95 cents per kilowatt-hour, this would leave the typical homeowner with annual electricity costs of about $1,400 a year, or about $116 per month .
These are figures you should keep in mind, as you contemplate purchasing solar panels and paying back the loan you’ll need to afford them.
Banks, credit unions, independent financiers and solar installation companies are all offering solar loans to qualified homeowners these days, and if you have the financial wherewithal to handle the monthly payments buying solar panels outright could be in your interest .
But if the terms of a solar loan are too rich for your budget, which they could be if you’re struggling to handle your bills as it is (including your utility bills), solar leasing might be your best option. With solar leasing the savings start immediately, and that might be what you want and need.
Solar purchasing will pay off in the long run, but leasing has short-term benefits that are impossible to deny. What you choose to value the most is, of course, up to you.
Further reading: Solar Energy Pros and Cons – The Ultimate Guide
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|Pros of solar energy||Cons of solar energy|
|Lower your electric bill||Doesn't work for every roof type|
|Improve the value of your home||Not ideal if you're about to move|
|Reduce your carbon footprint||Buying panels can be expensive|
|Combat rising electricity costs||Low electricity costs = lower savings|
- Cost. The initial cost of purchasing a solar system is fairly high. ...
- Weather-Dependent. Although solar energy can still be collected during cloudy and rainy days, the efficiency of the solar system drops. ...
- Solar Energy Storage Is Expensive. ...
- Uses a Lot of Space. ...
- Associated with Pollution.
- Solar Panel Installations Can Be Expensive. ...
- Solar Energy Doesn't Work at Night. ...
- Solar Energy Storage is Expensive. ...
- Solar Panels are Difficult to Move Once Installed. ...
- Some Solar Panels Use Rare Earth Metals.
- Standard home solar does not “work” at night.
- Home solar panels are not attractive.
- DIY solar installation is difficult (if not impossible) for most homeowners.
- Not every roof configuration is ideal for maximum solar power generation.
- Solar manufacturing is not good for the environment.
|Pros of solar energy||Cons of solar energy|
|Reduces electric bill||High upfront cost|
|Insurance against rising power prices||Intermittent energy source|
|Solar is cheaper than ever||Manufacturing panels has some impact on the environment|
|See a return on your investment||Requires space|
One of the biggest problems that solar energy technology poses is that energy is only generated while the sun is shining. That means nighttime and overcast days can interrupt the supply.Do solar panels increase home insurance? ›
You may not see an increase in your homeowners insurance premium after installing solar panels on your roof. However, you'll likely need to raise your coverage limits to account for the replacement cost of your solar panels, which will likely result in some increase to your premium.Are solar panels expensive to maintain? ›
A properly installed system has little to no solar maintenance costs. Over the course of its 25-30 year average life, there are only a few ongoing costs associated with the system as a whole.How long do solar panels last? ›
Solar panels, also known as photovoltaic or PV panels, are made to last more than 25 years. In fact, many solar panels installed as early as the 1980s are still working at expected capacity. Not only are solar panels remarkably reliable, solar panel longevity has increased dramatically over the last 20 years.Does solar make financial sense? ›
There are various ways solar panels pay off, from reducing your carbon footprint to increasing your home's value. The National Renewable Energy Laboratory (NREL) found that homes with solar power increased in value by $20 for every dollar saved on energy. That is a 20-to-1 return on investment (ROI).
