As electricity bills continue to rise, households everywhere are feeling the strain, prompting more people to look into other energy options to help save money. However, transitioning to solar energy often involves the upfront costs of purchasing and installing solar panels. 

This is where a solar lease offers a compelling alternative by eliminating the need for large initial investments, which makes solar energy more accessible to a wider range of households.

What is a solar lease?

A solar lease is a financial arrangement that allows homeowners to benefit from solar energy without buying the panels. Instead, they are rented from a third party.

How does a solar lease work?

Ownership

With a solar lease, homeowners rent the system while the third-party leasing company owns and maintains it.

Payments

The monthly payment is determined at the beginning of the lease based on the estimated power the system will produce. Typically leases will either be fixed for the entire term of the agreement or increase by a predetermined annual rate, but the payments don’t change based on the amount of electricity the system produces. 

• Fixed Monthly Payments: Solar leases generally require a fixed monthly payment. This amount is agreed upon at the start of the lease and is not directly tied to the electricity generation of the solar panels.

• Flat Rate or Escalator Plans: Some leases come with a flat payment plan, where the monthly payment remains the same throughout the term of the lease. However, many include an escalator clause, where the payment increases by a fixed percentage each year. This escalation rate is usually lower than historical increases in utility rates, aiming to provide savings over time compared to traditional electricity costs.

• Monthly Lease Payments: Homeowners pay the leasing company a predetermined monthly fee for the duration of the lease term, which covers the use of the solar system.

Maintenance

Since the leasing company owns the solar system, they are responsible for the monitoring, maintenance, and repair of the system. 

End of lease

At the end of the lease term, the homeowner may have the option to extend the lease, purchase the system at a predetermined price, or have the system removed.

Financial benefits

Any state or federal tax credits, rebates, or incentives are claimed by the leasing company when you lease a solar system.

This allows the leasing company to offer lower monthly payments to the homeowner, lowering the overall cost of the energy produced by their solar system. A lease can be an attractive option for homeowners who do not have the tax liability to claim non-refundable tax credits that may be available for financing or paying cash for a solar system.

While long-term savings are projections and are not guaranteed, homeowners should typically save money on their monthly utility bill with a solar lease. 

However, it's crucial to thoroughly understand the terms of a lease agreement and consider long-term energy needs before making a decision. As the solar industry continues to evolve, solar leases remain a key option for making solar energy more accessible to everyone.