Pricing options for solar leases and solar PPAs

Description

• Lease:  you pay a fixed monthly payment for the duration of the lease or, in some cases, you agree to an escalation schedule where your cost might increase between 2%-4% every year.
• PPA:  you pay a fixed cost per kWh for the duration of the lease or, in some cases, you agree to an escalation schedule where your cost might increase between 2%-4% every year.
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• You make a small down-payment;  generally $1,000+
• Solar Lease:  fixed monthly lease payment for the duration of the lease
• Solar PPA:  fixed cost per kWh for the duration of the PPA

• Pre-Pay the entire amount due on the lease or PPA when you sign the contract
• The benefits of a prepaid lease / PPA are very similar to those of an outright purchase. Because the prepayment removes the risk involved for the leasing company, they are willing to make adjustments to the cost of the lease that are favorable to you the property owner. In general, the lease amount will be similar to the purchase price of the system, net of any rebates, tax credits, and incentives. Also, the company is usually willing allow you to benefit from the sale of any available Solar Renewable Energy Credits (SRECs) either directly or through a reduction in the lease amount. The main difference is that the leasing company is the owner of the system.

Key Metrics for Evaluating quotes

• Cents/kWh for solar electricity
• Discount on current rates

• Cents/kWh for solar electricity
• Discount on current rates

• Return (or IRR)
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• Cents/kWh for solar electricity
• $/kWh installed
• Return (or IRR)

SRECs

• The benefits of owning the system, such as purchase rebates, tax credits, or other incentives would belong to the leasing / PPA company.

• The benefits of owning the system, such as purchase rebates, tax credits, or other incentives would belong to the leasing / PPAcompany.

• The leasing company is usually willing allow you to benefit from the sale of any available Solar Renewable Energy Credits (SRECs) either directly or through a reduction in the lease amount.

Pros

• No upfront investment
• Immediate savings through discounted electricity price (protected from electricity price inflation ) for the duration of the lease
• Significant reduction in carbon footprint
• No risk with respect to maintenance and repairs (vs. the low risk associated with ownership)

• Significant increase in property value. As a general rule, every $1 saved in electricity costs / year translates to an increase of $20 in the property’s value.

• Low upfront investment
• Slightly lower costs / month or /kWh and no escalation clause

• Immediate savings through discounted electricity price (protected from electricity price inflation ) for the duration of the lease

• Significant reduction in carbon footprint
• No risk with respect to maintenance and repairs (vs. the low risk associated with ownership)

• Significant increase in property value. As a general rule, every $1 saved in electricity costs / year translates to an increase of $20 in the property’s value.

• Price is similar to the purchase price net of all rebates and incentives with the leasing / PPA company managing all of the associated paper work (no waiting for rebates, tax credits, etc.)
• Effective rate for electricity over the duration of the lease / PPA can be up to 80% lower than your current rate.
• Generally entitled to take advantage of SRECs sales programs if offered in your state.

• Significant reduction in carbon footprint
• No risk with respect to maintenance and repairs (vs. the low risk associated with ownership)

• Significant increase in property value. As a general rule, every $1 saved in electricity costs / year translates to an increase of $20 in the property’s value.
• Potential for free subscription to program for tracking system performance online or via mobile apps

Cons

• Generally not the most financially rewarding for you, the property owner
• Price paid for solar electricity increases every year, although at a slower pace than inflation or grid-sourced electricity rates
• If you sell the property before the end of the lease/PPA term and opt not to purchase the system, you will need to ensure the buyer is credit worthy and willing to assume the solar lease/PPA

• Generally not the most financially rewarding for you, the property owner
• If you sell the property before the end of the lease/PPA term and opt not to purchase the system, you will need to ensure the buyer is credit worthy and willing to assume the solar lease/PPA

• Generally the best financial option for you, the property owner