Solar Panels: Lease vs Buy

[CMF]

I'm wondering if anyone has a "learned opinion" regarding the benefits of leasing a solar panel system instead of buying it outright.

Charles

 

[presley]

After looking into both, we decided to go with a purchase. Leasing makes it affordable to get started, but in the long run, it seemed like just a money maker for the leasing company. Plus, the way companies go out of business, last thing I wanted to do was have an installation by a company that would forever own my unit. That could get very expensive if/when they go out of business.

 

[Dave M]

I concur with a purchase, Charles. There are some basic differences that usually make a purchase more economical in the long run, depending on how the lease is written. Best examples:

1) The leasing company - as an intermediary - has to be planning to make a profit. How you can come out ahead under that scenario?

2) If you purchase, you can get a credit (not a deduction) against your Federal income tax for 30% of the cost of the system (for systems installed through 2016). And some states have similar credits against state income tax. Although some leasing companies adjust lease payments to partially account for your loss (and their gain) of the credit, this upfront benefit of purchasing is huge!

3) When you purchase, you forever reduce your out-of-pocket electricity costs. As electricity rates go up, your annual savings go up. However, if you lease, you generally lose some or all of that annual increase in savings. Most lease programs include an annual increase in lease payments designed to benefit the leasing company for those future electricity savings that you would otherwise enjoy.

4) On a resale of your home, you come out a winner by purchasing. At least one study has shown that the value of your home increases by about 20 times the annual electricity savings for a purchased system. However, a leased system can be a liability when you sell. The lease obligations compared to possible energy savings and the lease complexity for the potential new owner might well make that buyer look elsewhere.

5) At the end of the lease term, you must buy the system at fair market value ("FMV") or have the system removed. FMV cannot be zero according to the tax law, or the lessor will not be able to benefit from the tax credits. And despite any verbal representations, you'll just have to trust that the leasing company will assign a nominal FMV at the end of the lease. Will it really be nominal? What would the value be to you at that point? Wouldn't you love to continue to have an installed system in your home home? Of course! So it might well have significant value. Think twice if you really believe you can buy the equipment for a nominal price at the end of the lease.

 

[ScoopKona]

I'm wondering if anyone has a "learned opinion" regarding the benefits of leasing a solar panel system instead of buying it outright.

Charles

I have researched this EXTENSIVELY. I've talked to the people who have installed giant systems, small systems and everything in between.

The common piece of advice all of them gave me: "Make your house unusually energy efficient first, then go shopping for PV. If you do a good enough job making your house unusually energy efficient, you'll end up finding you probably don't want the PV."

I thought that was odd advice. Especially from people who install PV for a living.

The goal was to be able to keep our Las Vegas house at a comfortable temperature in the summer, without paying the $500-700 per month all our neighbors pay.

So we did all the energy efficient stuff -- blown in insulation, attic fan, garage fan, garage insulation. We put panels of 1" insulation in all the windows (during the summer at least), replaced all the bulbs in the house with LED, installed an evaporative cooler to cool the house on days when it was hot, but not 105f+.

We installed solar shades and a pergola. We put in an outdoor kitchen so we could cook without heating up the house. We used a kill-a-watt gizmo to isolate and vanquish the electricity vampires in the house. We buy appliances and gizmos in part based on their energy efficiency.

In all, we probably spent $7,000 on energy efficient "stuff." Many of these things add value to the house, so it's not like it's a 100% loss. And some of the things, like the kitchen and the coolers, aren't exactly portable, but we can take them with us if we sell the house.

By the time we were done, our Spring, Fall and Winter bills went from $150 per month to around $40 per month. The Summer bills went from $350+ per month down to $100-120 per month.

We could easily get by with a 5kW system now, where we would have needed at 15kW-20kW system before.

And, just like the PV people said, we don't want PV anymore. Why spend $10K on a PV system when we spend less than $1,000 per year on electricity? (And this is for a two-story 3,800 sqft house in the middle of the Mojave desert.)

 

[vacationhopeful]

I brought mine: 10K system (50 panels, 2 inverters) -- but the numbers for that purchase have changed quite a bit since then.

ScoopLV is right - using the electic vampire to find the energy pigs (and then replace them) is smart for everyone. I even gave one to my sister also 2 years ago. Way cheaper than $50-80,000 for solar PV.

