Solar Leasing Guide 2024

What Are the Typical Terms of a Solar Lease?

The terms of a solar lease are critical to understanding whether it’s the right route for you. Based on individual requirements, solar leasing companies can provide various lease terms, ranging from short to long periods. Typically, though, solar leases last 20 to 25 years.

Given that solar panels have an average lifespan in the range of 25 to 30 years, customers end up being able to utilize solar panels to their full lifetime potential, even if they don’t take the option to buy at the end. Different solar leasing companies will also offer opportunities for advanced services, including monitoring, lease payment and observation through mobile and web apps, although you also get these if you buy in cash or finance, in most cases.

Also included in these digital offerings are online portals through which customers can review their contract, make monthly payments and observe usage over time. As with the wider utility sector, solar customers are looking to choose companies with improved service and customizable solutions, all of which provide a better user experience.

Customers must also be aware that, typically, solar leases will require an annual payment escalator of 1 to 5% per year as a result of inflated electricity costs. These terms are spelled out clearly in the contract, though, so they should not come as a surprise.

Ending Your Solar Lease

Customers who choose to lease solar panels may find themselves in circumstances where they want to end their lease, such as if they are moving to a new home or they find that the lease payments plus electricity from the grid — if their system wasn’t sized properly — end up costing them more. Some solar leasing companies try to make this process as easy as possible, providing the option to transfer the lease to the new owners of the home or break the contract and remove the panels.

Unfortunately, it was common practice for companies years ago to hide high fees — sometimes up to $20,000 — for early lease termination in the contracts. This is no longer common, but you should be on the lookout for these fees if you plan on entering into a lease.

Even if you don’t break your lease early, it will come to an end eventually. When this happens, customers can either renew the same lease or cease the solar contract. In the latter instance, the solar company will dismount and remove the panels.

A last option is that customers can purchase the solar panels at a discounted rate (a price that is sometimes outlined in the contract at the time of the original solar lease).

If you want to know for sure how many panels you need, you can click below to connect with an EcoWatch-vetted installer and get a free estimate.

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Is a Solar Lease Right for You?

The decision of whether to lease solar, buy solar panels outright, engage in a PPA, or simply ignore solar as an option is a very personal and major decision. To help with such decisions, here are a few pros and cons of solar leasing to keep in mind:

Pros of Solar Leasing

Solar leasing comes with many natural benefits, including the following:

• No need to pay high upfront costs of solar panel installation
• Locks in energy prices for the future, when the market may be volatile
• Avoid the potential headache of maintenance and monitoring of equipment
• Significant utility bill savings
• Reduced household carbon footprint
• Power production guarantees in solar leases mean payments can decrease if the panel doesn’t produce as anticipated, minimizing the risk

Cons of Solar Leasing

Solar leasing is certainly not for everyone, though, as these contracts can come with a certain level of risk and concern as well:

• As utility rates increase, the leasing price also increases each year and could undercut expected cost benefits.
• Since you do not own solar panels, you are not entitled to the federal solar tax credit (an average of $8,991 in the U.S.) and some local benefits.
• Although there isn’t a high upfront cost, over the system’s lifetime, you’ll likely end up paying an equivalent or higher amount than what you would have if you bought the solar panels outright.
• Leased solar panels don’t increase your home value like panels you own do, because they are not a part of the property you own.
• Breaking your lease may be an expensive hassle if you wish to move.
• Leasing may not be economically feasible if you are in an area without net metering.

Watch Below: A real estate agent, familiar with the solar financing landscape, gives his take on whether leasing solar panels is worth it

The cost information presented in this article is derived from a comprehensive analysis, incorporating data from multiple industry sources. The average cost per watt per state was calculated based on figures from Consumer Affairs, Energy Sage, and Berkeley Lab’s Electricity Markets & Policy Department. Additionally, monthly energy consumption and the average monthly cost of electricity were sourced from the U.S. Energy Information Administration, ensuring a well-rounded and accurate representation of the information presented.