The easiest way to understand a solar lease is to think of it like this: Right now, if you do not have a solar system (or other distributed energy generation system), you are purchasing all of your power from electric utilities. You get a monthly or quarterly bill for the power that they provide you, and – although you could look into reducing your electricity usage or by investing in energy efficiency measures – there’s little that can do to reduce the rate at which you are charged to use power.
When you sign up for a solar leasing deal, you are effectively letting someone else build a mini power station a solar PV system – on the roof of your home or business, at no or little up-front cost to you. The company that has financed the construction of the system then sells you the power that it generates at a rate that is lower than your retail tariff.
Remember that with a solar lease or PPA, you do not own the system yourself – it is owned by the company that finances it. It may be possible to purchase the system for a discounted price at the end of your contract period, however.
The biggest incentive for leasing is that your monthly payment may be less than the amount you previously paid to the utility company, resulting in immediate savings the moment your system is turned on. Additionally, you will continue to realize savings throughout the entire lease term as electricity rates continue to rise and your home benefits from solar energy instead.
Another pro is that the lease provider will take care of the maintenance for twenty years because they are the owner of the solar system. On the other hand, since you are not the owner, you will not receive any rebates, incentives, and RECs (renewable energy certificates) associated with your solar system. Instead, they will go to the lease provider.
At the end of a twenty-year lease, the final cost of the system for the user is about 2-3 times more than the cost it would require to install and maintain your own solar panels. This is what makes the leasing process so lucrative for providers and explains why so many companies are happy to finance your solar with a lease product.
That said, leasing companies guarantee the solar panel performance for the entire lease term, so you can rest assured that you will be powering your home with solar energy for the next 20 years with no maintenance or repair costs. Also, they usually keep track of production by installing an online monitoring system. If you are a tech geek, you will enjoy checking in online to see how much energy the solar panels produce.