While it can be financially beneficial to buy your solar panels and take advantage of the solar power incentives in Los Angeles, that isn’t the only option for homeowners. For those who want the benefit of solar power for their home without the expense of owning the system, leasing is a great option. But what does it cost to lease solar panels? And what leasing arrangements are available to you?
What Are the Terms and Benefits of Leasing Solar in Los Angeles?
Your leasing rate and terms depend on a lot of variables, including type of system installed, local utility rate for power, and sometimes your personal (or business) credit. That said, there are two types of leasing available: solar leases and solar power purchasing agreements (PPAs). Both will give you the use of solar power without system ownership.
Leasing benefits typically include:
- Stable cost, which acts as a hedge against future utility price hikes
- Panel maintenance and monitoring
- A system warranty, meaning your installer should repair or replace system components as needed, should power production ever dip below projections
If you enter into a solar panel leasing agreement and then sell your home, the new owner will need to take over payments through the end of the lease. Many potential homeowners see solar as a bonus, but you’ll want to make sure your prospective buyers know and agree to this term beforehand.
How Are Solar Lease Rates and Terms Determined?
A solar lease gives you the security of paying a set rate for power every month, over a term of typically 20 years. That rate is based on how much power the system is predicted to produce. In exchange for your monthly payment, you get the use of power from the sun and a fixed hedge against rising utility rates. A sample solar leasing agreement from the Solar Energy Industries Association (SEIA) may be found here.
How Are Solar PPA Rates and Terms Determined?
With a solar PPA, you agree to purchase power from panels for a set price per watt. The agreed-upon price is typically five cents less per watt than the prevailing utility rate. Here’s a section from a sample PPA agreement, from SEIA. You can view the whole document here.
Pay Attention to Solar Lease and PPA Escalator Rates
While these are affordable and accessible options for homeowners hoping to go solar, it is worth noting that both solar leases and PPAs terms can include escalator rates, which raise payments by a set percentage annually, typically 2% to 3%. If your initial payment is relatively high, this can quickly turn a deal that started out looking good into an unwise proposition. Make sure to inquire about potential escalator rates and do the necessary calculations to determine whether leasing is still an economical option.
If you have additional questions about buying, leasing, or financing, or any aspect of going solar, we’d like to hear from you. We’ve helped thousands of homeowners across California go solar, and we’re ready to help you too.
Robert Sarai is the Business Development Manager at LA Solar Group with over 7 years in the real estate industry. He helps property owners discover solar power and assists with their energy goals. He can be contacted directly at 818-946-2320.Linkedin