In virtually all cases, the answer is no. Roof leaks after solar panels are extremely rare. When roof leaking after the solar panels are fitted does occur, however, it usually becomes evident very quickly after the installation process is finished.Do solar panels work on cloudy days? ›
Photovoltaic panels can use direct or indirect sunlight to generate power, though they are most effective in direct sunlight. Solar panels will still work even when the light is reflected or partially blocked by clouds.Do solar panels damage your roof? ›
For most homeowners, as long as your solar panels are properly installed, they shouldn't do damage to the exterior or the infrastructure of your roof. If you are working with a qualified licensed professional and your roof is in good condition, your solar panels won't affect the integrity of your roof.Is the cost of solar panels going down? ›
In 2022, solar panels in the U.S. cost about $20,020 on average down from more than more than $50,000 ten years ago. In this article, we'll break down the cost of solar by system size, state, and panel brand, all of which can significantly impact the final number you pay.Do solar panel companies own your roof? ›
Solar Panels – Ownership and Maintenance
Where solar panels have been installed by a solar panel provider, the provider will usually own and maintain them under the roof top lease. The lease should set out clearly the responsibilities for maintenance and removal of the panels where works are required to the roof.
What is the cost of a solar panel installation for an average 2,000 square foot home today? The average cost of a residential solar panel installation in 2022 ranges between $18,000 and $20,000, before applying tax credits or other incentives that may be available where you live.Do solar panels affect house sales? ›
According to the National Renewable Energy Laboratory, homes with solar panels sell 20% faster and for 17% more than those without.Are solar panels worth it for seniors? ›
Solar panels are definitely worth it for seniors. If you can purchase your system outright, you see the biggest savings overall. However, with a $0-down, low-interest solar loan, your monthly payments will typically be lower than your electricity bill, allowing you to see savings on day one.Do solar panels require maintenance? ›
Solar panels generally require very little maintenance in order to function, so yes, you can usually just let them be. The only thing they need is a periodic light cleaning to make sure dirt, leaves, and other debris aren't obstructing the sun's rays.What are 2 problems with solar panels? ›
In general, the disadvantages of solar energy include high cost, low efficiency, space needed for installing solar panels, the unreliability of sun exposure, and high pollution from manufacturing solar panels. Concentrated solar power plants are massively expensive to install with very low return on investment.
In fact, most manufacturers test and certify their solar panels to withstand hail up to one inch in diameter falling at 50 miles per hour. Today's solar panels are also extremely resilient against high winds and heavy rain.Do solar panels void roof warranty? ›
In most cases, solar panels will not void a roof warranty. However, you have to be cautious of some companies that may install solar panels without considering the consequences of some actions, such as drilling holes in your roof.What kind of roof is best for solar panels? ›
Asphalt is the most common type of shingle used on housing and is also the best roof for solar panels. These shingles are made from a fiberglass or cellulose type of mat that is very flexible and durable, making it the perfect material for solar panels.
How Often Should You Clean Solar Panels? It is generally recommended to clean solar panels every 6 months to a year in order to maintain the productivity, efficiency, and effectiveness of the panels. However, based on where you live and the level of dirt and pollution, the need for cleaning may be more frequent.Is it OK to pressure wash solar panels? ›
Pressure washers are great for cleaning the exterior of your home, including the roof and gutters, but it should never be used on solar panels. Yes, their high reach and pressure makes cleaning large sections of solar panels much easier but doing so runs the risk of damaging the panels.Is using solar panels cheaper than electricity? ›
How much money do you want to save a year on your power bills? Firstly, the benefit of solar power in New South Wales is that it reduces your power bill by around $400 per year per kW of solar, so if you install an 8kW solar system you can save up to around $3,400 a year from solar energy, or $850 every quarterly bill.How long do solar panels take to pay for themselves? ›
The most common estimate of the average payback period for solar panels is six to ten years. This is a pretty wide range because there are many factors that will influence the number of years it can take to pay off your panels and the monthly savings you can expect.How many solar panels do I need for a 2000 square foot house? ›
To make the average amount of energy used by a home in America, a 2,000 sq. ft. home would need between 16 and 21 solar panels. That's assuming the home has a good south-facing roof that gets a full amount of sunlight every day.Does heat affect solar panels? ›
Heat can “severely reduce” the ability of solar panels to produce power, according to CED Greentech, a solar equipment supplier in the United States. Depending on where they're installed, hot temperatures can reduce the output efficiency of solar panels by 10%-25%, the company says.Why you dont want solar panels? ›
High upfront costs for your solar energy system. This is usually because solar equipment and/or installation costs are expensive where you live. Space restrictions mean that you can't install a solar panel system large enough to deliver adequate electric bill savings.
