As the solar power industry continues to evolve, leases and power purchase agreements (PPAs) have become popular ways to offset the significant upfront costs of installing solar power. However, these payment options are designed to give the maximum financial benefit to the solar installer, not the solar customer.
Switch to Solar offers flexible financing programs designed to give you a much greater return on your investment in solar power. Below, we discuss what you need to know about solar panel installation financing and how our solar financing packages provide your home or business with a better return.
How do solar leases and PPAs work?
Leases and PPAs are financing arrangements, plain and simple. They obligate you to regular monthly payments over an extended period of time, usually 20 years or more! Make no mistake, under a lease or PPA, you are paying for the system. You’re just doing it over time. And worse, leases and PPAs actually do more for the companies providing them than they do for you! Here’s how:
1. Solar leases and PPAs hide the actual cost of the system.
With many leasing and PPA proposals, you are not shown exactly how much the system costs. You are simply shown the payment schedule.
Switch to Solar shows you the actual price for the system. If you decide to finance through Switch, that amount plus a small processing fee is financed. There’s no mystery.
Indeed, Switch goes the extra mile, showing you projected cash flows over the life of the system, along with a detailed economic analysis.
2. The solar leasing company, not the solar customer, receives Federal and State tax incentives.
Under a solar lease or PPA, you do not own the solar energy system or solar panels installed at your home. Someone else does, and they are the ones that receive the financial incentives, including the Federal Investment Tax Credit, State rebates and SREC payments.
With Switch to Solar, you spread out the payments for the solar energy system without giving up ownership of the system, so all of the financial incentives from solar power flow directly to you.
3. Your payments will escalate over time.
Many leases and PPAs look attractive in the initial years, but they escalate over time, increasing costs and making the economics difficult to evaluate.
With Switch to Solar, you pay a fixed monthly amount for the term of the loan. There are no escalating costs.
4. You’re stuck with a fixed term – usually 20 years.
Leases and PPAs typically carry terms of 20 years or more.
With Switch to Solar, the term of you loan is flexible. You can spread payments out over 20 years, or limit the term to 5, 7, 12 or 15 years.
5. Solar lease payments and energy payments are not tax deductible.
If you are not a business, you can’t deduct lease or energy payments from your taxes.
With Switch to Solar, the interest portion of your fixed, monthly payments is tax deductible.
6. Solar energy system installation options are limited.
Because solar leases and PPAs are typically funded through venture capital or public financing, available equipment and system configurations are limited to what certain large banks have approved for financing. Therefore, the solar energy system you are offered may not match your specific needs.
With Switch to Solar, our equipment and system choices are limited only by your preferences and our knowledge of what’s appropriate and reliable.
7. Maintenance costs are built into the lease, whether you need them or not.
Under a solar lease or PPA, a third party owns your solar energy system and is responsible for maintenance and repairs. Over 20 years, those costs are difficult to predict. Therefore the system owner builds a significant maintenance contingency into your lease or PPA payments.
With Switch to Solar, we want to limit your solar energy maintenance costs without inflating the price you pay for the system. Our approach is to warrant your entire solar energy system for 15 years. During that time, any and all repairs are covered 100% by us. After that, we can offer you an inexpensive, short term service contract based on actual current costs.
8. Pre-payment penalties and balloon payments.
Families often move before their solar lease or PPA expires. In that case, they are required to either buy the solar energy system at fair market value (with rising electricity prices, what would that value be?) or convince the buyer to assume the solar lease or PPA. In some cases, even after paying for 20 years, the homeowner still does not own the solar energy system; if they want to purchase the solar energy system they’ve been paying for, they must still pay the residual fair market value.
With Switch to Solar, your only obligation is to pay off the principal. There are no prepayment penalties, either explicitly or in the form of fair market valuations, and no balloon payments at term.