Imagine saving money on your electric bill and locking in today's price for your future bills with no money down. Solar leases have helped fuel the residential solar market boom, with installations increasing by 60 percent from 2012 to 2013. Now that some homeowners with solar leases are putting their homes on the market, the deal doesn't seem as sweet. Solar leases may scare off potential homebuyers, particularly if they don't understand them.
Some homebuyers are shying away from buying homes with solar leases, seeing them as liabilities instead of assets. The lease does require the homeowner to purchase solar electricity from the lessor, typically at a slightly lower rate than what's provided by the utility. Homeowners typically save money from day one -- while locking in the power purchase rate for years to come. SolarCity locks the electric rates for 20 years, thus serving as a hedge against rising energy costs.
Considering that home equity lines of credit have become more difficult to obtain and many homeowners can't pay the upfront cost of a solar system, a solar lease is an appealing option to utilize solar energy, reduce electric bills and mitigate the impact of rising electricity costs.
“They’re essentially moving into a home with a lower cost of ownership, a lower cost of energy, so a solar lease shouldn't make it harder to sell a house," said Jonathan Bass, a spokesman for SolarCity. “It becomes a selling point instead of a point of misunderstanding.”
Why are homebuyers shying away from leasing homes with solar systems?
A leasee does not receive the 30 percent federal tax credit or any local incentives that may exist. A $20,000 solar system for example (that is not leased) qualifies for a $6,000 federal tax credit. This reduces the value of taxes owed by $6,000 and is of greater value than a write-off. In addition, some states also offer rebates and other incentives for the purchase -- but not the lease of a solar system.
During a seller's market, the downsides of having a leased solar system may not be as pronounced. In a slow market, misunderstanding, credit standards, and foregoing incentives may scare off potential buyers. Unfortunately, sometimes going solar can have its drawbacks.
Image credit: Solar Service Inc. of Niles, IL
Sarah Lozanova is a regular contributor to environmental and energy publications and websites, including Mother Earth Living, Green Building & Design, Triple Pundit, Urban Farm, and Solar Today. Her experience includes work with small-scale solar energy installations and utility-scale wind farms. She earned an MBA in sustainable management from the Presidio Graduate School and she resides in Belfast Cohousing & Ecovillage in Midcoast Maine with her husband and two children.
Sarah Lozanova is an environmental journalist and copywriter and has worked as a consultant to help large corporations become more sustainable. She is the author of Humane Home: Easy Steps for Sustainable & Green Living, and her renewable energy experience includes residential and commercial solar energy installations. She teaches green business classes to graduate students at Unity College and holds an MBA in sustainable management from the Presidio Graduate School.