My 10K system was 81K back in Aug 2006. I still had to pay $8600 for a tearoff and new roof; another $5000+ for tree removal. My system has been live since May, 2008.

Yes, that is a LOT OF REAL MONEY as there was NOT 30% Federal tax credit, just $1,500 Federal credit. I did get a NJ Grant of $39,280.50 to pay towards the system. And starting in May, 2008 - I have NOT paid anything for my electric. I have also SOLD some SRECS on the commodities market -- $25,723.25.

So:
$81000 - Grant ($39,280.50)= $41,719.50
$41,719.50 - SRECs sold ($25,723.25)= $15,999.25
$15,999.25 - FIT Credit ($1500)= $14,496.25
$14,496.25 - Excess electric trueup yrly ($290.54+58.39+51.64)=$14,095.68
$14,095.68 - (41 months- no avg electric bill of $145) -$5945 = $8150.68
$8150.68

Forecasted: 2012 SRECs sold (13 @$175 each)= $2275
Jun 2011-May 2012 free electric (12 @ $145mthly) = $1740
2013 SRECs sold (13 @ $150 each) = $1950
Jun 2012-May 2013 free electric (12 @ $145mthly) = $1740
Jun, Jul, Aug 2013 free electric (3 @ $145mthly)= $435 ..... zero cost

So in less than 2 additional years, I will have recoup my initial PV purchase costs (if there is some SRECs $ generated). If no true future SREC sold, another 30 months needed to repay.

Of course, I could figure in the increase electric rates to quicken the offset. :ignore:

Did not include cost of roof (would have been needed soon) or tree removal (the 14 trees were way too big).

Meanwhile, I love being cold in the summer and warm in the winter (running my air conditioners or electric space heaters). It is PRICELESS!

 

[CMF]

Thank you all.

I concur with a purchase, Charles. There are some basic differences that usually make a purchase more economical in the long run, depending on how the lease is written. Best examples:

1) The leasing company - as an intermediary - has to be planning to make a profit. How you can come out ahead under that scenario?

I see it as a trade off. One of the proposal I received is from a company that offers leases as well as a conventional purchase. I come on top with any of the options with varying degrees of savings.

2) If you purchase, you can get a credit (not a deduction) against your Federal income tax for 30% of the cost of the system (for systems installed through 2016). And some states have similar credits against state income tax. Although some leasing companies adjust lease payments to partially account for your loss (and their gain) of the credit, this upfront benefit of purchasing is huge!

]Yes. The savings are huge. But, the purchase option is still twice the cost of the leasing option after all rebates and credits are applies. I am looking at estimates from four companies, not just the purchase price from the company that offers leases and purchases. So, I'm looking at spending $14K instead of $28K for the same system.

3) When you purchase, you forever reduce your out-of-pocket electricity costs. As electricity rates go up, your annual savings go up. However, if you lease, you generally lose some or all of that annual increase in savings. Most lease programs include an annual increase in lease payments designed to benefit the leasing company for those future electricity savings that you would otherwise enjoy.

All but the 0% down lease option in the lease proposal I receive lock in the rate. There is no annual increase. There is a 3.9%/year increase if I choose the 0% lease.

4) On a resale of your home, you come out a winner by purchasing. At least one study has shown that the value of your home increases by about 20 times the annual electricity savings for a purchased system. However, a leased system can be a liability when you sell. The lease obligations compared to possible energy savings and the lease complexity for the potential new owner might well make that buyer look elsewhere.

The prepaid lease option would eliminate virtually all of the complications. The new owner would have the same options as I would at the end of the 20 year term.

5) At the end of the lease term, you must buy the system at fair market value ("FMV") or have the system removed. FMV cannot be zero according to the tax law, or the lessor will not be able to benefit from the tax credits. And despite any verbal representations, you'll just have to trust that the leasing company will assign a nominal FMV at the end of the lease. Will it really be nominal? What would the value be to you at that point? Wouldn't you love to continue to have an installed system in your home home? Of course! So it might well have significant value. Think twice if you really believe you can buy the equipment for a nominal price at the end of the lease.

The options at the end of the lease are: 1) take down at no additional cost; 2) renew the lease; 3) purchase.

