The Ins and Outs of Solar Leasing

Jan. 8, 2015 by Sherry Stout

Leasing a solar photovoltaic (PV) system can help homeowners gain access to solar power without some of the hassles of ownership, but they need to understand the lease components to be sure they are getting a fair deal.

For some homeowners, leasing a PV system can help them reduce or fix a portion of their electricity bills. This is because solar leasing companies can tap into financial markets to help them take advantage of federal solar tax credits up front. Leasing companies can then pass along the savings in the form of reduced lease payments. Most leasing companies will also guarantee a PV system’s performance, so the homeowner doesn’t need to worry about checking panels, inverters, and connections to make sure the system is running smoothly.

There are caveats to leasing a solar energy system, of course, so consumers would be wise to investigate all options. Leasing may cost more over time than purchasing a PV system outright (the leasing company is assuming the risk of the system, which is incorporated into the lease payments). If the homeowners have access to other means of financing, they should evaluate which option will be best for them. Homeowners can get the 30% tax credit if they purchase a PV system, but have to wait until they file their federal income tax return to recoup their money. Homeowners should also factor in how long they intend to stay in their current residence and what will become of the PV system and its accompanying financial obligations.

Over the past few years, the Solar Technical Assistance Team has been asked multiple questions regarding lease options for solar PV systems. With the proliferation of solar leasing companies over the past several years, this isn’t surprising. Through these requests, NREL has seen many examples of different lease contracts. In response to these questions, NREL created a new fact sheet designed to familiarize prospective leasees with solar industry terminology and guide them through the types of questions they should be asking when making decisions. The "Homeowners Guide to Leasing a Solar Electric System" fact sheet explains the terminology that solar companies will likely use, provides a list of items that the prospective customer should consider when choosing a leasing company, and explains how to evaluate lease costs.

To find out more whether solar leasing makes sense for you (or your constituents), check out NREL’s solar leasing fact sheet.