Should you buy your solar system or use a lease / PPA?

The decision about how to pay for your solar PV system depends on your particular goals. Because everyone's goals are different, the "right" payment option is different for each person. The table below highlights the key differences and will help you to determine which option is best for you.

One thing to keep in mind when using this chart: A prepaid lease or PPA functions more like a purchase than the other leasing and PPA options.

Have questions or need additional information? We can help! Send us a note at info@energysage.com

Decision Criteria Solar Lease / Solar Power Purchase Agreement (PPA)
(solar photovoltaic only)
Buy or Finance the Purchase
(home equity or other loan types)

Best option if you…

  • …are concerned about being responsible for any maintenance / repairs
  • …have limited resources for the larger down payment required to finance or to make the purchase outright
  • …have a tax liability that is smaller than the amount of credits you could receive
  • …don‘t want to wait until the following year to receive the tax credit benefits
  • …don‘t want to fill out all the paperwork needed to receive rebates, tax credits, and incentives
  • …are planning to stay in your property for a long time.  (Note:  if you are planning on selling in the next few years, a prepaid option would be suitable and the solar photovoltaic system would increase the value and make the property easier to sell)
  • …have a tax liability that is larger than the amount of credits you could receive
  • …have access to money to pay for the system (either through savings or the ability to borrow at low rates)
  • …are a business and can realize tax benefits through treating the system as a depreciable asset
  • …plan to sell your property within the next few years.  (Note:  The solar photovoltaic system would increase the value and make the property easier to sell)

Cost

  • Low upfront cost generally ranging from $0 to approximately 50% of the system’s purchase price
  • No offsets from rebates, tax credits or incentives
  • Requires full payment upfront (either out-of-pocket or borrowing)
  • Cash rebates can reduce the cost of the system by 10%-50%.  Some installers offer to manage the paperwork involved with rebates and incentives for you and adjust the purchase price to reflect the net amount.
  • Tax credits reduce your Federal income tax liability for the year in which the system was purchased or can be spread over the next three years if your tax liability is less than the credit amount.

Maintenance

  • Maintenance and repairs are the responsibility of the leasing company that owns the system.
  • Most companies offer free online, smartphone, or tablet programs to track your system’s performance and report any issues to the leasing company.
  • You own the system and are responsible for maintaining it (Note: Solar PV systems generally require little or no maintenance.  Solar panels carry a 25-year performance warranty and solar inverters carry a 10-25 year performance warranty
  • There may be additional costs to track your system’s performance online or via a smartphone or tablet. These costs are generally $100-$200 / year

Terms

  • Terms are generally for 20 years, but some leases / PPA can be shorter ranging between 10-20 years
  • Terms for purchases financed with a loan will be specified by lender. In general, these types of loans are 7 years or longer with interest rates some - usually a 7 year term or longer loan, with interest rates somewhere between 3.5%-7.5%

Offsets

  • You do not qualify for any tax credits, depreciation, rebates or incentives

You qualify for all applicable:

  • Federal Investment Tax credits
  • State tax credits
  • Depreciation
  • Cash Rebates and other incentives

Savings / Returns on Investment

  • Excellent returns that can range from 10% to more than 30%, depending on your location, state incentives, and property characteristics.  
  • With $0-down and small down financing options of solar lease/PPA you will realize savings of 10% to over 50% on your electricity bills for the duration of the lease.
  • Prepaid leases / PPAs provide free electricity for the duration of the lease as well as the potential to make additional revenue by selling SRECs (read more about SRECs)

  • Excellent returns that can range from 10% to more than 30%, depending on your location, state incentives, and property characteristics.
  • Free electricity for 25-40 Years
  • Potential to make additional revenue by selling SRECs (read more about SRECs)

Pros

  • Low upfront investment
  • 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.
  • Significant reduction in carbon footprint
  • Qualify for all rebates, tax credits, and revenue from SREC sales
  • Attractive return on investment, especially if you borrow to finance the system.  Generally, the savings generated will be much larger than the cost of the money borrowed
  • 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.
  • Fewer issues to address when selling the property

Cons

  • Larger cash outlay upfront.
  • Responsibility for maintaining and repairing your system.

If you need additional information or have questions we can help you with, please feel free to send us a note to info@energysage.com