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PPA(Power Purchase Agreement) vs a Solar Lease

PPA(Power Purchase Agreement) vs a Solar Lease

Solar Lease:

  • More times than not there is a zero dollar down payment.
  • You’re locked into 15 years or more years, which is transferable to a new owner or home.
  • In a PPA vs. Solar Lease, you are not paying for any power that your solar panels generate. Instead, you pay an equipment lease payment plus any extra power you need buy from your electric company. The power your solar panel power is technically free, but you have a set lease payment that rise 3% to 4% a year. The escalator rates you pay per year are typically designed to be less than the increase in energy costs from your electrical company, running around 4% at least in California. Some programs are a flat rate, so no yearly increases.
  • You are always tied to the grid like PPA so any surplus residual electricity needs are covered by your utility.
  • Like a PPA, it is common to take care of maintenance, repairs and the monitoring of your system, but not every lease deal does that.
  • Just like PPA you need to have good credit
  •  Because you do not own the panels, you do not receive the tax benefits or rebates or Renewable Energy your governments have made available to you.
  • Like PPA’s, you have an option to buy later or at the end of your term for a set residual price. Used panels may be worth more than the cost of taking them off your roof, negotiating the Fair Market Value (FMV) at the end of the lease would be the best way to go.

Solar PPA:

  • Solar PPA is an abbreviation for “Power Purchase Agreement.”
  • There is usually a low upfront cost ($1000 or more)
  • You’re locked in for 15 to 20 years (normally) to this agreement, which is transferable to a new owner if you decided to sell the house.
  •  You’re always tied to the grid, so any residual electricity needs that your solar panels don’t produce is covered by your utility.
  • They charge you a set electrical rate that is sometimes flat, and sometimes calculated to rise (escalator rates) over the term of your agreement but the rate usually start really low and then rise of time above what a flat rate would look like. The rates are usually significantly lower than would your local electrical company would charge.
  • Excellent credit is a must if you want to entire into this kind of agreement.
  • Most of the time there is an option to buy later or at the end of the agreement for a set price per watt. More times than not this is negotiable since the value of the panels have depreciated dramatically by the end of the agreement.
  • The PPA company is responsible for the maintenance, cleaning, and any equipment related issue that may arise.
  • Since you do not own these panels you do not receive are tax benefits or State rebates or Renewable Tax Credits.

So, bottom line for a solar lease vs. PPA:

  • Lease, you typically do not have to put money down and you pay a flat leasing fee that rises every year by a certain percent, plus energy you consume beyond the capacity of your solar equipment via your utility bill. You may also benefit from tiered rates.
  • PPA, you pay for power generated by solar panels with some money down and flat or yearly increases on your PPA electric rate. You also benefit from tiered rates.

While both these options are good for low cost financing, there’s not a huge difference when it comes to a solar Lease vs. PPA. If it saves you money and you like what you see, go for it.

 Here is a video that explains it further in a chart format:

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