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What are solar leases and solar PPAs?

What are solar leases and solar PPAs?

Solar leases and power purchase agreements (PPAs) allow you to save on your energy bill without paying for an expensive solar system. They are simple, affordable, and low-maintenance options for those looking to benefit from renewable energy for their home or business.

Solar Leases and PPAs

Solar leases and PPAs can be compared to renting a solar system. Under either agreement, the installation company will install a solar system on your property. Unlike with a loan or cash purchase, the homeowner does not own the system. Instead, leases and PPAs give the lessee the right to use the energy produced by the system.

Differences and Similarities

Leases and PPAs are extremely similar, but they differ in the nature of the payment. With a lease, you pay a flat monthly rate to utilize the solar system and equipment on your property. You will have the right to use all of the energy produced by the system each month.

On the other hand, under a PPA you pay directly for the energy produced by the system. In some cases, a PPA is also a flat monthly rate regardless of energy usage. However, some PPAs give you the flexibility to pay only for the energy you use.

Which option is better will depend on the exact terms of each agreement and your monthly energy usage. Overall, both leases and PPAs offer unique advantages over other methods of financing a solar system.

Advantages

Monthly Savings

The main advantage of leases and PPAs is the monthly payment for each will almost always be less than your old monthly energy bill. This means that you will be saving money every month even without owning a solar system. Instead of paying for energy from a utility company you can purchase energy at a cheaper rate from the solar system company.

No Upfront Cost

Many leases and PPAs offer terms with no down payment required. This makes the barrier to entry for solar energy very low when financing with a lease or PPA. Financing with a loan or paying in cash will often incur a high upfront cost.

Convenient Maintenance

Another major advantage of leases and PPAs is all the system’s maintenance is the responsibility of the system owner. In this case, the solar company is responsible for all of the costs of maintaining the system. For this reason, leases and PPAs are convenient and hassle free.

Key Considerations

Before agreeing to a lease or PPA it is important to consider the terms of the agreement as well as your specific situation. The length of leases and PPAs generally ranges from 20-25 years. If you plan to move out of your house before the duration of your agreement is up, it is important to know your options.

One option is to purchase the system and roll its cost into the sale price of your house. Alternatively, you can sell the property with the lease intact and transfer it to the new owner. However, the latter may make selling the property more difficult.

Furthermore, the monthly rate will vary by installer and location. Some give you the option of making a down payment or prepaying for a certain amount of time or energy with a PPA. Finally, most of the financial incentives to go solar are only available if you own the solar system. Therefore, the solar lease company would benefit, not the lessee.

Overall, solar leases and PPAs are great ways to finance your next renewable energy project. They allow you to easily begin saving on your monthly energy bill without having to pay for an expensive solar system!

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