7 Things to Look for When Leasing Solar Panels
Solar leasing programs have made switching to solar easy and affordable, but as a homeowner you need to be aware of the differences and nuances between solar providers. We will outline the top seven things to consider when you are considering a leased solar energy system, and give you a breakdown of the marketplace of different lease providers and the details of their offerings.
1. Current Electric Bill and Annual Kilowatt Hour Usage
The draw to a solar lease is that you can have solar panels installed for $0 out of pocket and recognize immediate savings on your monthly electric bill. Do not count on the salesperson to tell you how much your remaining electric bill will be. Certain companies (I won’t mention names here) have been known to overstate savings by underestimating what the customer’s remaining average utility payment would be. You need to understand what a kilowatt hour (kWh) costs, and how many of them you use annually. Use this information to determine your remaining utility bill by subtracting the proposed annual solar production in kWh from your annual usage and multiplying by the cost of one kWh. In New York City a kWh costs approximately $0.25 based on the trailing two-year average.
2. What Equipment will be Installed and Where will it be Installed?
Many solar companies want you to sign on the dotted line before they even show you a system design. Make sure you are dealing with reality before signing a contract that may have cancellation penalties. The salesperson may be overstating the productive capacity of your roof, so make sure they show you a design of where the panels will be installed, what type of inverter system they will be using, and the brand of the different components. Not all solar is created equal. You want to make sure your installer uses a high quality, high efficiency panel that will maximize your roof space and generate the most power over the life of the system. I recommend SunPower panels because they are the most efficient panel available for a residential application, they perform better than any other brand over time, and with SunPower’s new integrated micro-inverter technology will be the cleanest installation on your home. Since SunPower panels are more efficient you can offset more of your electric bill and maybe even leave some room for future expansion if you have an electric car in your future.
3. Who will be Installing it?
Sometime it is easy to be blinded by the savings on a solar project, but it is important to remember that those savings are only as good as the work that is actually done on the house. You want to make sure the company installing the system has a track record of installing systems in your area. You should request references and go see systems that have been installed. If the company is legit they’ll have customer within a few miles of your home. You ultimately have to live with the panels on your roof so you should make sure the installation quality is high and the company isn’t taking shortcuts by running conduits on the roof, over the gutter, or across the side of your home. Generally speaking you will have more latitude with a local solar installer as you can get directly to the installation manager as apposed to a national company who has a standardized practice of how they install.
4. Who will be Backstopping the Project?
Four of the five major solar leasing companies are publicly traded and you can easily find their financial track record online. Sunrun (NASDAQ: RUN) had it’s IPO in late 2015 at $14 per share and as of this article is at $6.41 per share and shown a loss in the last two of three quarters. Solar City is probably the most well known publicly traded solar company, but is also the company with the largest losses. Solar City has yet to show a profit once with 8 straight quarters of losses, most recently a loss of $2.56 per share a 68.4% increase in losses from the prior earnings report. NRG Home Solar was the result of an acquisition of NJ based Roof Diagnostics Solar. NRG is rolling up their operation and selling other companies’ financing while laying off over 500 employees. Vivint Solar (NASDAQ: VSLR) is trading near all time lows at $3.74 per share after an acquisition by SunEdison was called off. Vivint has shown a loss for seven straight quarters since their IPO. SunPower is the only publicly traded solar company that is consistently profitable, and has shown a profit in 7 out of the last 8 quarters. SunPower has been in business for 30-years and has a proven business model with vertical integration by owning the manufacturing process. None of the four other national solar providers manufacture their own solar panels.
5. Does the Payment Increase Over Time?
Most national solar providers offer a low introductory rate that will increase significantly over time. A typical offering from a national solar provider has a 2.9% annual price escalator attached to it. This means if you were paying $0.15 per kWh day one with that provider you’d be paying $0.21 by year 10 and $0.30 by year 20. SunPower is the only solar leasing provider that has a standard offer with 0% annual escalation. I recommend SunPower because you know that no matter what, your annual cost will be the same.
6. What is the Degradation of the Panel they Want to Install?
Conventional solar panels degrade 2.5% in year one due to light induced degredation at 0.8% per year after that. SunPower solar panels are not subject to light induced degradation and only decrease by 0.25% per year. If your panels are degrading rapidly, but the price per kWh that they produce is increasing, you are getting less power for more money. That is why I recommend SunPower panels as they will produce more power at a fixed price which will maximize your savings.
7. Effective Monthly Payment
There are several considerations when considering solar, but the bottom line is certainly a big factor. When comparing solar providers’ offers, make sure you calculate the effective monthly payment taking into account how much the solar payment is, the remaining utility payment, and what that is going to look like in the future. Often times the deal that looks tempting in year one is actually more expensive 3-5 years down the road when you take into account the affect of the annual price escalation and loss of power due to degradation. By choosing a high quality, high efficiency solar panel, like SunPower, you can avoid the headaches of having a bad decision stuck on your roof.