Typically no. The majority of solar leasing companies only lease to homeowners. The homeowner may benefit from installing solar on a rental property as well as the tenant but it has to be the homeowner to setup the solar.
This decision depends on many factors and the homeowner’s goals:
If your electricity bills are over $180 a month, you have access to low-interest financing or if you have cash in a low return investment model and you pay Federal income taxes every year, it will be best to buy the system. Today the returns on solar systems for both commercial and residential ones are in double digits, anywhere from 12 to 20% and the paybacks range from 4 to 6 years depending on the utility bills..
If you have high electricity bills but no access to cash and somewhat low credit score, the PACE program may be a great solution. (See “What is solar PACE financing?” section.)
If you don’t have access to cash but have decent credit score (700+), you may want to lease the system. This way you can still lower your bills by up to 25%, without spending any money for the solar system itself.
Other factors to consider are:
- The system maintenance: if you buy the system, you are in charge of cleaning and insuring the system. If you lease the system, the leasing company will take care of all the maintenance since they are the owner of the system. Note that, the maintenance of a solar system is very easy, since there are no moving parts. Most of the time, the rain (as rare as it may be in California) takes care of the panel cleaning.
- How long you intend to stay at your current home: If you plan to stay at your current house for less than 6 years, it is usually better to lease, since most systems pay for themselves within 4-6 years, if purchased. If you intend to stay a very long time, then your financial situation is likely to determine if you want to buy or lease. Note that the solar panels increase the value of the house, so even if you sell the house within 6 years of buying the system, you are likely to recoup all the initial cost just from the sale of the house. Then all the savings achieved in the 6 years of solar production will be additional, which makes solar a worthy investment, even if you decide to move out of your home sooner than later.
- You pay a lot of income taxes: Then buying is definitely the best choice, since you can turn your tax dollars into an revenue-generating asset for yourself. If purchased, solar system provides a tax credit that is equal to 30% of the installation cost. This gets deducted from your tax bill, allowing you to pay less tax and use your funds to generate clean and cheaper energy. If you already pay taxes throughout the year, you will get a refund from the IRS equivalent to your tax credit after your file for your taxes.
Solar lease is basically leasing the solar system itself from a third party. The electricity bill goes down significantly – up to 95%- due to the solar production. But the homeowner pays a monthly amount for the equipment lease. The combination of the new electric bill and the lease payment is usually 10-25% less than the bill before solar.
PPA stands for Power Purchase Agreement. In this case, the system is owned by third a party, just like with the solar lease. Then the system owner sells the power that the solar system produces to the homeowner at a cheaper rate than the utility company. The combination of the new electric bill after solar and the monthly PPA payments can be up to 25% less than the homeowner’s current bill. Many companies use the “lease” terminology for PPAs as well, so as not to confuse the clients.
Any house with an average monthly electric bill of $120 or more will easily see significant savings. The higher the bill, the more the solar can save. Most utility companies such as SCE and SDG&E use a tiered rate schedule, which means the more power a house uses the more the homeowner pays per kWh of power. If a homeowner buys the solar system, typical payback is around 5-6 years for bills around $150 but goes down to 4 years if the bills are more than $200 a month. Every house is different and your sales consultant is the best person to tell you how much your savings will be for your specific situation. A typical household in California sees a savings of 80-95%. If the homeowner leases the system, since there are no upfront costs, there is no payback period. In the case of a leased system, the homeowner typically can lower their electricity bills by up to 25-30%.
The most important components to look at before deciding if solar may make sense for a house are:
- Average monthly electricity bill: If the bill is over $120, solar will likely make financial sense.
- The roof: The roof should have enough space on East, South or West side. North-facing roofs are not ideal for solar since the power production is significantly lower but can still work in some cases. The roof age and material are also important. We do not recommend installing on roofs older than 12 years and suggest that you re-roof before the solar installation. Also, some roofing materials, such as Cal shake, wood shake and certain types of metal are not suitable for solar installation.
- Shade: There should be minimal shade on your roof since this will impact the solar production. Very large trees and tall roof obstacles such as big chimneys can cause unwanted shade on the panels.