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Solar energy has never been more popular in the United States. This truth of this claim is backed by the growing number of people who work in the solar industry, the amount of electricity generated from solar, the number of rooftop solar panel installations, and more. Let’s take a look at some statistics:
- 10.6 Gigawatts (GW) of solar was installed in 2018.¹
- Solar has been either #1 or #2 since 2013 in terms of capacity added to the U.S. grid.²
- 242,000 people work in the solar industry, which is double the amount in 2012.³
- Over 700 Megawatts (MW) of solar energy was installed in Q3 of 2019 alone.⁴
- The average cost of solar panels has been nearly halved since 2014.⁵
That’s a lot of people falling in love with energy from the sun, and according to market trends, you’re probably one of them! But even after some initial research into powering your home with solar energy, you still have some questions. At the top of that list lies the big one:
“Should I lease or buy solar panels for my house?”
Addressing the costs of solar energy for your home is the right question to ask. We think everyone should start using energy from 100% renewable energy sources, so that means we should figure out how to help everyone get solar. In fact, Chariot Energy give you access to electricity from 100% solar power without you needing to add solar panels to your roof.
But if you do want to use the direct power of the sun in your home, it’s important you understand all the details so that you make the right choice for you. Thus, we want to explain the difference between buying and leasing solar panels, complete with some essential pros and cons.
What is a Solar Lease?
The short answer? It’s just like anything else you lease — a home, a car, some land — except that it’s specific to rooftop solar panels. You receive all the benefits of powering your home with solar energy without having to worry about the upfront costs or long-term maintenance. Let’s examine this a bit further:
- You can lease solar panels and pay NO upfront costs.
- You don’t have to pay to fix or repair the solar panels.
- You support renewable energy.
- The lease is typically 15-20 years.
- You can choose to buy your panels at any time.
You also have two different ways to obtain these solar panels for your roof: a solar lease and a solar Purchase Plan Agreement (PPA).6
Solar Lease
Like any lease, you’re renting the materials for a specific amount of time, and you contractually pay a certain amount every month. That price is typically determined by the average amount of energy the panels on your roof generate each month. And that means it could go up each month at the whim of the solar leasing company.
Solar Purchase Plan Agreement (PPA)
In this situation, you’re paying for the electricity being generated rather than paying for the panels. This makes it more akin to signing up for a green energy plan from your local retail electric provider, but with this method, you’re actually using solar energy instead of buying Renewable Energy Credits (RECs).
Both of them involve having a third-party company owning the panels while you get to participate in the renewable energy revolution. Leasing remains the perfect option for people who want to use solar power but don’t want the responsibility of owning the actual solar panels or have the finances to make an outright purchase.
How Can I Buy Solar Panels?
There are two key reasons for the rise in solar panel installations over the past decade: the cost of the materials has decreased as panel efficiency has increased, and the U.S. government created the Solar Investment Tax Credit (SITC) to encourage people to purchase solar panels.7 Thus, for everyone who wants to own their solar panels outright instead of leasing them, you have two choices:
Cash Purchase
By cash, we mean you have the ability to pay for everything at once, so you can definitely use your credit card or obtain a cashier’s check from the bank instead of plunking down a stack of bills. This method puts you in complete ownership of your entire rooftop solar system from Day 1, including all of the savings.
Solar Loan
Think of it like making any other sizable purchase in life: if you don’t have the funds to pay for your solar panels all at once, you can take out a loan. This process assumes you have good enough credit to get a loan with a good interest rate from a bank, credit union, or solar installer. If the interest rate is too high, you won’t experience the true depth of savings from your solar panels.
Again, the point of buying your solar panels outright is to give you the maximum amount of savings.
The Pros and Cons of Leasing Solar Panels
Hopefully, we’ve given you have a better idea of how you can obtain solar panels for your home. Now, we want to compare and contrast these methods so you can make the right choice for your life. What works for your neighbor won’t necessarily work for you, so it’s important you have all the details and nuances involved with this decision.8
The Pros of Leasing
If you want to lease your solar panels, it’s typically because you don’t want to bear the large upfront cost of buying them. This is especially true since solar loans aren’t available in every area. Thus, you can expect to enjoy the following perks:
- Zero money down
- No maintenance costs
- Solar energy for your home
- No need to navigate the tax credit red tape
- The satisfaction of supporting renewable energy generation
The Cons of Leasing
Then again, leasing does mean you’re missing out on a few of the benefits offered by full ownership.
