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Clean Power New California Solar Leasing Contracts vs New California Solar Panel Purchases. Credit: Climate Policy Initiative

Published on December 9th, 2013 | by Zachary Shahan

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Solar Leasing Explosion In California (Chart)

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December 9th, 2013 by Zachary Shahan 

Originally published on Cost of Solar.

The solar leasing trend has certainly taken off. Over 75% of new solar homeowners in California are now leasing solar. This finding comes from a Climate Policy Initiative report on California solar policy and consumerism that includes a comparison of California solar leasing and California solar purchases.

California solar leasing

New California Solar Leasing Contracts vs New California Solar Panel Purchases. Credit: Climate Policy Initiative

The report comes to a number of interesting findings, but the finding on the shift from solar ownership to solar leasing is probably the most interesting. In 2007, only 10% of California homeowners were going solar through a solar panel leasing arrangement. The shift to over 75% solar leasing in 2012 is clearly significant.

As I just noted the other day, there are some huge reasons why California solar leasing (and solar leasing in other states where it’s available) has taken off — primarily, people love $0 down payments and financial savings from Day 1.

People are going solar for financial reasons more than anything else. Many people could probably save much more money down the road by purchasing solar panels (or, at least, their families could… if they don’t outlive the long lifespan of increasingly efficient solar panels). But waiting several years to get money back on an investment is not the route many people want to take. Who knows what will happen tomorrow?

Also, it’s worth noting that solar leasing companies don’t give you a bad deal. Solar leasing companies can actually take advantage of some federal solar panel incentives that normal homeowners can’t take advantage of. From Day 1, or very close to Day 1, solar leasing customers should benefit from savings on their electricity bills that outweigh their monthly solar leasing payments. The leasing companies also take care of maintenance, doing the paperwork to collect on your solar tax credits and rebates, and other such issues.

So, at the very least, solar leasing companies are giving us a much better deal than utility companies offer. What is there to complain about?

California Solar Leasing Also Booming Because of Solar Incentive Changes

The solar market is anything but stagnant. Due to solar energy’s many advantages (and lack of significant disadvantages), the market is growing fast, but the avenues along which it grows vary a lot from place to place… largely based on policies in those places.

California’s strong solar power growth has actually taken place “in the face of declining financial incentives for solar installations at the state level through the California Solar Initiative,” as the Climate Policy Initiative (CPI) notes. The California Solar Initiative (CSI) did a tremendous job stimulating solar power growth while solar panels cost a lot. However, a rapid drop in solar panel costs combined with remaining federal solar incentives has made solar even more competitive today without support from CSI than it was a few years ago with such support. And California solar leasing options have made the attractiveness of going solar without CSI support even more attractive for many people… well, over 75% of solar customers, according to the CPI study.

In actuality, right now might be one of the best times in the coming decade or so to go solar in California. Federal solar incentives are currently scheduled to expire in 2016. Solar panel prices recently fell through the floor due to economies of scale in manufacturing, oversupply of solar panels due to extreme ramp-up of solar panel production in China and other countries, and the cut-throat competitiveness that resulted. After the dramatic drop in solar panel prices mentioned above, supply has started to better match demand and prices have started to rise a little in 2013. Solar panel prices could fall again and go a little below where they were at the beginning of 2013, or they could rise a bit more — the future is uncertain. With costs near a record low, incentives still available, and solar leasing companies offering amazing 20-year leasing contracts, now is an excellent time to look into going solar.

But, as noted above, policies influence how people go solar, and how it would be best for you to go solar. Solar leasing is only legal in about a dozen states. And various states and municipalities have other solar policies that make other ways of going solar more attractive. For example, some states have “Community Solar Garden” legislation that makes community purchasing of solar power possible. Some municipalities have “PACE” legislation that allows you to go solar using a loan that you pay back through higher property tax payments. The practical result is very similar to that of solar leasing — you enjoy monthly electricity bill savings that outweigh your property tax increase, and you get to skip the high initial price of purchasing a solar panel system.