Other benefits of leasing include: 1) system upgrades as technology improves; 2) no repair worries; 3) no worries about a declining SERC market and any of the associated problems with selling my SERC credits. This last point is what I weigh most heavily. Purchasing a solar system would not make sense in my situation if the SERC market crashes as some people think it will.

I'm still waiting on proposals from a couple of other companies. And I going to check leasing options from additional companies as well.

Charles

 

[Clemson Fan]

I just bought a 40k system which will be installed within the next month. In Hawaii our electric costs a fortune. We burn coal (all imported across the ocean of course) for most of our energy here in Hawaii. I really wish we would go nuclear here in Hawaii, but when I mention that to people I get a look of "are you crazy" from them. Of course their expression changes when I remind them that we have about 20 or so nuclear reactors sitting in Pearl Harbor at any one time, but I digress.

Anyway, I've done all the energy saving stuff already (solar water, changed all the lightbulbs in the home, solar attic fan, new energy efficient washer and dryer, etc.) and my monthly electric bill is still around $800/month (was $500/month 2 years ago for the same energy use). The only thing I haven't done is get a new energy efficient central AC which I'm doing concurrently with the PV system at a cost of about another 10k.

I'm hoping that after I get all this stuff done my bill will drop to $200-300/month.

BTW, we get a state tax credit of 35% plus the federal tax credit of 30%, so we get 65% back in tax credits. That means that 40k system will end up costing me around 14k. Well worth it I hope!

 

[CMF]

WOW. That's a heck of a kick in from the State of Hawaii. In Maryland is 10% and I think the money is running out. I'm curious, how many panels are you installing and how many watts per panel? I have quotes for 44 - 235w panels and 50 - 185w panels; the purchase price is $50K and $47K, respectively. The up front lease price for the $50K system is $14K.

Charles

 

[Unashu656]

At this point, the standard contract requires a deposit (!) And 10-20 year contract, which is transferable to subsequent owners or a new home. Rent month to cover the equipment, a certain amount of solar energy, and often include the maintenance provider.

While most homeowners will end up with a smaller market long-term economic with the SPPA is the lack of payment and maintenance included to make sure an attractive option for homeowners who want to use solar energy without requiring technical expertise or significant time investment.

 

[ScoopKona]

Anyway, I've done all the energy saving stuff already (solar water, changed all the lightbulbs in the home, solar attic fan, new energy efficient washer and dryer, etc.) and my monthly electric bill is still around $800/month (was $500/month 2 years ago for the same energy use).

What do you pay per kWh?

At $500/mo or $800/mo, there's gotta be an insulation solution out there that will pay for itself in less than a year. I'm assuming you're in a older house with 0th generation insulation?

Have you had someone in with an infrared camera? Where's the heat transfer happening?

An $800/month bill would make me very angry. "Honey, let's take a bulldozer to this place and start from scratch" angry.

 

[Clemson Fan]

I'd have to look it up, but it's much higher per kwh then what my parents pay in SC.

My home was built in 2001 with good construction and insulation and double pane windows and all that good stuff. I live in the hottest, and sunniest, part of Oahu though and we do use the central AC an awful lot.

I'm getting a 20 panel system installed and I'd have to look at all the other details and post them when I'm home and have them readily available. I did get 4 different quotes, though, so I don't think I'm getting ripped off. I suspect the price is a lot higher here because everything is much more expensive in Hawaii and even though the 35% state tax credit is good, my suspicion is that that also has a lot to do with driving the prices higher. It seems like anything that the government subsidizes will cause the price to rise on that item.

 

[Clemson Fan]

We pay 35 cents per kwh in Hawaii.

 

[Passepartout]

We pay 35 cents per kwh in Hawaii.

Wow! I've toyed with the idea of putting some PV panels on the roof- or at least a hot water pre-heater, but at $.07/KwH I'd have to have a very sharp pencil to figure out the time-to-payoff.

Jim Ricks

 

[Dave M]

The options at the end of the lease are: 1) take down at no additional cost; 2) renew the lease; 3) purchase.
Charles

There is no free lunch, Charles. Think about it. How will the leasing company make money on this deal if they lease it to you for $14k rather than sell it to you for a net (after credits) of $28k? Simple, in your own words:

The options at the end of the lease are: 1) take down at no additional cost; 2) renew the lease; 3) purchase.

