A solar lease is where you do not own the solar panel system yourself. Solar loans are an ownership option where you own the solar panels and get all the benefits of ownership. Let’s talk about solar leases and PPAs, and starting with leasing solar panels from a solar company.
Solar Lease
Here’s exactly how they work: a solar provider installs a solar energy system on your property at no cost to you. You agree to lease the system from the solar provider for a low monthly payment. Your property gets all of the electricity generated by the system, and the value of this electricity is more than the monthly lease payment.
Terms Of A Solar Lease
The term of the lease is 25 years, but you can purchase the solar system after just 5 years if you would like to. At the end of the lease, you can either renew it or sign a solar power purchase agreement to purchase the system outright. The solar provider owns and maintains the system throughout the lease term, and the best part is that the solar company guarantees the production of electricity.
Differences Between Solar Lease and PPAs
Now, a lot of you have heard about solar leases and solar PPAs, which are very similar except for one key difference. A solar lease is a fixed monthly payment where you pay a fixed amount for whatever comes out of the solar panels you’re leasing.
Solar PPA
Now, a solar PPA, which stands for power purchase agreement, is where you agree to purchase electricity from the system at a fixed rate for every kilowatt-hour that the system makes. So, instead of paying a specific monthly payment in a lease, you’re paying a payment per kilowatt-hour. So those are the differences between a lease and a PPA, but both of them have the main benefits of you not owning the system, having a production guarantee, having no money out of pocket for the installation, and saving money over the life of the term, whether it be leasing or through power purchase agreements.
Solar Loan
Now, the other main option for financing solar is a solar loan. A solar loan is a situation in which you own the system, not just lease solar panels. You’re taking out a loan to pay for and own that solar system. Now, the best part about a solar loan is that you don’t pay anything out of pocket for the installation, and your first monthly payment for the loan is not due until after the system has gone live. So you don’t start paying anything out of pocket for the installation; you only pay once the system is up and running.
Benefits To Owning Your Solar System
There are a lot of benefits to owning the system, and you’re welcome to those solar incentives if you take out a loan or you write a check to pay for the system. In the lease and PPA options we talked about earlier, the solar provider owns the system, and they get the benefits of ownership.
Opportunity To Obtain A Federal Solar Tax Credit
They are the federal solar tax credit, which is a 30% value of the cost of the system. So if the solar panels cost $30,000, you’re going to get a $9,000 tax credit. That’s a dollar-for-dollar tax credit off your income taxes that you would have otherwise had to pay to the federal government.
Energy Credits
The other benefit of owning and buying solar panels is solar renewable energy credits that may come with your system depending on what state or market you live in. Some states have SRECs or solar renewable energy certificates, some do not. New Jersey has a strong SREC program, Pennsylvania has one as well where they’re about half the value of New Jersey and Connecticut, while Texas does not have any SREC programs right now.
Long Term Savings
No matter which option you choose, whether it be a solar loan, a solar lease, or PPA, you’re guaranteed to save money. These systems are designed to save money, and we’re able to design them that way because the solar systems generate electricity for decades once they’re installed. There is little to no maintenance once they’re installed, and they’re going to be working for many, many years, powering your home with clean renewable electricity from the sun.
Get A Free Solar Consultation With Green Power Energy
If you have any questions, feel free to contact us or schedule a free consultation with a solar installer through our website, greenpowerenergy.com.