- Maintenance depends upon the solar panel company
- Reduced savings from solar panels
- Reduced savings by not earning tax credit
- Reduced savings by not having access to solar buybacks
- The solar panel company can remove the panels anytime
Another negative about leasing involves moving to a new home before you finish the terms of your lease. Since the lease is tied to the actual house, it can be difficult to sell your home because the buyer might not want to take over the rest of that lease. While some solar companies let you pay to remove them as a way to break your lease, that can be cost-prohibitive for some people.
The Pros and Cons of Buying Solar Panels
If you’re truly interested in buying your solar panels, the following discussion will definitely put the entire situation into sharp relief. Even with the SITC, this will be a major purchase, so you and your family need to have a serious conversation with all the possible information on-hand.
The Pros of Buying
Is it a large up-front price? Yes. But will the savings be worth it? Absolutely. Full ownership of your own solar system provides several excellent benefits.
- Increased home value
- Increased savings (even compared to renting)
- The chance to sell your solar energy generation to the electricity grid
- All the electricity is yours
- All the tax credits are yours
The savings are so substantial with owning your own solar panels that the industry average for paying yourself back from the initial purchase price is five to seven years. That means, since the average solar panel lasts 20-25 years, you could enjoy up to 20 years of free solar power after you pay back your investment!
The Cons of Buying
Both research and anecdotal evidence tells us that the one thing holding people back from installing solar panels is the large upfront cost. This is especially true since loans and leasing aren’t available nationwide — typically only in areas where solar installers can make the maximum return on their investment. Simply put, solar panels are expensive.
Even more, leasing advocates will tell you that solar panel ownership means you’ll have to pay for maintenance. While that’s true, solar panels are designed to withstand terrible weather — including hurricanes — and they also come with substantial warranties, insurance, and other protections. Hence, owning solar panels really isn’t the onerous maintenance problem some might believe.
Our Recommendation? Install Solar Panels on Your Home
Here we are: leasing vs. buying. Both give you the “warm fuzzies” of knowing you’re helping the planet by using renewable energy from solar power in your home. Leasing offers you solar panels with limited upfront costs, but lower lifetime savings, while buying asks you for a large initial investment, while promising relatively prompt payback and higher lifetime savings.
To put it another way, check out this 2016 chart from Consumer Reports.
To summarize:
- A Lease or PPA = about $25,000 savings in 20 years
- A Loan = about $40,000 savings in 20 years
- Cash = about $60,000 savings in 20 years
And when you factor in paying yourself back, you’re making close to $90,000 in savings over 20 years. That’s a huge argument in favor of full ownership.
In fact, most solar industry experts recommend ownership over leasing because of those greater financial benefits. You’re able to use all of your solar energy, instead of ceding your tax credits and solar buyback potential to a third-party solar installer.
Most of them also recognize that not everyone can afford outright ownership. And when combined with statistics showing that over 75% of Americans simply can’t use rooftop solar, it’s obvious the industry has a long way to go before it reaches full-scale adoption.9
This is why it’s important that people have access to affordable electricity plans like those offered by Chariot Energy. By creating excellent renewable energy plans from 100% solar energy, we give Texas residents the ability to show their love of the environment without needing any solar panels on your roof. The world needs to reduce its dependence upon electricity from fossil fuels, and you can do your part by signing up for electricity from Chariot Energy today!
Sources:
1. https://www.seia.org/news/us-solar-market-adds-106-gw-pv-2018-residential-market-rebounds
2. https://www.seia.org/solar-industry-research-data
4. https://www.seia.org/us-solar-market-insight
5. https://www.energy.gov/eere/solarpoweringamerica/solar-energy-united-states
6. https://www.energysage.com/solar/financing/should-you-buy-or-lease-your-solar-panel-system/
7. https://www.seia.org/initiatives/solar-investment-tax-credit-itc
8. https://www.npr.org/2015/02/10/384958332/the-great-solar-panel-debate-to-lease-or-to-buy
9. https://solstice.us/solstice-blog/why-americans-cant-access-rooftop-solar/