You won't want it taken out, because you would have to start all over again. So you will (1) renew the lease - again and again - or (2) purchase it - probably at almost as much - with no tax credits - as you would pay today.

 

[vacationhopeful]

I just bought a 40k system..

Okay, you are spending $40,000? I installed a 10KiloWatt systems with a purchase price of $81,000 years ago. I generate about 13KW yearly -- I report my inverter's readings to the SREC people (the world infamous PJM grid people)(yes, I am a registered electric generator on the PJM grid).

 

[theo]

O.K. --- I'll "bite"...

...using the electic vampire to find the energy pigs (and then replace them) is smart for everyone. I even gave one to my sister also 2 years ago.

What on earth is this "electric vampire" ? Where is it found / sold and at what cost?

 

[CMF]

There is no free lunch, Charles. Think about it. How will the leasing company make money on this deal if they lease it to you for $14k rather than sell it to you for a net (after credits) of $28k? Simple, in your own words:You won't want it taken out, because you would have to start all over again. So you will (1) renew the lease - again and again - or (2) purchase it - probably at almost as much - with no tax credits - as you would pay today.

Dave, they make money because they enter into long term SREC sales contract. So they take my money and up front money from the sales of SREC. Everybody wins, I start saving money on power from day one and the seller gets a bag full of cash.

Twenty years from now?? Who knows what the world will be like and if I will be around to see it . . . .

Charles

 

[vacationhopeful]

What on earth is this "electric vampire" ? Where is it found / sold and at what cost?

I got mine at Home Depot. About $30. It plugs into an outlet and you plug the appliance into that. The digital display shows the electric usage the appliance is drawing thru the gadget. Put the cost per WATT in and will report it in $ cost. My sister plug her vampire into the power strip for the boys' video games ---- as they tended to go upstairs without powering down. She zaps their allowances now and they turn the games, TV, lights, etc off ... to keep their monthly allotment under control and to keep their allowance in their pocket.

My sister is an mechnical engineer. She used it also to convince her husband to buy the better refrigerator. She has plugged in the dehumidifier, small freezer (unplugged that), the boys computer (upgrade the oldest to a laptop), etc. I sure she has all the details on a spreadsheet.

I found mine to be too detail intense.

 

[Elan]

What on earth is this "electric vampire" ? Where is it found / sold and at what cost?

The most popular one is the Kill A Watt. It's for single appliances. There are also whole house electricity monitors. Go to Amazon and search for "Energy Monitor".

 

[Tia]

Interesting and glad someone else asked for me, as had the same question

I got mine at Home Depot. About $30. It plugs into an outlet and you plug the appliance into that. The digital display shows the electric usage the appliance is drawing thru the gadget. Put the cost per WATT in and will report it in $ cost. My sister plug her vampire into the power strip for the boys' video games ---- as they tended to go upstairs without powering down. She zaps their allowances now and they turn the games, TV, lights, etc off ... to keep their monthly allotment under control and to keep their allowance in their pocket.

My sister is an mechnical engineer. She used it also to convince her husband to buy the better refrigerator. She has plugged in the dehumidifier, small freezer (unplugged that), the boys computer (upgrade the oldest to a laptop), etc. I sure she has all the details on a spreadsheet.

I found mine to be too detail intense.

 

[ScoopKona]

We pay 35 cents per kwh in Hawaii.

Well, that's the problem right there. If you were paying Las Vegas rates ($0.065 per kWh, under the "Time of Use" plan), your bills would be in line with mine.

Solar certainly makes a lot of sense at $0.35. I wouldn't lease -- unless you're getting the tax credit and not the installer. I'd just bite the bullet and buy. What's the cost for the system? Here, it's around $10K for a 5kW system.

Just do a net-tied system. Even if it's a little underpowered, it's still producing the most power during the daylight hours when you need it most. Your meter doesn't have to spin backward at your electricity rates for the system to make financial sense. Sure, there's the braggin' rights, "My meter spins backwards!"

But I'd go with the least expensive system that will get you through the 11am-7pm peak time. Insulate the bejeezus out of your house, and put in the most efficient AC, 'fridge and lightbulbs possible, and you're most of the way there. Way more cost-effective than doing a 20kW system powering inefficient compressors.

 

[isisdave]

Scoop,

Are you able to tell which of the long list of things you did gave you the most savings? For example, did insulating the garage help a lot? How about the cooler; does it require VERY low humidity to do its thing well?

