Sunrun solar lease contracts: What to watch out for

If you’ve started shopping for solar, 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. The panels sit on your roof, but Sunrun owns them, and you pay Sunrun monthly for the electricity the system produces. Today, Sunrun groups its lease and PPA offers under what it calls its Sunrun Subscription Plan:

• 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, so your monthly bill fluctuates depending on how much energy you use. 

Sunrun has also rolled out a newer option called the Flex Plan, currently available in Texas, Illinois, and California. Unlike the standard subscription, which is sized to cover your current electricity use, Flex intentionally oversizes your system. That way, it accommodates future needs—like an electric vehicle charger or a heat pump—while you only pay for the energy you use today, subject to a monthly minimum. There's also a prepaid option that lowers your rate in exchange for paying some or all of the contract value upfront.

Most Sunrun agreements now run 25 years (15 years in Illinois and Puerto Rico), which is longer than the 20-year terms that were once standard across the leasing industry.

Every Sunrun offer includes a few key numbers you'll want to evaluate closely before signing. Here's an example of what a real quote might look like:

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")

This is very important: 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, typically ranging from 0% to about 2.9% per year, built into the agreement. It's commonly called an escalator clause.

In the example above, the annual escalator 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 can offers significantly higher 25-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.