Thursday, August 25, 2016

The good and bad about the Solar Lease and the Solar PPA

Lets start with the basics. What is a solar lease or PPA ?

The solar lease and the power purchase agreement (PPA) are very similar products and are used interchangeably.  Large Solar companies like Solar City as well as local New Jersey Solar Installers like Ampericon have this product in their solar portfolio.

In simple terms homeowners who avail of a solar lease/ppa  are basically changing their electric utility company. Once you go solar via the lease or the ppa, you will start to pay the solar company every month for power instead of the electric utility company.  Your electric expenses reduce dramatically once you go solar.  There are no upfront costs for the lease or the PPA.  The cost of installation, permits, design and construction are all taken care of by the solar company. Your only obligation is to buy the power produced by the solar system.

Local installers like Ampericon reduce your monthly bill by 40% or more and offer you 6 months of free electricity.  Larger solar companies like Solar City have much higher overheads and costs and are able to offer saving of around 20% and have no free months of electricity.

Lets look at an example :  Marguerite Kerr  and  her son Hunter of Hamilton New Jersey went solar in June of 2015.  Prior to going solar their PSEG electric bills used to be peak in summer around $325 per month and settle at about $150 during the cooler winter months.  They paid PSEG a total of $2,520 during the last 12 months.  Thus, their average electric bill was $2520 / 12 = $210 per month.

Once Marguerite and Hunter went solar in June 2015 their electric bill reduced to $127 per month. Switching to the solar lease saved them $997 during the year. That is 40% lower than their earlier electric bills.  Ampericon even paid for their first 6 months of solar power.

Hunter and Marguerite in Hamilton NJ leased their solar system from Ampericon
Hunter and Marguerite decided to go with Ampericon as the savings were significantly higher than Solar City (50% off vs 25% off).  Ampericon used German solar panels and American micro-inverters and the Kerr's thought this combination of  value and excellent product quality made them the better choice.

Now,  for the difference between the Solar Lease and the PPA. The solar lease is an equal payment plan with the same payment amount every month. For example the Kerr lease had an equal monthly payment of $127 a month. The  PPA is a monthly payment based on actual usage.  Over a year you end up paying the same amount for the PPA and the lease. That is why most people use the terms interchangeably.

Homeowners never have to worry about the maintenance, insurance or warranty of the solar system as all that is taken care of by the solar company during the lease term (20 to 25 years). The solar lease or PPA is an excellent option for homeowners who want to go solar without spending anything out of pocket.  If you want to save money without making any out of pocket investments, the lease/PPA is your best choice.

So what about the bad ?

As a homeowner you don't receive any of the incentives associated with the solar system. The tax credit, the renewable energy certificates etc are all taken by the solar company.  And the lease term is usually 20 to 25 years, a very long time. The good news  though is that it is easily transferable if you sell or move from your home.

So for those of you who want other options, you can look at  purchasing your solar system by paying cash or through financing. There are some excellent purchase program from the utility companies as well like the  PSEG Solar Loan and the JCPL Sungage program.  See my other articles on these programs to compare and contrast your solar options.

Anjan Saikia
Keeping Solar Simple


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