We live on the edge of the desert and in August used 2450 kWh ... 1500 from Edison, and the rest we made on the roof. The 1500 from Edison still cost $303; that's an average price of 20 cents/kWh, but we were in Tier 5 where each additional kWh costs 28 cents. Time of use rate is not practical as we're home all day, as are the dogs. The house is from 1989 and has decent insulation, but its upstairs AC (there are two systems) is undersized for the exposure, and would run all the time if we let it.

I want to look into a solar-powered pool pump. We downsized it from a 2 hp monster from 1989 to a whisperflow 1.5, but it still uses almost 300 kWh a month, or $75 in the summer months. I've heard of pumps that use their own one- or two-panel PV arrays and a DC motor with some sort of controller that avoids having to have an inverter.

BTW, power on Kauai is more like 45 cents/kWh. Marriott Waiohai annual reports always tell us what they've done this year to reduce usage. Just about every light is LED now, and they're saving huge amounts of money.

 

[ScoopKona]

Scoop,

Are you able to tell which of the long list of things you did gave you the most savings? 1) For example, did insulating the garage help a lot? 2) How about the cooler; does it require VERY low humidity to do its thing well?


BTW, power on Kauai is more like 45 cents/kWh. Marriott Waiohai annual reports always tell us what they've done this year to reduce usage. Just about every light is LED now, and they're saving huge amounts of money.

[Numbers added to quote.]

1) Not really. Remember, insulation SLOWS the transfer of heat. It doesn't stop it. The garage vent and fan was more effective.

2) Yes, you need desert conditions for the cooler to work. Don't bother unless you live in the desert.

The BIGGEST things were the attic gable vents and fans, the attic insulation (radiant barrier, actually -- Google it), and the WINDOW INSULATION. LED lights are great, too. But they take a little more than a year to pay for themselves. The window insulation paid for itself the first month.

The window insulation pays massive savings dividends. We bought 1" 4'x8' styrofoam insulation sheets at Home Depot, cut them to fit our windows (using a table saw), and slapped them in. We only use them in the summer, but it easily saves us $100 per month during the summer months.

Here, read this thread: http://www.city-data.com/forum/las-vegas/1388538-newbie-utility-bills-help.html

 

[Clemson Fan]

WOW. That's a heck of a kick in from the State of Hawaii. In Maryland is 10% and I think the money is running out. I'm curious, how many panels are you installing and how many watts per panel? I have quotes for 44 - 235w panels and 50 - 185w panels; the purchase price is $50K and $47K, respectively. The up front lease price for the $50K system is $14K.

Charles

The system I'm getting is 20 240 watt SunPower SPR-240E-WHT-D panels. Each panel will have its own inverter so there will be 20 inverters. It's supposed to have a daily output of 24kWh per day which amounts to 730-750 kWh per month for a total savings at Hawaii electric rates of $250-300/month. It will have net metering and will be tied into the grid. Each panel will also be individually monitored over the internet so if one panel is not producing like it's supposed to it can be replaced individually. I'll be able to view my system's output over the internet and it will have a layout of my panels on my roof and I'll be able to see what each panel is producing.

I'm also spending another 10k to have my 10 year old 10 SEER central AC replaced with a new 16 SEER system.

After all this I'm hoping my electric bill will drop to $250-300/month.

We'll see?!?!

 

[Clemson Fan]

BTW, power on Kauai is more like 45 cents/kWh. Marriott Waiohai annual reports always tell us what they've done this year to reduce usage. Just about every light is LED now, and they're saving huge amounts of money.

Yes, the outer islands are worse then Oahu. I've been told that Molakai has the highest electric rates in the whole country.

We continue to burn imported coal! Wonderful, isn't it! There was a huge project proposed about a year or so ago to place a huge windfarm in some shallow water just off off Molakai. It was a real clever design to where each unit would produce energy by not only the wind, but the bottom of the towers would convert the movement of the ocean currents into more energy. It was supposed to be able to supply all of Honolulu's energy needs. That got shot down by the enviromentalists who were worried it would affect whale migration or breeding or something like that. I swear they don't know what they want. They claim to be pro clean energy, but every time a project comes up they defeat it because of some imagined concern. So, we continue to burn coal!