The solar leasing trend is certainly a hot one, as you can see from the California solar leasing and solar ownership study referenced above. However, there’s a lot of variation in solar policies across the US, and the best solar option for your neighbor may not even be the best solar option for you. The only thing that is more or less constant is that going solar is a smart financial decision for people all across the country, saving each of them tens of thousands of dollars. You can find out the best solar option for yourself by completing our very short form. We can help you to find what solar incentives and policies exist in your area, and we can help you examine the advantages of solar leasing versus solar panel ownership. Don’t delay and lose out on the tremendous solar options available today!

Join the US solar power rooftop revolution!

California solar leaving savings

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About the Author

spends most of his time here on CleanTechnica as the director/chief editor. Otherwise, he's probably enthusiastically fulfilling his duties as the director/editor of Solar Love, EV Obsession, Planetsave, or Bikocity. Zach is recognized globally as a solar energy, electric car, and wind energy expert. If you would like him to speak at a related conference or event, connect with him via social media. You can connect with Zach on any popular social networking site you like. Links to all of his main social media profiles are on ZacharyShahan.com.



  • Viir Exeter

    I am buying and going all solar. The panels will be on the roof in a couple of months. Buy them. CanNOT wait to be off of the grid. YES!

  • Doug

    Flexible financing plans influenced my decision to go solar. Competition will (and has) made solar affordable to all homeowners.

  • CaptD

    Depending on where you live, energy will get less costly quicker, the same is true for all the people in California, especially in southern California!

    New Wind Power Cheaper than Existing Coal and Natural Gas in Many Parts of the Country – The Equation: http://blog.ucsusa.org/new-wind-power-cheaper-than-existing-coal-and-natural-gas-in-many-parts-of-the-country-337#.UqfnpMtC87E.twitter

  • Ray Boggs

    “So, at the very least, solar leasing companies are giving us a much better deal than utility companies offer. What is there to complain about?” There’s plenty to complain about. For instance the leasing companies price their systems much higher than what you can purchase a system for. Typically $5.75 to $6.50 per watt. You can purchase an installed, high quality system for less than $3.00 per watt before incentives.
    When you lease, they’ll take the 30% federal tax credit and cash rebate worth about $10,000 on a 6 kW system at their higher pricing. The leasing company will tell you that most people would not qualify for the tax credit but this is untrue. If a taxpayer doesn’t owe enough in federal taxes the first year then all a homeowner has to do is increase the number of allowances for the following year, thus creating a tax liability so that he or she can take advantage of the tax credit. Simple.
    At less than $3.00 per watt before incentives, it now actually cost less to purchase your system than it does to do even a pre-paid lease. At that price, even retirees can save lots of money by owning a solar asset rather than renting the leasing companies asset.
    The leasing company will tell you that they will take care of all of the maintenance, repairs, monitoring and insurance but it’s actually the homeowner who is overpaying for all of these services because of the much higher cost of leasing versus owning.
    With a 20 year solar lease, the homeowner will be stuck with the same ageing technology on their roof for the 20 year term of the lease. When you own your solar system, you can sell it anytime you wish and upgrade to the latest technology. There are no upgrades with a solar lease.
    When you lease a solar system, you’ll probably have difficulty selling your home. After all, what potential homebuyer will want to assume your lease payments on used equipment, when they can buy a brand new solar system while keeping all of the financial incentives for tens of thousand of dollars less than your remaining lease payments. Remember, less than $3.00 per watt versus the cost of that expensive lease.
    And what are you actually getting on your roof when you lease. Is it a high performance, name brand system that you might want to purchase after your lease term is up or is it a low cost, poorer performing product that you would never consider buying. When the leasing companies provide their quotes, they tend to suppress this information, only telling you the size of the system, its power production and your payments.
    And good luck if you can’t make your lease or PPA payment on time. A lease contract that I recently reviewed from a major solar leasing company says that if you’re more than ten days late on your lease payment, the leasing company can come and remove the system and pursue legal action against you to collect the balance of payments on your lease. Just 10 day! Good Luck.

    • Marion Meads

      The leasing company is doing a very subtle bait and switch in terms of rate escalation. For the first few months, you will be happy because you are getting lower rate than your utility. Wait a few years for the price escalation.