Your Home Is Using Too Much Power
If your solar panels are not reducing your bill, it can be because: Your system is generating less electricity than you use. You're using too much electricity at night when panels aren't generating it. Too many appliances or devices are plugged in.
But there are other reasons why 2022 is an especially good year to invest in a solar panel system. Electricity rates across the country are rising and even doubling in some states. As those rates rise, the savings that come from installing solar only increase.Can rain destroy solar panels? ›
The rain itself will have no effect on your solar energy system. Solar panels are made of waterproof material, hence moisture won't damage them.Can rain break solar panels? ›
Solar panels that are not waterproofed properly can have rain get inside and damage individual cells. Rain can also flood the panel, meaning that less amount of sunlight can reach the parts that react with the solar energy.Does rain damage solar panels? ›
Rain itself will have no effect on your solar energy system. Solar panels are waterproof, so moisture won't damage them. And, in fact, rain is helpful in that it will wash off some of the dirt and debris that accumulates on the panels over time. What about severe storms or a hurricane?What temperature do solar panels stop working? ›
In the winter, it's also less likely for solar panels to reach their peak temperature, or peak power. Once their temperature rises above that peak temperature, solar panel performance decreases. Research has demonstrated that panels begin losing efficiency around 77ºF.How well do solar panels work in winter? ›
Solar panels convert sunlight into electricity, and as long as there is sunlight falling on the panels, it does not matter how hot or cold it is. In fact, photovoltaic (PV) solar panels work more efficiently in the cold. This is because, like all electric-powered things, solar panels work best in chilly temperatures.Does wind affect solar panels? ›
Here's where the wind comes in. The wind cools solar panels. Though it won't make or break your solar panel production overall, it does make a difference. Solar panels cooled by 1 degree Celsius are 0.05 percent more efficient.Does mold grow under solar panels? ›
Solar panels are similar to your home's roof. They can slowly develop organic growth like moss, mold, mildew, algae, and lichen. Organic growth on your solar panels can reduce power outputs and create hot spots.Can High winds knock your solar panels off your roof? ›
In the most extreme cases, solar panels may stay anchored down, but uplift from strong winds can tear sections of your roof off. Cases like these show that a well-built solar racking system may be more resistant to high winds than your roof itself.
Don't turn them down out of concern for your roofing contractor's ability to make repairs. Roofing contractors can and do walk on Tesla Solar Roofs – when wearing the appropriate safety harnesses. They won't damage the roof in the process. However, you as a homeowner, should never walk on your roof.Will solar prices go down in 2022? ›
Solar module prices will fall to 25 U.S. cents per Watts in 1H 2022, and 1-2 cents per Watt lower in 2H 2022. Polysilicon production has been the bottleneck in 2021.What will replace solar panels? ›
Caption: Perovskites are widely seen as the likely platform for next-generation solar cells, replacing silicon because of its easier manufacturing process, lower cost, and greater flexibility.What is the federal tax credit for solar in 2022? ›
Solar PV systems installed in 2020 and 2021 are eligible for a 26% tax credit. In August 2022, Congress passed an extension of the ITC, raising it to 30% for the installation of which was between 2022-2032. (Systems installed on or before December 31, 2019 were also eligible for a 30% tax credit.)What should I watch out with solar companies? ›
Why should you care?
- Injuries that happen to workers while on the job, on your property.
- Injuries the contractor causes to others (like your neighbors) while on the job, on your property.
- Damages to your property from faulty work.
Reduced Savings Potential
A big disadvantage of leasing solar panels is the long-term savings opportunity. Since you pay the solar company every month for the length of your lease, you will save money on your energy bills, but it's typically not as much in the long-term compared to owning the panels yourself.
