The Hidden Costs of Solar Leases and PPA’s
What You Need to Know
In several of my recent meetings with homeowners, the topic of leasing/PPA has come up once again. Whenever there is a downturn in the economy, higher interest rates, or political uncertainty, leasing companies use this opportunity to promote a product that has never been in the best interests of the homeowner. The sales rep will emphasize the positives and downplay the negatives. Here’s what you need to know, just in case you missed it in their lengthy contract written in legal language.
1. Escalators: The Cost Keeps Climbing Most solar leases include an annual escalator, which is a percentage increase in your monthly payment. This means that while the initial cost might be low, it will rise over time, often outpacing the savings on your electric bill. By the end of your lease term, you could be paying significantly more than you initially signed up for.
2. In Perpetuity: A Never-Ending Commitment Solar leases can extend beyond the typical 20-25 year lifespan of the equipment. This means that long after the equipment has aged and potentially become obsolete, you may still be locked into paying for it.
3. Lack of Support: Who Do You Call for Help? With solar leases, you’re often left in the dark when it comes to support. When issues arise, finding help can be a nightmare, as companies frequently outsource their customer service, leading to longer wait times and poor service.
4. Who’s Actually Installing Your System? Many solar lease companies use subcontractors for installation. Subcontracting often results in varying quality of work and a lack of accountability. If something goes wrong, pinpointing responsibility can become a bureaucratic maze.
5. Incentivized to Sell, Not Support: Sales representatives can earn substantial bonuses for signing you up for a lease. This creates a conflict of interest where reps might prioritize closing the deal over ensuring that the system is the right fit for you.
6. Passing the Buck: Accountability issues are rampant in the solar lease industry. When problems arise, customers often find themselves caught between the lease company, subcontractors, and utility companies, with no clear solution in sight.
7. Long-Term Costs: A Pricey Commitment Over a 25-year period, the total cost of a solar lease can be much higher than purchasing a system outright. When you factor in the rising payments due to escalators, the financial burden can be overwhelming.
8. Not Meeting Expectations: Solar lease agreements often come with production thresholds that guarantee a certain amount of electricity. However, if your system underperforms, the company might not be as proactive in addressing the issue, leaving you with less savings and more frustration.
9. Cutting Corners To maximize profits: Leasing companies will use lower-quality products that don’t perform as well or last as long. This can lead to more frequent maintenance issues and a shorter system lifespan.
10. Sold Off to Wall Street: Treated as a Commodity Once your system is installed, the lease and its associated benefits, such as the Investment Tax Credit (ITC) and asset depreciation, are often sold off to Wall Street investors. This means that the company that initially signed you up might no longer have any interest in your long-term satisfaction.
In conclusion, while solar leases can appear to be an affordable way to go green, the hidden costs and potential pitfalls make it a less attractive option in the long run. Carefully weigh your choices and consider all potential outcomes before signing on the dotted line. You might find that owning your solar system, despite the higher upfront costs, provides more financial stability and long-term benefits.