Effective July 1, 2024, third-party rooftop solar leasing is legal in Virginia. The General Assembly’s bill is expected to make solar more attainable and accessible, reducing and in many cases, eliminating all upfront installation costs. But what does this mean and how do you determine if this is the right option for you and your home?
How do solar leases work?
With a solar lease, a leasing company either installs or subcontracts another company to install solar on the customer’s property at no upfront costs to the customer.
The customer then leases the solar system from the third party, making regular monthly fixed payments which are often less than their prior electric rates.
Solar leasing companies are typically responsible for:
- System installation
- Maintenance and repair of the system
- Monitoring its performance
- Compensating the homeowner if the system underperforms (also known as a production guarantee)
At the end of the lease term, homeowners can choose to renew the lease, upgrade to a new system, or have the system removed at no additional cost. If the homeowner moves, the lease can be transferred to the new homeowner, or the remaining payments can be prepaid.
With the solar market expected to grow by 10 times in the next decade, third party leasing presents itself as a pathway to increase accessibility/affordability of renewable energy.
With minimal to zero upfront costs, predictable monthly payments, free maintenance and repairs and immediate savings on energy bills, solar leasing can be an attractive option for homeowners who want cleaner and sustainable energy without the complexities and costs associated with purchasing a solar system.
Are there any downsides to solar leasing?
Although solar leases offer an affordable solution to solar energy without hefty costs, your long-term savings are much lower than those associated with a loan or cash purchase. Since the lease company owns the system, only they can claim solar rebates and tax incentives.
Having a solar lease is a lot like renting a home instead of buying one: the costs may be cheaper initially, but more expensive in the long run. If you plan to sell your home, leases can complicate that process as well, especially if the new buyer is not interested in taking over the solar lease.
As with all major investments, leasing should be approached with a judicious eye and a certain level of skepticism. As we discussed in our article “I got doorknocked by a solar salesman”, it’s incredibly important to recognize when a solar provider or loan company isn’t being honest, or is over-promising what you’ll get from your system.
Leases are often popular in urban areas so if you live in RVA or NOVA, you’ll likely get door-knocked by someone offering a third-party-owned system (check out our guide to going solar in Richmond instead).
When is it best to lease a solar system?
Solar leasing is a great option if you can’t use the benefits solar would provide, like the 30% tax credit, or the long-term benefits of SRECs. A solar lease is also great option to keep upfront costs low, but it passes along most of the benefits to the leasing company.
The bottom line? If you are interested in solar for your home, be sure you understand all your financing options in detail before signing a contract. If you are promised to save $20/month with a solar lease, you need to understand what the financial assumptions are, and make sure they are realistic.
Whether you are working with a leasing company, a financing institution or directly with a solar installer, ask them to review costs in detail, including interest rates, dealer fees, monthly payments, size of system and energy offset, cost per watt and loan/lease terms. The right company will be transparent and deliver a high quality service regardless of your financing option.