Many times, the leasing company will have an option that lets you relocate the solar panels to your new home. Alternatively, the leasing company may let the new homeowner buyout what's left on your lease. You may also be able to buy the solar panels outright from the leasing company.What happens at the end of a solar lease? ›
What happens at the end of the contract? At the end of your initial lease term, your options may include renewing the solar lease contract for one to ten years, upgrading to a newer solar panel system and signing a new contract, or removing the system.How long do solar batteries last? ›
Home solar battery units last anywhere between 5 and 15 years. If you decide to install a solar battery today, it's almost certain you'll need a replacement in the future to match the 20- to 30-year lifespan of your solar power system.How big of a solar system do I need for a 2500 square foot house? ›
On average, it takes between 28 to 32 solar panels to power a house. This will cover 100% of the energy costs for a 2,500 sq ft home.
Solar Panels For a 1500 Square Foot House
The average home in the United States is roughly 1500 square feet. With a home of this size, the typical electric bill comes in around $100 month. In order to cover the electricity for this home, you would need an estimated 15-18 solar panels.
Once you pay off your loan or buy your system outright you will essentially be getting energy for free. When it comes to payment, those who are using solar energy will still get a monthly utility bill. This will show how much energy you produced versus how much energy you used for the month.Do solar panels increase bills? ›
PV solar panels enable you to generate your own free electricity, which is then used to power your household appliances and other electrical devices. This means that you won't need as much electricity from the grid so will save money on your bills, especially if energy prices rise.Why do most people not have solar panels on their houses? ›
Can a House Run on Solar Power Alone? Practically, it is not often possible. This is because solar only works when the sun is shining—when it is cloudy or nighttime, they do not generate electricity. There are some battery solutions to provide power during these times, but they still tend to be quite expensive.Do solar panels on homes make a big difference in energy bills? ›
Financial returns and lower monthly utility bills are major incentives for going solar. The exact savings you will see with solar depends on the following: Electricity consumption. Solar energy system size.What are the pros and cons of going solar? ›
|Advantages of Solar Energy||Disadvantages of Solar Energy|
|Decreases use of non-renewable resources||High upfront costs|
|Reduces power bill||Sunlight dependent|
|Energy independence||Space constraints|
|Long-term savings||Environmental impact of manufacturing|
Solar power is pollution-free and causes no greenhouse gases to be emitted after installation. Reduced dependence on foreign oil and fossil fuels. Renewable clean power that is available every day of the year, even cloudy days produce some power.Is it harder to sell a house with solar panels? ›
According to the National Renewable Energy Laboratory, homes with solar panels sell 20% faster and for 17% more than those without.Is it smart to get solar panels? ›
Homeowners who install solar power systems can receive numerous benefits: lower electric bills, lower carbon footprints, and potentially higher home values. But these benefits typically come with significant installation and maintenance costs and the magnitude of the gains can vary widely from one house to another.Do solar panels work at night? ›
The short answer is: no, solar energy systems only operate during the day. This is because the power from the sun is key to how a solar panel turns light into electricity.
Solar panels can protect your roof from the sun's harmful rays. The panels absorb sunlight that otherwise would be absorbed directly by your shingles, sun bleaching them and drying them out. Additionally, air flows between the panels and the roof, cooling the roof considerably.How many solar panels would it take to power a house? ›
The average home in the U.S needs between 16 and 20 solar panels to cover its electric bills. Three main factors impact how many solar panels you need: your energy usage, the sunlight in your area, and the solar panels you choose.
MYTH #1: Solar panels require more energy to manufacture than they produce in their lifetime. FACT: A study by the National Renewable Energy Laboratory conclusively demonstrates that the manufacturing energy cost versus the energy production payback for solar modules is generally less than 4 years.How many solar panels do I need? ›
You can calculate how many solar panels you need by multiplying your household's hourly energy requirement by the peak sunlight hours for your area and dividing that by a panel's wattage. Use a low-wattage (150 W) and high-wattage (370 W) example to establish a range (ex: 17-42 panels to generate 11,000 kWh/year).