Purchase vs Lease/PPA (Power purchase agreement)

     Going solar can be done in a couple of different ways. Purchasing the system or Leasing/PPA with 3rd party ownership. When you purchase the system, regardless of if it was paid for with cash or financed with $0 down, you are eligible for the federal tax credit and can enjoy the increased value of your home, along with the actual cash flow savings. When the homeowner sells their house, they simply add the value of the system into the listing price and will receive much of the investment back. With the slow monetary depreciating curve of a solar system, the analogy I commonly make is that solar is similar to buying a car, driving it around for 7 years, and then selling it for the same price you bought it for. How much does the car cost in this example? It’s free! This is the ideal way to go solar if you have the funds to purchase outright or the credit to finance the system and want to maximize your savings.

     The second method is not quite as ideal and I do not recommend going this route unless a purchase isn’t possible. Going solar through a lease/PPA is better than not going solar at all, but will end up costing more money more often in the long run versus purchasing. PPA’s and leases are commonly sold by some of the largest and most recognized solar companies nationally. SunRun is the largest. While there are differences among leases and power purchase agreements, the concept is the same. Let’s use SunRun in our PPA example... SunRun purchases a system for you and installs it on your roof. SunRun owns the system and is eligible for the tax credits. You agree to buy the power (kWhs) the system produces for 25 years. The price per kWh can be fixed or on an escalator each year.

     The price per kWh for PPA’s are sold around 14-16 cents/kWh on the low end and into the 20’s for a pricier bid. Compared to our current 37 cent rate, this appears to be a good move. Your payment will be lower instantly. The catch? It’s a 25 year agreement and if the homeowner decides to move before that period is over they have to convince the buyer of their home to allow a transfer into their name. If the buyer of your home has the cash or credit to finance a solar system himself, many times the math works out better to just purchase a system and so the buyers demand it be payed off before they move in. The sellers are stuck and have to buy out the lease/PPA, which is always more than what it would have cost just to buy in the first place. Plus, since it’s not a new system, there is no tax credit. This happens more often than a successful transfer of the PPA into the new owner’s name. When SunRun says they guarantee a transferability, they are technically right because it could be transferred if the buyer worked with you and took it over.

       PPA's were more popular several years back when solar financing was not available and the cash price of systems were much higher. Now that the prices have come down and financing is widely available, PPA's aren't as necessary unless somebody cannot quality for financing. Even without the opportunity to take the tax credit, a purchase is still a better option most of the time. There will always be circumstances when a lease/PPA is someones best route, but it is very rare and if you are personally thinking about doing a lease/PPA, especially contact me so we can talk about if it makes sense for you.