      What they are not telling you is that had you purchased the system at zero down, which is available now for solar PV projects, you will be paying the amortization that will be equal to your electric bill or comparable, and after 3-7 years (depending on your deal on the installation of the system), all of your electricity produced is additional income to you, for perhaps another 30-50 years before your system disintegrates. With solar leasing, at the end of the 20 year contract, you will still be paying them, and you will own nothing.

      For both zero down scenarios, snake oil type aggressive marketing practices done by solar leasing companies get their gullible clients, line, sinker, and hooked for life.

      • Ray Boggs

        Marion, well said ! That it exactly. It’s so subtle that even the most intelligent consumers are falling for it. We’ve had many customers contact us asking for help to get out of their contracts after their 3 day right of rescission has expired. Unfortunately there’s nothing that we or even an attorney can do. Their contracts are airtight.
        The leasing and PPA salespeople are trained to focus only on the savings on the electric bill. They’ll ask: “If I can reduce your electric bill with no money out of pocket, would you sign my contract? That’s what we hear repeatedly from consumers. They focused only on the immediate saving not on the overall cost of the lease or PPA in the end. It’ very sad. Hopefully the word about $0 down loans and the benefits of ownership will spread faster than their snake oil can be consumed.

        • http://zacharyshahan.com/ Zachary Shahan

          Well, as i think you both imply, it’s the failure of consumers to try to figure anything out (do any math) that makes this model so successful. And perhaps the failure of competitors to sell their options. Unless people really can’t make use of the tax credit and really can’t qualify for a loan, is there any other explanation for 75% of California’s leasing their systems?

          • Bob_Wallace

            Let’s assume that profit margins are higher for leasing than selling (seems to be the case).

            Since companies are in business to make money one shouldn’t be surprised if they work harder to sell leases than to sell systems.

            Remember, in the US/Germany item by item comparisons we spend a lot more per watt for “customer acquisition”. We’re doing more to sell customers, in Germany the systems seem to be selling themselves. If you’ve got someone out knocking on doors you’re probably going to have them pushing the most profitable product.

          • http://zacharyshahan.com/ Zachary Shahan

            Yeah, I wouldn’t put it on the solar leasing companies. They are working for themselves and are doing very well. I’d put it on consumers and competitors to solar leasing companies to do a better job getting customers to buy rather than lease through a solar giant.

          • Ray Boggs

            I believe that you’ve hit it on the nail head. Consumers are so excited at the prospect of reducing their electric bill with no money out of pocket that they rush to sign the leasing company’s contract without doing the math and without investigating the alternative options.

            The other advantage that the leasing companies have that explains their success is that they were first to market with a zero down financing option during the peak of the economic crisis when consumers were desperately seeking ways to reduce their monthly expenses. Being first to market has given the leasing companies the power of momentum.

            You would be amazed at the number of consumers that we encounter that express doubts about the existence of other $0 down financing options. They’re so inundated with all of the leasing company’s marketing; radio, TV, canvassers, mailers, etc., that they question why they’ve never heard of these other superior financing options.

            Fortunately for the consumer, all of that is beginning to change now. Because of a grassroots effort, alternative means of financing are finally beginning to gain a foothold in the marketplace. Even companies like SunPower that once only offered leasing, is now promoting $0 down loans as an option. Even smaller leasing players are beginning to shift to loans and other alternatives.

            I feel confident that by the end of 2014, the scales will tip in favor of the alternatives to leasing. Once the market becomes permeated with the message that a lease is less, this far more expensive means of financing will become a thing of the past.

            I thank you for offering this forum that allows people the opportunity to voice their opinions without censorship. It’s what makes this country great. The leasing companies have hundreds of millions of dollars to spread their message. Without resources like Clean Technica, the message of a better financing alternative would never be effectively voiced.

          • http://zacharyshahan.com/ Zachary Shahan

            Thanks for all this. Genuinely, with this discussion, I’m feeling even much more motivated to get the word out about the $0 solar loans.

