Sunrun solar lease contracts: What to watch out for

If you’ve started to explore the solar market, you’ve probably stumbled upon Sunrun in one way or another. It’s one of the largest solar installation companies in the country and partners with household names like Comcast, Major League Baseball, and Costco. The company primarily offers solar leases and power purchase agreements (PPAs), though cash purchase and solar loan options also exist. 

If you’re considering a lease or PPA from Sunrun, it’s important to understand the rates and terms offered to you to ensure you’re getting the best deal possible—here’s everything you need to know.

When you sign a Sunrun lease or PPA, you give the company permission to install solar panels on your home. Even though the panels are on your roof, you don't own them. You agree to pay the owner (Sunrun) monthly for the electricity the panels generate.

• If you sign a solar lease, you pay a flat monthly "rent" to Sunrun in exchange for electricity. 

• If you sign a PPA, you commit to paying a fixed rate per kilowatt-hour (kWh) for the electricity your solar panels generate, which means your monthly payment will fluctuate depending on how much energy you use. 

As with most other solar leasing companies, Sunrun leases and PPAs are both typically 20-year agreements.

All Sunrun leases and PPA offers have standard rates that you can use to evaluate your long-term solar savings. Here's a rundown of what you're signing up for if you accept a Sunrun quote.

Monthly payments to Sunrun

Sunrun offers are based on a per-kWh rate (in the case of a PPA) or a flat monthly payment (in the case of a lease)—those are two of the most important numbers that will show up in your Sunrun quote. Make sure your new monthly Sunrun payments are lower than your average electric bill from your utility.

Annual rate increase ("escalator")

The monthly payment indicated in your Sunrun lease or PPA offer is only your rate for the first year. Leases and PPAs often have an annual rate increase of around 3% per year built into the agreement, commonly called an escalator clause.

In the example above, the annual increase is 0.99%, which means that the 14.5-cent rate you pay per kWh will increase to 17.5 cents per kWh by the end of the 20-year agreement.

Electricity rate assumptions for PPAs

In Sunrun's calculation of 20-year savings, the PPA offer assumes that electricity rates will increase by 4.75% each year. However, electricity rates—and rate increases—can vary significantly by state. For example, the national ten-year average is closer to 3%.

You can use the U.S. Energy Information Administration, a federally funded energy statistics and analysis resource, to get an idea of what sort of rate increase to expect in your state. The EIA has information about historical per-kWh rate increases and projections for future electricity rates. Double-check the EIA's predictions for your area to ensure they’re similar to the rates in your Sunrun offer. Additionally, confirm that the electric bill information is accurate for your home. Don't hesitate to ask clarifying questions to ensure your final quote is correct.

Understanding how much electricity your panels will generate and how much you may still need to buy from your utility can help you confirm that your system is the right size for your home.

When it comes to leases and PPAs, you don't want a system that will produce more electricity than you can use. If Sunrun installs a system that produces more electricity than you use, you could end up paying Sunrun for more electricity than you need.

Sunrun lease and PPA offers also include information about the equipment installed on your roof. You’ll want to evaluate the quality of the solar panels and inverters in your offer to ensure you receive high-quality equipment that will last through your 20-year commitment.

The initial quote you receive from Sunrun won't contain all of the information included in your final contract. Before you sign on the dotted line, there are a few more questions you should ask your Sunrun energy consultant:

Whether it makes sense for you to buy or lease solar panels depends on your personal financial situation and your reasons for going solar. While owning your solar panels offers significantly higher 20-year savings than leasing, solar leases can sometimes be a better deal for homeowners who can't take advantage of tax credits or other rebates and incentives.

Most solar leases don’t require a down payment and solar leasing companies will often entice you to sign a same-day agreement by highlighting benefits like zero money down – but you don't want to commit to the first offer you receive. As with any major financial decision, shopping around and receiving multiple quotes is the best way to ensure you get the most competitive offer for your solar lease or PPA agreement.