This article will go over the 4 most common misconceptions regarding solar PPA’s discussed on popular websites.
After potential solar homeowners hear a pitch about the benefits of a solar PPA, they often become a bit skeptical of this option to acquire solar because of how foreign it may seem from the status quo. They might search for “solar PPA vs ownership” and find surface-level articles that justify their beliefs. These articles are often published by websites that are not solar companies but lead-capturing platforms.
I find it very important to debunk some of these commonly discussed PPA drawbacks because we at Cleanstart feel that everyone should have the opportunity to go solar whether you are in a cash position or not. Addressing some of these common misconceptions about solar PPA’s in our opinion is necessary.
For a more comprehensive analysis of solar PPA vs. ownership, including a deeper dive into the pros and cons and a side-by-side comparison, check out our extensive guide here: Solar PPA vs. Ownership: Is Owning Solar Really the Best Option?
Below are some commonly discussed solar PPA drawbacks on popular websites such as Marketwatch, SolarReviews, CNET, and EnergySage.
- “You will never own your system under a solar lease unless you buy out the contract.”
- “Since you do not own a leased system, you cannot claim certain solar incentives. For example, the company that owns the system will be able to claim the federal solar tax credit, but you cannot.”
- “Lease payments consume a large chunk of your monthly budget. In the long run, you can save a few thousand additional dollars with a cash purchase or a solar loan.”
- “Selling your home while you have an active solar lease is sometimes difficult because you must find a buyer willing to assume the remaining monthly payments.”
Let’s debunk each one of these common lease and PPA talking points and look at the actual facts of owing your solar vs. renting your solar.
1. “You won’t own your system with a solar lease unless you buy out the contract”
This is correct. You will never own your system unless you buy out the contract.
The question you have to ask yourself, and the question I have been asking myself and challenging for the near 10 years I’ve been in the industry, is, “what are the actual benefits of owing the panels?”
If you really think about this question, it is actually quite difficult to come up with an obvious answer that would make owning outright better than renting.
It is true that owning your solar system or purchasing outright, will save you more money rather than renting the solar equipment over the course of 25 years (warranty period).
However, once you purchase the solar equipment, you are no longer covered in the event that your system stopped working. You would be on the hook for any electric bills you’ve received from the utility company.
I’m not suggesting this happens often, but with a lease or PPA, you gain the peace of mind that if your system stops performing for any reason, the solar company is contractually obligated to cover any additional electric bills you incur. This reassurance is valuable to many homeowners who prefer not to own the panels themselves.
If you don’t have the funds for a $40,000 solar system upfront, a PPA or lease is an excellent option. You can enjoy all the benefits of solar energy without any initial investment. While long-term savings may not match those of owning a system outright, a lease or PPA immediately reduces your electricity costs each month.
Choosing to let the solar company handle the full responsibility of the system is appealing for those who prefer a hands-off approach. In such cases, owning the solar system may not be the most suitable choice.
2. “If you lease a system instead of owning it, you can’t claim certain solar incentives”
True. Somewhat. Claim the federal tax credit? No. Claim state incentives? Yes. Although with a lease or PPA, you don’t necessarily claim the state incentives, it is automatically applied to the monthly payment for you, making it another reason for the growing popularity of a lease.
Some states make the claiming of the incentives a bit challenging and cumbersome. With a lease or PPA, the state credits are automatically applied, lowering your monthly payment making that payment more attractive.
The federal tax credit is typically applied for by the solar company and is what they use to install the equipment for you at no cost out of pocket.
If the goal is to lessen your tax burden for the year, then cash would do that for you because you can claim the solar tax credit directly. But again, you would need to be in a substantial cash position to do so.
3. “Lease payments consume a large chunk of your monthly budget”
This argument doesn’t really make much sense. The reason is you already have a budget for electricity.
If you have a monthly electric bill, you already have an idea of what your monthly electricity budget is.
A solar lease or PPA would replace your current electric bill with a lower one. It is money you are already spending. So this is a pretty silly statement.
4. “Selling your home while you have an active solar lease is sometimes difficult because you must find a buyer willing to assume the remaining monthly payments”
This is sometimes true. Some buyers may prefer not to take on a solar payment. They might opt for a home without solar and accept higher electricity bills instead.
However, there are also buyers eager to benefit from lower, fixed electricity costs through a solar lease or PPA.
Typically, for every one person uninterested in a solar-equipped home, there are many others who are. Fortunately, current lease and PPA agreements often include the option to buy out the system when selling the home, which is straightforward and common practice.
This option effectively addresses concerns about selling a home with a solar lease. Additionally, the buyout cost after five years is usually half the cost of purchasing a new solar system outright. This represents a discount for homeowners.
We offer a calculator that determines the fair market value and buyout cost of your leased solar system from year five to twenty-five. This tool provides valuable insights. If you’re interested, feel free to schedule a virtual consultation with one of our energy consultants to explore this further
Conclusion:
Purchasing a solar system outright with cash offers significant benefits to homeowners, including a substantial reduction in tax liability for that year and greater long-term savings on electricity costs. Of course, this option requires having the necessary funds available.
If you don’t have the upfront cash, there are various programs designed to help homeowners access the advantages of solar energy through alternative means. It’s crucial for websites discussing these options to present them transparently and without bias.
Remember, whichever route you take, solar will always cost less than what you are currently spending on your utility bills.
Ultimately, the decision to own solar panels boils down to your specific needs and the advantages that matter most to you. For personalized clarity and guidance on finding the best fit, we encourage you to schedule a virtual consultation with one of our solar experts.
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