Disadvantages of Solar Panel Leases

What are the disadvantages of a solar panel lease?

We have been pretty excited about the idea of leasing solar panels to avoid the upfront cost of purchasing a solar power system. For many homeowners, residential solar leasing is the only way they can switch to the renewable energy resource.

A solar panel lease typically involves a company that owns, installs and maintains the solar panels on your home. You sign a contract under which you will pay the company a monthly fee that is less than the current cost of your electricity (these are called solar power purchase agreements, or PPAs). The length of solar leases varies, but are generally 10-20 years. They may be assignable to a new owner if you sell your home, but be sure to check before entering a solar panel lease.

While there are some definite advantages to going green and saving the money required to invest in a solar power system, a lease is not 100% perfect. Consider these disadvantages of solar panel leases:

First, switching to solar power is usually a means by which you can take charge of your own power. But with a residential solar lease, you are still dependent on an outside company for your electricity. In other words, you have switched one utility for another. Even with significant savings in your power bills, you will not enjoy the freedom of relying on your own generation of electricity.

Second, you lose the ability to enjoy the benefits of net metering. This is when you generate more solar electricity than you need and the excess is fed back into the grid. Then, when you draw on grid-based power, you can use the credit you have earned to off-set any charges. Some families can even earn a profit under net metering arrangements!

Third, under solar panel leases, the homeowner does not get the benefit of generous tax incentives that offset the cost of a solar power system. The solar power company enjoys those incentives and may not pass the savings along to you under the contract.

Finally, residential solar leases often have a long contract period. As mentioned above, a solar lease may or may not be assignable to a new owner. Carefully review termination provisions in the lease to make sure that you will not get hit with a penalty or will be required to “buy out” the lease.

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