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Will Leasing Solar Panels Become More Popular in Coming Years?

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Jane Marsh's picture
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Jane Marsh is the Editor-in-Chief of Environment.co. She covers topics related to climate policy, sustainability, renewable energy and more.

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  • May 6, 2022
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When solar panels were first introduced in the 1970s, consumers could expect to pay upwards of $105 a watt. Only the wealthy could afford to install solar panels on their homes, and since the panels themselves were relatively inefficient, the technology didn’t gain the momentum it has today.

The price has dropped dramatically in the intervening decades. In 2022, the cost per watt will be as low as $2.77. Solar panels have become more affordable in recent years, but leasing panels was more popular before the price drop than owning them. The market shifted toward ownership in the late 2010s. Will leasing solar panels become more popular again in the coming years?

Why Did Solar Leases Lose Popularity?

Solar leases were a popular way for homeowners to install solar panels on their homes without the significant upfront costs of solar installation. Instead of making a massive initial investment, leases allowed homeowners to install panels for little to no upfront costs. The problem didn’t like the savings but rather the monthly fees — and the restrictive contracts that left people trapped for decades.

The average solar lease lasted 20-25 years and depending on the details of the lease and homeowners could find themselves trapped in their homes, unable to move. People who tried to sell their homes with leased solar panels found that removing the panels was against their lease contract, so moving became impossible.

As solar panels gained popularity, government entities started to offer tax incentives, rebates and even cashback to encourage homeowners to invest in solar. Leasing the solar panels often meant either the installer claimed these rebates and incentives or the installation didn’t qualify. The threat of being trapped in a lease or missing out on signing bonuses for installing solar slowly chased people away from the idea of leasing their panels.

Options Other Than Leases

The technology has become more affordable, but purchasing solar panels is still expensive. Homeowners can expect to spend anywhere from $12,000 to $18,000, depending on the installation size. To make solar more accessible for everyone, many cities have established programs that can make that dream a reality. In 2018, GRID Alternatives Mid-Atlantic set up a program to help low-income homeowners install solar panels on their homes.

Solar panels installed on low-income homes can substantially impact the quality of life for those who reside there. The average homeowner in the United States pays upwards of $1,430 annually for electricity. A solar installation can drop an $80 electric bill to less than $5 a month. This sort of savings can make a massive difference in the lives of people who live paycheck to paycheck.

Will Leases Regain Popularity in the Future?

It’s hard to tell if solar leases will regain popularity in the future. There are many downsides to this sort of installation, from the strict contract to the fact that these panels don’t add any value to the home because they don’t belong to the homeowner. Leasing solar panels also mean that the homeowner doesn’t qualify for the incentives or rebates offered by the government to encourage them to buy solar.

Despite the negatives, solar leases still have some positive aspects. It is a less expensive option because there are no upfront costs and the homeowner still gets the benefits of reduced utility bills and green energy.

Regardless of whether a homeowner decides to buy or lease, there are plenty of options for them to choose from. Solar panels and other green energy are the future and keeping up with that demand will require multiple forms of financing, depending on each homeowner’s means and needs.

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Doug Houseman's picture
Doug Houseman on May 10, 2022

I hope solar leasing is banned. 

Having dealt with a number of customers that have (or had) leases, they are about the worst thing that can happen to a non-utility energy customer. 

1) There tends to be no promise on actually meeting energy bills

2) Maintenance tends to be poor from the leasing companies

3) They tend to act like second mortgages - with release from the contract or transfer having to be OK'ed by the leasing company

4) if you want out at the end of the lease you tend to have to pay the leaser to remove the panels.

5) Nothing is noted about failure or degradation - and those costs tend to be on the lessee

6) It is on the lessee's insurance to deal with storm damage, and in some cases the lessor want's the insurance payment in cash, and then does not either remove or repair the system

7) There is no planning in the lessor's side for load growth or reduction

8) changes in tariff are on the lessee's costs, not the lessor's

In short most of the potential changes in costs are on the Lessee's side of the equation, and the interest rates are typical of an unsecured loan (including increasing payments as the Prime Interest Rate changes).

Many people will feel the impact of the Fed's rate change in the US in the next couple of months. 

No banning solar leasing is best for most people right now. 

Matt Chester's picture
Matt Chester on May 10, 2022

Is there a scenario where these problems could be addressed by regulation, or do you think that's not even worthwhile given these risks? 

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