            I do think this really nails it: “The other advantage that the leasing companies have that explains their success is that they were first to market with a zero down financing option during the peak of the economic crisis when consumers were desperately seeking ways to reduce their monthly expenses. Being first to market has given the leasing companies the power of momentum.”

            But the consumer demand now is highlighted really well in the SunPower CEO interview I just published: http://cleantechnica.com/2013/12/12/sunpower-ceo-chairman-talks-solar-leasing-boom/

            Maybe i should just run a version of this story every week: http://cleantechnica.com/2013/10/25/solar-loan-admirals-bank-vs-solar-lease/

            :D

    • http://zacharyshahan.com/ Zachary Shahan

      Hmm, a lot of good perspective. Thanks for that!

  • CaptD

    The most important question ratepayers should be asking is:

    Why does the CA Public Utilities Commission allow the public Utilities to charge so much for energy, which only enriches their shareholders while continuing to rip off ratepayers… ? CA has some if not the highest energy rates* in the USA!

    What is serving the “public good” about that?

    * http://sanonofresafety.files.wordpress.com/2013/09/compareyourelectricrates2012-04.jpg

    • Marion Meads

      It is no surprise that the highest price gougers, such SCE and SDG&E, are lobbying very hard to reduce the value of the feed-in electricity produced from residential solar, and they want to charge exorbitant connection fee, stranding fee, and prevent residential solar PV from installing electric energy storage.

  • CaptD

    The chart is no surprise to me since people in CA are impacted by the poor economy and therefore they just don’t have the money to pay for Solar themselves!

  • Marion Meads

    Copied From SolarHome’s arguments:
    http://www.solarhome.com/financing.htm

    Thinking About A Solar Lease ? Better Think Again !

    Before you sign that airtight leasing contract, you had better have your attorney and your accountant read the fine print. When compared to purchasing a solar system, especially as low as prices are today, a solar lease will probably turn out to be one of the worst investments that you’ll ever make.

    1. Add up your payments on that zero down solar lease and you’ll find that you’ll be paying up to triple the cost for a solar system when compared to purchasing a solar system.

    Why do the leasing companies charge you so much more for their systems ? Because their investors get a bigger tax credit when they charge you more for your leased system.

    2. The zero down solar leasing company will take any cash rebate and the 30% Federal tax credit that should have gone to you.

    3. You’ll probably have trouble selling your home because most home buyers will not want to assume the lease payment on a used solar system that’s using yesterday’s technology. Especially since they would only be saving a fraction on their electric bill.

    4. Your monthly lease payment may increase by up to 3.9% per year.

    5. After making 20 years worth of lease payments, the solar system will still belong to the leasing company.

    6. At year 20 if you owned your solar system, your system would have up to another 15 to 20 years worth of income generating potential. When you lease a solar system, at year 20, you’ll have to give your solar system back to the leasing company or you’ll have to buy it from them at fair market value if you want to keep it.

    7. And to add insult to injury, with the weather worsening like it is and and power outages on the increase, with a solar lease you probably won’t have any backup solar power.

    So when the lights go out in your neighborhood, even while the Sun is shining and even though you’ve made all those leasing payments on all those solar panels on your roof, most leased solar system are designed to turn themselves off, leaving you without power for as long as the power outage lasts.

    In fact, in most cases you won’t even be allowed to add battery backup power to your leased solar system’s inverter. You would have to completely pay off 20 years worth of lease payments, then buy your leased solar system from the leasing company and then and only then would you be allowed to add an emergency power option to your leased solar system.

    And Good Luck With Ever Selling Your Home With A Solar Lease Attached To It.

    • CaptD

      RE: Why do the leasing companies charge you so much more for their systems ?

      The most important question is:

      Why does the CA Public Utilities Commission allow the public Utilities to charge so much for energy?

      See cost chart posted on top!

  • spec9

    I’m glad more solar PV is being installed but these customers are really being stupid. They should just take out a home equity loan and pay for installation with cash. They can then get a 30% tax-credit and also deduct the loan payments. If they are REALLY smart then you install yourself. A self-install pays for itself in less than 5 years if you have an EV.

