Third party solar leases have proven themselves incredibly popular in recent years, playing a key role in propelling rooftop solar panels into the mainstream. Depending on the state, anywhere from 50%-90% of rooftop solar installations were financed by solar leasing or PPA at the beginning of 2014, according to the SEIA. You could say that solar leases have revolutionized the US solar industry.
But are solar leases always a good idea? These financial mechanisms are still relatively new and you, as a smart solar shopper, should approach them with a healthy dose of caution and a discriminating eye. This point has been highlighted in the recent efforts of a number of Congresspeople to shine a brighter light on how solar leasing is pitched to consumers – both for the sake of those in the market for a system as well as for the solar industry itself.
Remember: There’s more to solar than just solar leases & PPAs! Zero-down solar loans and outright solar system purchase may be a better option for you than a solar lease. Compare a wide range of quotes for free using EnergySage’s Solar Marketplace.
Is solar a good deal? The typical solar lease sales pitch
The benefits of a solar lease are usually marketed thus: You get a solar power system on your roof for little or no money down (depending on the type of solar lease), and the company sells the electricity to you at a rate that is lower than what you typically pay for electricity. You save money on your power bill without having to spend a cent on having a system installed. Ostensibly, it’s win-win for both you and the solar company.
On the surface, it certainly sounds like a sweet deal, but as we pointed out not long ago, ‘free solar panels‘ are not exactly free. You pay for the electricity that the panels produce, and in doing so over the course of of a 10 to 20-year contract, you pay for the system (and then some).
The most important question for you to ask is whether entering a solar leasing agreement will really save you money in the long-run – to filter the facts out of the typical solar lease sales pitch. What are you really getting when you sign up for a solar lease?
Are certain solar companies lying about solar leasing?
Concerns about potentially deceptive marketing practices by some solar lease providers were raised last month by twelve House Republicans, led by Paul Gosar of Arizona. In a letter addressed to the Chair of the Federal Trade Commission, the Representatives describe a number of questionable practices that solar shoppers should be aware of – and that the FTC should investigate.
It has been reported that some companies are using potentially deceptive sales techniques and overstating potential savings in order to get consumers to sign lengthy leases for rooftop solar systems. Reportedly, consumers are being enticed by some solar leasing companies who offer zero-money-down leases, essentially teaser rates, for a 20-year lease agreement. The sales presentations, however, purportedly inflate grid power rates. If these allegations are true, these possibly misleading leases could be a serious threat to consumers as they are tied to our citizens’ homes and have the potential to cause significant harm to the solar industry.
In a similar move the month before, four house Democrats – all from Arizona, one of America’s hottest solar markets – asked the Consumer Financial Protection Bureau (CFPB) to investigate whether there is potential for consumers to be harmed by the marketing practices.
In the November 19 letter, they emphasized their support of the booming rooftop solar industry. But they also made it clear that a number of issues required addressing to ensure homeowners and businesses considering solar are not misled by solar salespeople who leave important details out or gloss over the disadvantages of a solar lease.
The questions they pose to the CFPB are:
What steps has the Consumer Financial Protection Bureau taken to investigate the possibility that misleading sales techniques are being employed in the rooftop solar industry?
What protections are in place to ensure that consumers who are considering entering into long-term solar leasing arrangements are made fully aware of the long-term implications of these transactions? For example, reports suggest that third-party leases may result in escalating payments to home sellers in the event that subsequent buyers do not want the solar system or cannot assume the lease, thus complicating real estate transactions.
What has the Consumer Financial Protection Bureau done to investigate complains that have arisen about the marketing techniques employed by some rooftop solar leasing operations?
Has the consumer Financial Protection Bureau considered performing a staff review of third-party-leases in the rooftop solar industry and issuing recommendations on how we can better educate and protect consumers contemplating these transactions?
At the time of writing, the CFPB has not published anything in response to the Democrats’ letter, and the FTC has nothing specific to third-party solar leases on its website. It’s surely only a matter of time before this changes. Although politics do play some role in the current debate, the fact remains that for any industry to be a viable, self-sustaining one, there needs to be robust competition and transparency in the market. An intervention by the CFPB or FTC to regulate marketing practices by solar lease providers will ideally result in an improvement on both these fronts – to the ultimate benefit of both consumers and the industry.
Does this mean solar leasing is a bad idea?
Absolutely not – it just means that you’ll have to do your own research to make sure you’re getting the best available deal on solar (you’ll still want to do this even after any rules are put in place). We here at EnergySage emphasize that the concerns raised by the Congresspeople mentioned above do not mean that there is anything inherently wrong with the concept of solar lease / PPA deals.
But we also urge you to keep in mind that, like anything, some deals are better than others. You need to be smart about how you shop for solar. Here are some tips to help you shop more wisely:
- Think of your sun-soaked roof as an asset that solar leasing companies want to get their hands on. The more electricity your panels produce, the more money these companies make.
- Consider a solar lease as you would any major purchase: Be discriminating – never mind the fact that you may pay nothing up-front.
- Compare a wide variety of quotes, then work the companies off one another to try to get a better deal. There are now numerous companies offering solar leasing deals, and competing for your business. Use this to your advantage.
- Look into a solar loan as an alternative to a solar lease. Solar loans present may of the same benefits as a solar lease – except that you will own the system when the loan is paid off.
- Have money in the bank? Consider purchasing a solar system. Up-front puchase of a solar system is almost always the best option for those who can afford it. (Read more about purchasing vs leasing your solar system.)