Our Guide to Solar Power Purchase Agreements and Leases
If you’re considering a solar panel for your home, you may want to look into solar leases and solar power purchasing agreements (PPAs). These offer people the option to install solar panels without paying for any up-front costs, making it an accessible and affordable way for people to reduce their impact on the environment.
Under a solar lease and a PPA, your solar installer will construct a system on your property then bill you a monthly fee to use the power it generates. With these contracts, homeowners can make the transition to solar without putting down any money. However, there will be a lower return on investment over the system’s life.
The Definition of a Solar PPA
A solar PPA is a rental agreement between you, the homeowner, and a solar installer. Under this agreement, the installer will erect a solar power system on your property while retaining the system’s ownership. You will then rent this system’s use while paying a monthly fee to use the panels’ energy.
Many homeowners have opposed solar leases and PPAs because these contracts are usually more advantageous to the installer. If you want to maximize your return on investment and reduce your energy bills as much as possible, you may want to consider buying your own system with cash. However, if money is a problem, then leases and PPAs provide a viable option to go solar.
How Solar Leases and Solar PPAs Operate
The leasing company will install a system on your property under these options, which they will own throughout the system’s life. The ownership allows the leasing company to claim the 26 percent federal tax credit and other local rebates and incentives, which owners receive as an award.
After the installers set it up, you then have to pay them every month to benefit from the power that the panels produce. In this situation, leases and PPAs differ. If you’re under a solar contract, the monthly fee is fixed. It is calculated based on the average estimated production of the solar panel system, even though the actual output will be higher during summer and lower in the winter.
Under a solar PPA, however, you pay only for the energy that you use. The contract usually implements a price-per-kWh scheme, which is slightly cheaper by a few cents from what a utility company charges.
The Value of Solar Leases and PPAs
Generally speaking, the value of these two agreements is determined in the contract’s terms and conditions. Although they’re comparable, it is difficult to say if one option works better than the other without analyzing the agreement. If you are considering these options, be sure to scrutinize the terms. You will have to calculate how much the payments will increase over time, so determine if this helps you substantially save energy.
However, if you prefer to own your solar panel system but do not have enough cash, consider taking a loan. Financing your system with your loan will allow you to own the system and reap tax incentives and rebates given to solar panel system owners. You will also protect yourself from future rate increases, which have a massive impact on your return on investment.
Solar leases and PPAs are a great way to make a faster transition to solar power without investing a significant amount of money. It allows people in tight financial situations to reduce their energy consumption and carbon footprint, which is a growing necessity. Be sure to talk to a solar installer to find the best options for you.
Socal Solar Guru is a solar installation company in Southern California that works directly with top manufacturers and solar programs in the USA. We ensure our customers the broadest range of options and the most significant savings in solar panel systems while providing top-notch service. With our unbeatable prices, you can make the switch to solar in an instant. Book a 15-minute discovery call with us today!