Ownership and You

Few would argue that home ownership is a common goal of most middle-class families in the United States. Most geographically-anchored families, with decent credit, would never dream of committing to a 20 yr home rental. The same could be said about owning a vehicle – most families either pay cash or finance; looking forward to the 5th, 7th or future year when the vehicle is fully purchased with zero monthly payments.  With very few exceptions, this common sense approach also applies to Utility Bills – just like a mortgage for your home or a loan for your vehicle, the purchase of your home’s electric power is a no-brainer investment when compared to the alternatives:

  1. continuing to rent from your current Utility Provider
  2. switching from one big utility to another by signing up for a solar lease.

What the Leasing Companies Say…

Our area’s most popular national leasing companies have received a lot of scrutiny recently for the advertising and sales language used to get homeowners to sign on the dotted line.  In the spirit of transparency, let’s take a closer look at some of these messages:

“NO MONEY DOWN!”

Those three magic words that we all love. Bear in mind, however, that over HALF of the upfront cost of the system (yes, the REAL upfront cost) is paid for in financial incentives. When you sign up with a lease – most of those incentives go straight into the pocket of the leasing company who receives your Federal Tax Credit (30% of system cost) as well as your SRECs (circa 20% of system cost). The Anne Arundel County $2500 property tax credit, for example, is not available for a solar lease – only purchases.

With solar purchase – you still have No Money Down options. A 20 yr loan, for example, will ensure than you pay less than you currently pay your utility AND you fully own the system.  Most systems are warrantied for 25 yrs so that’s a minimum 5 yrs of free – as in truly free – solar power.  Furthermore, it’s probable your system will last 10 – 15 years beyond the warranty.

“PAY LESS FOR YOUR ENERGY!”

With a lease or power purchase agreement (PPA), it is possible that, at least for the first year or two, you will reduce your monthly electric bill by a nominal $5 – $30. However – buyer beware – most leasing companies have escalators written into the small print of their contracts. As one popular national leasing company states, “A 3 kW system starts at $25-$100 per month with an annual increase of 0-2.9% each year for 20-30 years…”

Given this, there’s a good chance that – in the years to come – solar leasers could actually be paying MORE for their solar energy than they would be with BGE.

If you could exchange a 20 year mortgage for a 20 year rental agreement, in order to save $10/month, would you do it?

“NO MAINTENANCE OR REPAIR ISSUES”!

This sales tactic feeds on the fear of folks who are looking to invest, for the very first time, in a technology that’s relatively new to them. Solar electric systems have no moving parts. Much like the existing electric system in your house, they rarely fail, aside from the occasional warranty issue – which is usually covered with a 25 yr manufacturer warranty, as well as a 10 yr workmanship warranty from most accredited installers.

What the leasing companies DON’T say:

  1.  Someone else now owns a portion of your home. Should you want to sell that home – the prospective homebuyer has to be willing to adopt the solar lease as a separate entity. With solar panel ownership on the rise, this could be unattractive to prospective buyers looking to own instead of rent their energy. With most leases the only way out is to pre-pay the remainder of the lease.
  2. Forfeited Incentives:  Most solar leasing companies do not list the current financial incentives that you forfeit as soon as you sign your leasing contract. This is a blatant omission of the fact that an outright purchase will pay for itself many times over compared to a lease.Over HALF – and for us here in AA county – up to 60% of the upfront cost of the system (yes, the REAL upfront cost) is paid for in financial incentives.  When you sign up with a lease – most of those incentives go straight into the pocket of the leasing company who receives your Federal Tax Credit (30% of system cost) as well as your SRECs (circa 25% of system cost), along with other notable depreciation tax incentives.  Your Anne Arundel County property tax credit of up to $2500, as well as your $1000 Maryland State Grant are not available for a solar lease – only purchases.
  3. Inflated Purchase Price:  Most solar lease companies have a vested interest in a customer signing a lease contract, as opposed to purchasing and owning the system outright. If you want to know the true cost of system ownership, solicit vendors who specialize in outright system purchase and have a vested interest in ensuring a cost-effective system. It is quite possible, if not probable, that the purchase price presented by a solar lessor will be highly inflated to deter your interest in a purchase over a lease.

A lease or other solar rental agreement can be a suitable option when:

  1. You have NO federal tax liability
  2. You cannot qualify for purchase financing, though leases do require credit checks as well.

Top SIX Reasons to OWN:

  1. MONEY –  Compared side by side with a leasing/rental agreement, a self or other-financed solar purchase will pay for itself many times. For families looking to steer away from any upfront costs, long term – no money down loan options often ensure your bill is immediately lower as your work towards OWNING the system.
  2. NO BILL INCREASES –  While homeowners with BGE accounts and Solar Leasing rates are seeing rate hikes of up to 2.9% per year on average – the rate hike on a customer-owned solar system will stay at exactly zero for the lifetime of the system.
  3. ALE OF HOME SIMPLICITY –  A customer-owned solar system, like any home improvement, is simply part of the house and transfer of the solar asset is included in the overall property sale. With a solar lease, the leasing company has to approve the buyer to assume the lease of your solar system.  If not, you get to incur the cost of moving the system to your new home.
  4. RESALE VALUE – According to the Department of Energy’s 2013 Report, homes with an OWNED solar system sold for an average premium of $5911 per 1kW of installed solar.  A more recent study was completed under collaboration between Lawrence Berkeley National Laboratory and a national real estate appraisal firm.  Among the findings were that homes in Maryland with customer owned solar systems sold for an average premium of $3820 per Kilowatt (most residential systems in Maryland are sized between 5kW – 15kW).  This is significant.  Further, homes with third party owned solar systems (leases and PPAs) sold at a discount to the market price.
  5. LOCAL, SIMPLE SOLUTIONS – most national leasing companies currently operating here in the Mid-Atlantic are out-of-state corporations who have targeted subsidy-rich States – such as Maryland – to build up a customer base. However, what happens when those subsidies inevitably change or disappear?
    Most locally owned and operated solar contractors, with deep roots and business ties to their communities have a vested interested in providing a cost-effective and highly efficient solar power system to their customers. Although solar power systems, like the electrical system in your home, have no moving parts and do not require any routing maintenance – it’s nice to know that the company who installed the system will probably be locally based and available for the occasional warranty issue or power production question.   
  6. YOU OWN, YOU CHOOSE – want a solar system that provides some power during a power outage? Want super-attractive, all-black solar panels? Want the choice of U.S. made equipment? Solar manufacturers offer a wide array of choices to meet every taste and budget and local firms typically offer many options. National leasing companies typically do not. Your system will be a part of your daily life for a 25 yr minimum – options are good…