    • CaptD

      If people can even get a home equity loan, many seniors ate trapped in their current loans because they have no “income”…

      • http://zacharyshahan.com/ Zachary Shahan

        my guess is that inability to get loans is one of the barriers to people buying their systems. but i have no evidence on this.

        • CaptD

          Perhaps that would make a great follow on article, solar installers and their lenders would have some ideas on that subject…

          I know some cities are now offering loans using the home as collateral, with the solar panels adding to the value to the home and transferring to any new owner, which help both the home owner and the City keep the air cleaner, a big issue in California! Thanks

          • http://zacharyshahan.com/ Zachary Shahan

            Yeah, I’ve been waiting for a survey on this, but haven’t seen any. Maybe worth trying to crowdsource some info from our readers. Thanks for the idea.

  • Marion Meads

    This is the result of aggressive marketing on the side of solar leasing companies. Leasing is outrageously more expensive as the escalated price of PPA creeps in. The quoted price to the government for installing the leased solar PV are jacked up so that the companies can get more proportion in tax incentives.

    It is by far, a lot better to own the solar panels. If you worked hard and looked around for the best quote, you can make it to the point that the 5-year monthly amortization to a zero-down loan on a complete solar grid-tied system is equal to your monthly bill. It means that after 5 years, you effectively reduced your monthly bill to just the connection fee, which is about $7-$15/month. This will never happen with solar leases that comes with PPA escalation, but the marketing is excellent, they give you an apparently huge reduction in your bill today at zero down, but not in the years to come.

    • Matt

      Ok read the report on soft costs again. “The basic finding was that third-party ownership adds $0.78 per watt to residential systems”. That almost 20-25% of the cost! Very short term thinking. And read those contracts close, it is not clear that it will save you money 10 years out. It depends a lot on the assumptions you make.

      • Bob_Wallace

        It may be short term thinking on the part of people who sign leases rather than purchase systems, but it does get more solar on roofs.

        I’m a bit more interested in cutting GHG emissions than worrying about who is making/saving money.

        I’d be really happy if people started leasing EVs and PHEVs by the tens of millions and we crushed huge numbers of gas hogs. Even if the leasing company was making money.

        • Marion Meads

          if these leasing companies were not so greedy for profits, we could have much more solar PV in much shorter time. The time is at hand to have retail grid parity, even cheaper, had our installers not been super greedy!

          • Bob_Wallace

            I think we made a mistake in the way we set up solar subsidies.

            Had we used a FiT program that guaranteed X cents per kWh produced for Y years then there would have been a lot of motivation to find the cheapest/best price for installation. If you had a 15 cents FiT and you could get installed/produce for 10 cents then you could pocket the nickel. That would cause people to look for a “9 cent” or cheaper … installer.
            The way we set subsidies up is that people seem to look at a system as paying/mostly paying for their monthly bill and eventually paying off the system. That probably doesn’t drive shopping as well as hard as the possibility of making a profit.

            Germany used a FiT approach and drove down their prices very fast. In a part of the world with overall poorer solar resources.

          • sean

            I’m pretty sure Shibani Joshi told us all that germany has far more sun than the USA.

          • A Real Libertarian
          • http://zacharyshahan.com/ Zachary Shahan

            haha. i used it. :D

          • http://zacharyshahan.com/ Zachary Shahan

            haha, yes she did. :D

      • Marion Meads

        Matt, the reports are really nothing, you can yack about it ad infinitum. What I have to decide is all about the quotes that I get and how much will it cost me total, on monthly, yearly, and for how long.

        • CaptD

          Good comments, I look forward to reading more of yours!

  • RobS

    I cant understand how people don’t realise that these companies wouldn’t offer the service they do unless owning the solar panels had a significant financial return, leasing just further adds to the already outrageous soft costs on solar in the US. With interest rates so low you are far better rolling the costs of solar into a home mortgage or just paying outright and reaping the full financial reward of going solar rather than gifting most of that reward to the leasing company. Still in the end what matters most is further renewable penetration on the grid.

    • http://zacharyshahan.com/ Zachary Shahan

      Agreed. 100%.

    • Todd

      Agreed! 100%+

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