What are solar leases and solar PPAs?
Solar leasing and PPAs essentially allow you to rent a solar system that a solar company will install on your roof. You can use the energy the system generates to lower your electricity bill. Most solar leases and PPAs have no upfront cost, but custom down payments and prepaid options are also available.
Little to no maintenance is required on your part. The solar company you rent is responsible for the maintenance and monitoring of the system. Under these circumstances, you do not own the solar panel system. Instead, you make monthly payments to the solar company.
With the conclusion of a solar leasing or PPA you enter into a long-term contract. On average, these contracts have a term of around 20 years. You can choose to buy the solar panel system or remove it at the end of your contract. You can also buy the system at any time during your term.
The amount you pay for your solar system increases every year. The amount of the increase is specified in your contract, but is usually between 3% and 5%.
Solar Leasing vs. Solar PPA – What’s the Difference?
Solar leasing and solar PPA are very similar. The biggest difference between the two is that with a solar lease you pay a fixed monthly payment. With a PPA, you pay a fixed amount for each kilowatt hour (kWh) of electricity generated. Since your payment is directly correlated to the amount of energy produced by the solar panels, a PPA option can save you more in the long run.
Renewable energy projects can require a large amount of land. These projects can be built on either public or private land. Some jurisdictions have made it easier to lease public land, such as the US Bureau of Land Management, which designates specific lease areas only for projects like this.
When it comes to leasing, caution is always required, as strict environmental regulations apply in many areas. Clear up any possible misunderstandings between you and the landowner before building a renewable energy project. You should also ensure that you understand any ownership or sale tradeoffs associated with the Renewable Energy Certificates (RECs) that the system generates.
Is leasing right for you?
There are many factors to consider when deciding whether renewable energy leasing is right for you. The savings are typically between 10% and 30% of your electricity bill, but unless your electricity bill increases at a rate similar to monthly payments for solar leasing and PPA every year, you may not save money in the long run.
If you can afford to pay cash for a solar system or get a solar loan approved, these options will save you more money over time. With a cash payment or a solar loan, you also own the solar system, which gives you various solar incentives – namely tax advantages. You don’t get these benefits with PPA and solar leasing options because you don’t own the solar panel system.
It’s also important to keep in mind that a solar lease or PPA can make selling your home difficult. You can pass the contract on to the new homeowner. However, this can be daunting for some buyers. If the new buyer does not want to continue the PPA or solar lease, you will likely have to pay a fee to break the contract.