Solar: PrePaid Lease vs Purchase

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sranga

Member
Joined
Apr 4, 2011
Messages
7
Location
Northridge, CA
Hi Guys

I am considering installing a Solar System and wanted to find out your thoughts on the PrePaid lease vs outright purchase of the system. The PrePaid lease sounds too good to be true. With the lease option all of the vendors provide a "service" that includes monitoring, insurance, inverter replacement at no extra cost over the lease term.
For instance, here is one of the quotes:
PrePaid lease: $5K (one time upfront payment and no financial liability till the end of the 20-year lease)
Purchase: $14K

If I am in a position to go for either option, which one should I choose? Appreciate your inputs.


- Ranga
 
sranga said:
Hi Guys

I am considering installing a Solar System and wanted to find out your thoughts on the PrePaid lease vs outright purchase of the system. The PrePaid lease sounds too good to be true. With the lease option all of the vendors provide a "service" that includes monitoring, insurance, inverter replacement at no extra cost over the lease term.
For instance, here is one of the quotes:
PrePaid lease: $5K (one time upfront payment and no financial liability till the end of the 20-year lease)
Purchase: $14K

If I am in a position to go for either option, which one should I choose? Appreciate your inputs.


- Ranga

I entered into a prepaid power purchase agreement [PPA] for solar recently. It's not a lease for tax and legal purposes. The legal fiction is that the financial institution or company that eventually takes the assignment of your PPA is a utility selling power to you. I wondered how they can turn a profit, too. The "secret" is that your $5k system is probably valued at $12-13k. SolarCity or SunRun sells the PPA to a bank or Google, which is looking for tax credits and deductions. The Federal tax credit -- which they take -- is based on the $12-13k figure. Then there are state incentives for them. They can also write off the equipment through very liberal depreciation rules. The whole scheme is called tax-equity financing. As a homeowner, you can't claim a tax deduction for depreciation. Only a business can. And the top corporate tax rate is 35%. So, it appears to be a perfectly legal and quite clever way to provide solar power at a lower price, by giving companies with large tax liabilities a way to claim credits and deductions. I'd be interested in whether people closer to the solar industry have a different take on how this works, but it looks like a win-win to me.
 
sranga said:
Hi Guys

I am considering installing a Solar System and wanted to find out your thoughts on the PrePaid lease vs outright purchase of the system. The PrePaid lease sounds too good to be true. With the lease option all of the vendors provide a "service" that includes monitoring, insurance, inverter replacement at no extra cost over the lease term.
For instance, here is one of the quotes:
PrePaid lease: $5K (one time upfront payment and no financial liability till the end of the 20-year lease)
Purchase: $14K

If I am in a position to go for either option, which one should I choose? Appreciate your inputs.


- Ranga
Careful. Check to see if they are adding on a KWh charge. I've seen cheap leases that also charge you 10 or 20 cents per KWh generated!

I did a prepaid 20-year lease on a PV system last year. $14K for a system that would have cost $18K (I think) to purchase. No other charges, included full maintenance, monitoring, insurance, etc. Yes, I'll have nothing at the end of 20 years, but by then, if I'm still alive at age 76, I'll be able to get something a lot better.

By the way, it is a lease, according to the paperwork, so the federal tax credit is unavailable. That is one possible reason to do it as a purchase.
 
So I just prepaid a lease through Sunpower and I'll give give you the lowdown on my experience.

We wanted to erase our electric bill, as well as juice up our Leaf so we have 66 Sunpower 230 E18's.

This system would have cost a mint had we paid cash, and we were originally planning for a much smaller system, but then we were told about the lease, which of course sounded much too good to be true. Our system cost was 17.5k, plus another 2k at year 7 to buy out the system, which we will do.

The bonus for us is not maintaining the system or repairing things that break for those first seven years. In the unlikely event that one of the two inverters craps out, then we don't pay a dime. That combined with the low up-front cost made this a no-brainer.

I would get several companies to give you quotes. We specifically wanted Sunpower panels because they don't use toxic metals and the panels can be recycled at the end of their life.

Good luck.
 
Gentlemen: Are there any companies here in Dallas area that you would recommend who would give me a low-down on this whole Lease .vs. buy thing ? A few of my friends are also interested.

I also learnt that Green Mountain Energy buys excess power back at the same price they sell upto 500kWh per month and 50% after that. This I believe is a new development as for Texas is concerned.

thanks
Jay
 
I am interested also (Dallas area). Not sure my HOA would allow solar panels, but I could always be the first to try! Even just a small system for charging the Leaf.
 
Cheezmo said:
I am interested also (Dallas area). Not sure my HOA would allow solar panels, but I could always be the first to try! Even just a small system for charging the Leaf.
Texas Property Code 202.010 passed last year: http://www.sos.state.tx.us/statdoc/bills/hb/HB362.pdf. It probably will not be easy depending on your HOA and AAC. Let me know what information on providers you find out if you do not mind sharing.
 
I'm in california and just signed a prepaid lease with sunpower and I had to get approval with my HOA. I feel that if you have the money for an upfront prepaid lease then go for it. Sunpower is upgrading my subpanel and adding another circuit for a second ev for me. I would have spent $10k more to purchase after rebates than the lease. Since sunpower guarantees purformance in the end I will be paying about $0.07/kwh.
 
I found my HOA documents, and they specifically allow for solar panels. That is a relief. They want to approve the placement, appearance, etc. but what I have in mind could not possibly be a problem.
 
So I went to the "Earth Day at Dallas' event to specifically research the solar energy and three different companies were represented. I had time to talk to only one of them - 1SolarTech.

They provide a 'Pre-paid' lease option, in which you pay all of costs upfront but the product is leased to you. You don't own it. The main advantage of doing this is that they own all of the maintenance and repair throughout the leasing period. I don't recall what the leasing period was, but I will get back with more details. I gave my address and my 12 month usage numbers for them to research and get back to me.

I will get back to you as I hear from those guys. But rough calculations make it seem the ROI is close to 15+ years. Stay tuned.

-Jay
 
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